Cigna completed the sale of its group life and disability insurance unit to New York Life Insurance for $6.3 billion in a move to focus on its healthcare businesses, the companies announced Thursday.
The acquisition of Cigna’s group life, accident, and disability insurance business, first announced a year ago first adds about 3,000 employees and more than nine million customers to New York Life’s “portfolio of strategic businesses,” the companies said.
Cigna said it expects to realize $5.3 billion in “net after-tax proceeds” and “expects to utilize the proceeds primarily for share repurchase and repayment of debt,” the company said in a filing on Thursday with the U.S. Securities and Exchange Commission. Cigna has said it will also use proceeds to pay down debt accumulated from its $67 billion acquisition of the pharmacy benefit manager Express Scripts more than a year ago.
Cigna’s move is similar to what Aetna did in 2007 agreeing to sell its life and disability business to The Hartford Group for $1.45 billion in cash.
“This acquisition, the largest in our company’s history, reinforces our financial strength by generating capital that can contribute to our surplus, dividends, and earnings,” New York Life Chairman and CEO Ted Mathas said Thursday in a statement. “We are excited to welcome to New York Life our new employees and the millions of new customer relationships that we will gain through this milestone transaction. We look forward to building on our leading group benefit solutions market position in the years ahead.”
Meanwhile, Cigna is focusing on its health offerings to consumers, employers and those insured by Medicaid and Medicare. Cigna is in a race with rival health insurance companies like UnitedHealth Group, Anthem, Humana and CVS Health’s Aetna health insurance business to grow its business administering health benefits for seniors as more flock to Medicare Advantage plans.
For its battles ahead, Cigna will need cash from the New York Life divestiture as it competes with rivals into the business of providing healthcare services.