Health insurer Cigna signs 10-year deal with Canada's Catamaran

June 10 Mon Jun 10, 2013 6:01pm EDT

June 10 (Reuters) - Health insurer Cigna Corp signed a 10-year agreement with pharmacy benefit manager Catamaran Corp and said it expected to record a related charge of about $25 million in the current quarter.

U.S.-listed shares of Catamaran, formerly SXC Health Solutions, rose 15 percent in extended trading as the deal lifts uncertainty over a key contract.

The Canadian company had a contract with Medicare provider HealthSpring, which was acquired by Cigna. The contract brought in about a third of Catamaran's 2012 revenue of $9.94 billion.

Catamaran, which competes with Express Scripts Holding Co and CVS Caremark Corp, administers health plans and drug benefits for employers and run mail-order pharmacies. Pharmacy benefit managers help cut costs of medication by encouraging more use of generic drugs.

Cigna expects the agreement to begin making a positive contribution to earnings in 2014 and to add about 50 cents to earnings per share in 2015.

BofA Merrill Lynch acted as sole financial advisor to Cigna on the agreement.

Catamaran's Toronto Stock Exchange-listed shares closed down 3 percent at C$49.60 on Monday. Cigna shares closed at $69.00 on the New York Stock Exchange.