NEW YORK Health insurer Cigna Corp(CI.N) said on Monday it had reached an agreement to buy the health-care unit of Great-West Life & Annuity Insurance Co. for about $1.5 billion in a move to expand its business in the western United States.
In addition to the cash payment, Cigna said it would fund about $400 million of additional capital to support the acquired business.
Cigna said it expects the deal to close in the first half of 2008 and add to its full-year 2008 earnings forecast of $4.00 to $4.20 per share. The transaction is expected to further add to earnings in 2009 and beyond through managing medical costs and operating expenses and through added membership, Cigna said.
"This transaction will broaden our distribution reach and provider network in key geographic areas of the country, particularly the Western regions of the United States, and expand the range of health benefits and products we offer employers and their employees," Cigna Chief Executive Edward Hanway said in a statement.
Great West's parent company Great-West Lifeco Inc (GWO.TO) said it will use some of proceeds from the deal to repay bridge financing associated with its August acquisition of Putnam Investments LLC.
Great-West Healthcare, based in Denver, provides medical, dental, vision, life and disability coverage to some 5,200 employer groups and 2.2 million members across the United States, the company said.
"We are committed to working with Cigna to facilitate a smooth and efficient transition for Great-West Life & Annuity's current U.S. group health care customers, distribution systems and employees," Raymond McFeetors, Chief Executive of Great-West Lifeco, said in a statement.
(Reporting by Bill Berkrot; Editing by Gary Hill)