CIGNA Corp. is buying a business with experience at selling administrative services to relatively small self-funded health plans.
CIGNA has agreed to pay $1.5 billion in cash to buy Great-West Healthcare from Great-West Life & Annuity, Greenwood Village, Colo. Great-West L&A also will get to keep $750 million it has invested in the U.S. business. Great-West L&A is a unit of Great-West Lifeco Inc., Winnipeg, Manitoba, which, in turn, is a unit of Power Corp. of Canada, Montreal.
The Great-West health care business provides or administers medical coverage for 1.5 million U.S. residents, and it is particularly strong in the "administrative services only" market.
Traditionally, CIGNA has focused on selling health coverage to large groups.
The Great-West Healthcare deal should help CIGNA gain new capabilities, and the business "has historically posted good and steady earnings and margins," according to analysts in the Chicago office of Fitch Ratings.
Completing the deal also should help CIGNA expand its distribution reach and provider networks in Western United States, says CIGNA Chairman H. Edward Hanway.