Cigna To Buy Great American Supplemental Benefits For $295 Million
05/10/2012| 06:28pm US/Eastern
Cigna Corp. (>> CIGNA Corporation) has agreed to acquire American Financial Group Inc.'s (AFG) Medicare supplement and critical-illness businesses for approximately $295 million in cash, as the managed-care company looks to expand its presence in the individual and seniors markets.
Cigna said its acquisition of Great American Supplemental Benefits Group, one of the largest manufacturers of supplemental health insurance products in the U.S., is expected to close in the second half of 2012.
Great American generated approximately $325 million of revenue last year.
Cigna said the acquisition will expand its individual supplemental offerings to customers in the U.S., bring scaled offerings to the seniors market and extend its direct-to-consumer retail channel.
The deal comes after Cigna bought Medicare carrier HealthSpring Inc. in January for $3.8 billion. The HealthSpring acquisition represented a change in the balance of Cigna, which had primarily focused on employers but will now also be a major source of both Medicare prescription-drug plans and Medicare Advantage coverage, the private insurers' version of the government program.
Cigna has seen its revenue grow in recent quarters, helped by growing membership and a continuing trend of patients using fewer health-care services amid a shaky economy. Last week, the company reported its first-quarter earnings fell 10%, due in part to acquisition costs, though membership growth contributed to better-than-expected revenue.
Meanwhile, American Financial said the deal is expected to be slightly dilutive to its earnings in the short term but will help the company focus on its core businesses.
Cigna shares were up by 11 cents to $45.02 after hours. The stock is up 6.9% so far this year.
-By Nathalie Tadena, Dow Jones Newswires; 212-416-3287; email@example.com