New York Life To Expand By Acquiring Cigna’S Non-Medical Insurance Unit For $6.3 Billion
New York Life Insurance Company has been listed as one of Fortune 500’s largest corporations in the United States based on over-all revenue. Founded in 1845, it was hailed as the third-largest life insurance company in the U.S. and the most prominent mutual life insurance entity in the country with an asset of $585.9 billion under its management. In line with its aim to maintain its high credit score and a position in the financial services industry, New York Life Insurance Company saw an opportunity to increase its insurance policyholders by millions with Cigna’s offer to sell its group life and disability insurance unit for $6.3 billion. The move can be compared to The Hartford Group’s acquisition of Aetna Inc.’s life and disability business for $1.45 billion in cash a couple of years ago.
The chairman and chief executive officer of New York Life Insurance Company Ted Mathas said the transaction increases the value that they could deliver to the policy owners. It could also add millions of customers to the New York Life family. He continued to say that Cigna’s group life and disability business enhance their portfolio of strategic companies, led by a well-experienced management team and high-quality workforce that they wanted to welcome to their family. They are also committed to making the transition as smooth as possible for employees and clients alike. Relative to the sale, Cigna Corporation (CI) said it would use a portion of the proceeds in increasing the company’s share repurchase authority by $3 billion and up to $4 billion in aggregates. It will also use some of the funds to settle the loans they accumulated when the company purchased pharmacy benefit manager Express Scripts for $67 billion during the past year and turned it into one of their subsidiaries. Investment planning experts see this as an intelligent move so that the health services organization founded by CG (Connecticut General Life Insurance Company) and INA (Insurance Company of North America) can focus on its core growth platforms and avoid opting to refinance loans.
Finally, as Cigna Corp. devotes full effort on its healthcare services, it will be able to pay particular attention to its health benefits offering for senior policyholders. This specific age group tends to prefer Medicare Advantage plans increasingly. This development will give Cigna Corp. leverage to compete with other healthcare insurance companies such as Indiana’s Anthem Inc., Kentucky’s Humana Inc., and Minnesota’s United Health Group Inc. As the company’s chief executive officer David Cordani said, Cigna is looking at “whole-person health.” It also plans to fuse their mental health coverage, medical care insurance, and pharmaceutical services into a more convenient and efficient claim process for consumers and patients alike.
To further support this initiative, Cigna Inc. is consistent in their pursuit to promote value-based reimbursement models to replace the fee-for-service payment option, to provide a high degree of health care for populations of patients, and not just for select individuals. But this thrust for health care reform is admittedly quite costly. It needs a considerable amount of investment money to prepare for systems integration, information technology advancement, and provider network alignment. The sale of the company’s non-medical business to New York Life Insurance Company will provide the required additional capitalization without resorting to a new business loan.
The contracting insurance companies, New York Life and Cigna, officially announced December 18, 2019, that they already entered into a definitive agreement. They are also expected to close the acquisition by the third quarter of the year, subject to the approval of concerned regulatory agencies and other customary requirements.
Based on Materials from Forbes
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