DOW JONES NEWSWIRES
Cigna Corp. (CI) 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;
nathalie.tadena@dowjones.com