Health insurer Cigna Corp. is selling its group disability and life insurance business to New York Life for $6.3 billion in cash, the companies announced Wednesday.
It will use the proceeds to repurchase shares and repay debt in the wake of its merger with pharmacy benefit manager Express Scripts.
The companies expect the deal to close in the third quarter of 2020, subject to regulatory approval.
"We are proud of what we have achieved in our life and disability business, and the world-class team that powers it. We are confident that clients and customers, including the many who also receive health and related benefits through Cigna, will continue to enjoy the high-quality benefits solutions and service for which this business is known," Matt Manders, Cigna's president of strategy and solutions, said in the announcement.
With the sale, Cigna is following in the footsteps of Aetna, which shed its group life and disability business in 2017 to focus on its core health insurance products. Mutual life insurer New York Life, meanwhile, will benefit from the addition of millions of new members.
Cigna has been working to deleverage after the Express Scripts deal sent its debt-to-capitalization ratio to 50.9% at the end of 2018. It previously told investment analysts it was on track to bring that ratio down to the upper 30s by the end of next year.
The group disability and life business is one of Cigna's smallest segments, accounting for about 8% of its income from operations in 2018. The unit reported total revenue of $5.1 billion and income from operations of $523 million that year. It covered 14.8 million people.
Across all its segments, Cigna reported revenue of $48.7 billion and income from operations of $4.2 billion in 2018.
As part of the deal, Cigna group insurance employees will transfer to New York Life. The companies will enter a multiyear collaboration to offer an integrated health and group insurance product to clients, they said.
"This transaction increases the value we can deliver to our policy owners, strengthens our well-defined business model, and adds millions of customers to the New York Life family," New York Life Chairman and CEO Ted Mathas said in the announcement.
