CIGNA has signed a definitive agreement to acquire Great-West Healthcare, the Healthcare Division of Great-West Life & Annuity, Inc.
Under the terms of the agreement, CIGNA will pay approximately $1.5 billion in cash to Great-West Life & Annuity and to fund approximately $400 million of additional capital to support the acquired business. The transaction, subject to required regulatory approvals and customary closing conditions, is expected to close during the first half of 2008.
Headquartered in metro Denver, Colorado, Great-West Healthcare has 3,750 employees and currently serves 2.2 million covered lives, including approximately 1.5 million medical members in its employer segments. Great-West Healthcare's national health care network consists of some 4,275 hospitals and more than 575,000 physicians and ancillary providers.
"Great-West Healthcare will be a significant addition to CIGNA. Great-West Healthcare's talented team of employees has built the company's reputation for strong service and innovation, and we look forward to welcoming them to CIGNA," said H. Edward Hanway, CIGNA chairman and chief executive officer. "Great-West Healthcare's capabilities clearly complement our own. This transaction will broaden our distribution reach and provider network in key geographic areas of the country, particularly the Western regions of the United States, and expand the range of health benefits and products we offer employers and their employees."
Hanway noted that Great-West Healthcare's competitively differentiated offerings appeal to employer groups of all sizes, and have been particularly well received by small to mid-sized businesses seeking the financial flexibility afforded by a variety of funding options. "This acquisition aligns very well with our strategy by enhancing our competitiveness in the middle market segment and expanding our participation and offerings in the small business segment."
The acquisition is inclusive of Great-West Healthcare's full portfolio of health and group insurance offerings and the supporting information technology infrastructure. Great-West Healthcare's products include traditional managed care PPO, POS, HMO and Open Access plans, as well as consumer-driven health care products such as HRAs and HSAs, and are offered in association with a range of flexible funding options. Great-West Healthcare's offerings will be added to the CIGNA portfolio to complement its current range of health benefits and related specialty products and services, expanding the choices it offers, particularly to small to mid-sized employers.
"CIGNA's acquisition of Great-West Healthcare combines complementary strengths in products and expertise, and will build on the strong provider relationships that are important to both organizations," said Rick Rivers, executive vice president of Great-West Healthcare. "Our customers and members will gain access to additional CIGNA resources and value-added services and programs. CIGNA intends to build on Great-West Healthcare's competitively differentiated offerings to expand its operations and create near-term and long-term growth opportunities."
CIGNA anticipates the acquisition to be accretive to its full year 2008 earnings per share outlook of $4.00 to $4.20 per share. The transaction is expected to be accretive to earnings in 2009 and beyond by achieving synergies related to managing medical costs, capturing operating expense synergies and growing membership over time.
CIGNA Corporation and its subsidiaries constitute one of the largest investor owned health and related benefits organizations in the United States. CIGNA provides employers with benefits, expertise and services that improve the health, well-being and productivity of their employees.