Aetna to sell group life, disability business for $1.45B

Ruhman joins NewcrestImage with more than 20 years of hospitality experience in senior management positions.
Aetna could use the proceeds from the sale of its group life and disability business for internal investments to enhance the company’s customer experience, share repurchases and/or repayment of debt.

Aetna is selling its group life and disability insurance business for $1.45 billion, a transaction that will allow the company to focus on its core strength: health insurance.

The Hartford, an insurance firm specializing in property and casualty insurance, group benefits and mutual funds, said on Monday that it will purchase the business line from Aetna in a transaction that’s expected to close in early November.

The majority of the employees who work for Aetna Group Insurance will transfer to The Hartford, the announcement noted. Aetna could use the proceeds for internal investments to enhance the company’s customer experience, share repurchases and/or repayment of debt.

“Our transaction with The Hartford will benefit both our shareholders and customers, allowing us to have a stronger focus on our strategy of creating a personalized approach to improving member health,” Aetna President Karen Lynch said.

The asset that Aetna is selling “has been less solid and views as less of a core competency” when compared to Cigna, which sees its life and disability insurance business as integrated with its health insurance business, Leerink Partners analyst Ana Gupte wrote in a research note (PDF).

As for what Aetna might do with the proceeds from the transaction, Gupte added that the company could be mulling a vertical move to acquire a pharmacy benefits manager—especially given Anthem’s announcement last week that it would create its own PBM through a deal with CVS.

Aetna’s own contract with CVS expires in 2020, and while it has previously hinted at working more closely with the company, Anthem’s new pact with CVS now makes a potential merger between the two entities unlikely.

Earlier this year, Aetna abandoned its attempt to acquire fellow insurer Humana after a federal judge blocked the transaction on antitrust grounds. The Aetna-Humana tie-up was one of two ill-fated deals among the country’s largest health insurers, as Anthem also failed in its bid to successfully acquire Cigna.