Health insurer Cigna Corp. (CI) announced a definitive agreement to acquire Great-West Healthcare, the healthcare division of Great-West Life & Annuity Insurance Co., for USD 1.5 billion in cash. Great-West Life & Annuity Insurance is a subsidiary of Canada-based financial services holding company Great-West Lifeco Inc. Under the terms of the deal, Cigna will also fund about USD 400 million of additional capital to support the acquired business. The transaction is expected to close during the first half of 2008, subject to regulatory approvals and customary closing conditions. The acquisition enables Cigna to expand health care coverage and offerings in key regions as well as employer segments. The transaction has an enterprise value of USD 2.25 billion. Cigna anticipates the acquisition to be accretive to its fiscal year 2008 earnings per share outlook in a range of USD 4.00-USD 4.20 per share. In addition, 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 growth in membership over time. Great-West Healthcare is headquartered in metro Denver, Colorado and has 3750 employees. The company currently serves 2.2 million covered lives, including approximately 1.5 million medical members in its employer segments. Its national healthcare network consists of some 4,275 hospitals and more than 575,000 physicians and ancillary providers. The acquisition includes 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, in addition to consumer-driven health care products such as HRAs and HSAs. Cigna noted that these are offered with a range of flexible funding options. Further, the company said that Great-West Healthcare’s offerings would be added to its portfolio to complement its current range of health benefits and related specialty products as well as services. Great-West Healthcare’s competitively differentiated offerings appeal to employer groups of all sizes, and have been well received by small to mid-sized businesses, which seek the financial flexibility afforded by a variety of funding options. Separately, financial services holding company Great-West Lifeco Inc. said that its US-based subsidiary Great-West Life & Annuity signed a definitive agreement to sell its health care business, Great-West healthcare, to a subsidiary of Cigna. Great-West Life & Annuity will retain an estimated USD 750 million representing the amount of equity invested in the business as at the anticipated closing date. The company said that after payment of taxes and write-offs associated with intangibles and certain other assets of the business, it will have approximately USD 1.6 billion that will be used to repay bridge financing associated with the acquisition of Putnam Investments LLC, the transaction for which was completed on August 3, 2007. Among Cigna’s peers, Aetna Inc. (AET) said last month that it finalized the purchase of Goodhealth Worldwide for international private medial insurance that offers expatriate benefits to individuals, small and medium enterprises, and large multinational clients around the world. The company stated that it believed the purchase broadened its Global Benefits’ expatriate offerings and significantly enhances its global capabilities and reach.

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