New York Life expects the $6.3bn acquisition of the Cigna unit to increase the value it can deliver to its policy owners, while adding millions of customers

New York Life will pay $6.3bn for Cigna's group life and disability insurance business (Credit: PxHere)

US mutual life insurer New York Life has agreed to acquire the group life and disability insurance business of rival Cigna for $6.3bn in the biggest insurance industry acquisition deal of 2019.

Post-acquisition, the unit will operate within New York Life’s portfolio – which it claims is “highly profitable” – with Cigna’s staff within the acquired business transferring to the new owner.

The acquisition is expected to close in the third quarter of 2020, subject to applicable regulatory approvals and other customary closing conditions.

New York Life chairman and CEO Ted Mathas 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.

“Cigna’s group life and disability business enhances our portfolio of strategic businesses and is led by an experienced management team and high-quality workforce, who we look forward to welcoming to our company.

new york life cigna
New York Life chairman and CEO Ted Mathas (Credit: New York Life)

“We are fully committed to making this transition as seamless as possible for employees and clients alike.”


Cigna group insurance boss expects new owner to grow business

Cigna Group Insurance president William Smith said: “Our team is excited to become a part of New York Life and continue to focus on the mission of providing financial security and peace of mind to individuals, families, and businesses across the country.

“New York Life is a highly-respected brand in our industry and has the capital, commitment, and trust to help us grow and thrive going forward.

“We look forward to continuing our relationships with our valued customers and clients.”

The health service company expects to use the proceeds of the sale for share repurchase and repayment on its debt in 2020.

It continues to expect to fulfill its deleveraging commitments made after the $67bn merger with pharmacy benefit management organisation Express Scripts in 2018.

New York Life’s financial advisor for the deal is Credit Suisse Securities (USA), while Debevoise & Plimpton is the legal advisor. For Cigna, BofA Securities is the financial advisor, while Sidley Austin is the lead legal counsel for the deal.

The deal, which is subject to applicable regulatory approvals and other customary closing conditions, is expected to be completed in the third quarter of 2020.


Analyst says acquisition will benefit both parties

According to Aurojyoti Bose, lead analyst at market research firm GlobalData, the deal between Cigna and New York Life is expected to benefit both companies.

He said: “This acquisition is also the largest M&A by New York Life so far and forms a part of its strategy to further strengthen its presence and market share in life, accidental and disability insurance space.

“It will also allow Cigna to focus on its healthcare business, reduce debt levels and invest in its value-based business model.

Cigna aims to pay down debt it incurred through the merger with Express Scripts, which cost the firm $67bn.

“Following the acquisition of Express Scripts Holding Company for US$67bn in 2018, Cigna has been keen on divesting its group life and disability insurance business, and focus on its healthcare business,” Bose adds.

Cigna’s total debt stood at $38.8bn at the end of Q3 2019.