Philadelphia — CIGNA Corp. is expanding into the small-group healthcare market with the announcement of its intention to pay $1.5 billion in cash for Great-West Healthcare, a deal that is expected to close during the first half of 2008, subject to regulatory approval. The Philadelphia-based carrier, whose CIGNA HealthCare business is based in Bloomfield, Conn., said it plans to fund the deal through cash and debt, and that it will also inject approximately $400 million of capital into its subsidiaries to support the acquired business.

Great-West Healthcare, Greenwood Village, Colo., currently serves 2.2 million people, including 1.5 million health plan members mainly from small and medium-size employers. CIGNA's health plan serves 10.2 million members. The deal will grow CIGNA's medical enrollment and is expected to boost the company's earnings beginning next year, analysts say. Expected to close during the first half of 2008, the deal is expected to add to CIGNA’s full-year 2008 earnings; however, the carrier released no actual projected figures.

According to the popular press, Great-West will be CIGNA’s largest acquisition based on enrollment since the 1997 purchase of Healthsource in New Hampshire. Known for service national accounts (large employers), CIGNA has kept a steady focus on increasing its presence in the mid-size market (employers with 200 to 5,000 employees). The Great West acquisition increases CIGNA’s presence in this market and according to analysts, will allow CIGNA to grow in the small-employer market as well. The small-group market is attractive because it continues to show some employment growth, CIGNA Chairman and Chief Executive H. Edward Hanway told the popular press Tuesday.

Source: CIGNA, Business Wire, Reuters

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