Genworth Sells Medicare Supplement Business to Aetna for $290M

Genworth Financial Inc. and Aetna have reached an agreement in the sale of Genworth’s Medicare supplement business and related blocks of in-force business. Aetna will purchase the business, which has more than 145,000 Medicare Supplement members, for $290 million. The transaction includes the sale of Continental Life Insurance Company of Brentwood, Tennessee and its subsidiary, American Continental Insurance Company. It also includes reinsurance agreements between certain Genworth life insurance subsidiaries and Aetna to transfer the Medicare supplement in-force business sold by these Genworth entities. Aetna expects to finance the acquisition with available resources.

Genworth expects the total capital resulting from this transaction within its life insurance companies that will be available for redeployment to be approximately $240 million. The company will record an after-tax gain of approximately $35 million related to the sale and anticipates that the transaction will close in the fourth quarter of 2011, subject to customary closing conditions and adjustments, as well as regulatory approvals. Existing Medicare supplement policies will remain in effect following the transaction, and policyholders will continue to have access to the full benefits of their policies.

"This sale represents another step in executing our strategy to concentrate on leadership positions within our businesses," says Michael Fraizer, Genworth chairman and CEO. "The transaction clearly benefits both parties, as it moves a sound platform to a company that is committed to the long term development of the Medicare supplement business, while allowing Genworth to focus our Retirement and Protection segment in markets where we have the strongest value propositions. Looking ahead, we continue to actively pursue strategies that free capital for targeted redeployment and enhance shareholder value over time."

The transaction will be treated as an asset purchase for tax purposes and is subject to customary closing conditions, including federal Hart-Scott-Rodino antitrust and state regulatory approvals. The transaction is expected to close during the fourth quarter of 2011.

“By acquiring this business, Aetna will significantly expand its footprint in the Medicare Supplement business,” says Mark Bertolini, Aetna chairman, CEO and president. “This important growth opportunity comes at a time when the Medicare population is anticipated to increase as baby boomers reach age 65. Medicare Supplement is expected to be a fast-growing product in the coming years as individuals seek peace of mind for out-of-pocket costs and employers look for added retiree coverages.”

Aetna expects to maintain the business’ current management, staff and operations, which are primarily based in Brentwood, Tenn.

“This acquisition is in keeping with Aetna’s plan to broaden its product portfolio and add new revenue streams, and address the increasing needs of the senior population,” says Joseph Zubretsky, Aetna senior EVP and CFO. “Aetna brings capabilities to grow the Medicare Supplement business, including access to commercial retirees and Medicare Prescription Drug Plan members, multi-channel distribution and other Aetna product offerings.”