Aetna announced today that it has agreed to buy the Medicare supplement and related blocks of in-force business of Genworth Financial for $290 million.
Genworth's business, conducted through Continental Life Insurance Company of Brentwood, Tenn., has more than 145,000 Medicare supplement members. The transaction will substantially enhance Aetna's market footprint as a provider of Medicare supplement insurance.
"By acquiring this business, Aetna will significantly expand its footprint in the Medicare supplement business," said Mark T. Bertolini, Aetna's 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."
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According to its first quarter operating results, Medicare members were the smallest portion of Aetna's book of business, representing just more than 400,000 members. This pales in comparison to the more than 16 million members in its commercial lines and the 1.2 million members in its Medicaid products.
Joseph M. Zubretsky, senior executive vice president and CFO, added, "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. 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."
Aetna said it plans to finance the deal using current internal resources. The company has ample ability to pay all cash for the business, as it has more than $3.5 billion cash on hand as of the end of March. The business being acquired had approximately $317 million in net earned premium for 2010.
The deal is projected to be earnings-neutral for Aetna in 2012 and is expected to close in the fourth quarter this year.