New York Life Insurance capped off 2020 by completing the biggest deal in its 175-year history.
The company closed the $6.3 billion cash purchase of a Cigna unit that sells life, accident and disability insurance. The takeover will add roughly 3,000 employees and more than 9 million customers, with the unit operating as a standalone business to be renamed New York Life Group Benefit Solutions.
“This acquisition, the largest in our company’s history, reinforces our financial strength by generating capital,” New York Life chief executive Ted Mathas said in a statement.
Such deals are a rarity for New York Life, which operates as a mutual insurance company owned by its policyholders.
The company is among several life insurers that have made bets on businesses that sell policies through employers. Life insurers have increasingly gravitated towards group benefits because they are less sensitive to the low interest rates that have been a drag on investment income for years.
The coronavirus pandemic has also posed some challenges, delaying the deal’s completion by a quarter. Covid-19 also is likely to weigh on New York Life’s results this year and next because of higher mortality rates. Still, the company is optimistic about the long-term strategy behind the acquisition.
“We are acquiring a great company that is a top-five player in this market that is going to enhance our capital generation and diversify our businesses and our risk,” Alain Karaoglan, a New York Life senior vice president, who is leading the integration, said.
“We are not a serial acquirer, so when we make acquisitions, we have to be thoughtful, methodical and purposeful about it. And this one fits perfectly.”
