New York Life Insurance Co. agreed to buy a Cigna Corp. business that sells life and disability insurance for $6.3 billion, becoming the latest insurer to make a bet on selling policies through employers.

The transaction is New York Life’s biggest acquisition as Chief Executive Officer Ted Mathas cements the firm’s position as the leading U.S. life insurer owned by its policyholders. For Cigna, the cash deal will generate about $5.3 billion in net after-tax proceeds, which it will use for share repurchases and debt repayment.

“This is an attractive market segment,” New York Life Chief Executive Officer Ted Mathas said in a phone interview. The deal “is a great way to add value to policyholders because they get the returns that are much higher than capital market returns.”

Businesses that sell insurance or retirement offerings through employers have become attractive options for buyers in recent years. Lincoln National Corp. bought a group-benefits business from Liberty Mutual Holding Co. for $3.3 billion last year, and Hartford Financial Services Group Inc. acquired an Aetna Inc. life and disability operation in 2017.

Confronted with almost a decade of low interest rates, some life insurers have been revamping their mix of businesses. About two years ago, MetLife Inc. separated Brighthouse Financial Inc., a business that had $220 billion of assets at the time, in a bid to focus more on operations that sold insurance through employers rather than straight to individuals.

Rival Voya Financial Inc. also took a step Wednesday to further simplify its business. The company struck a deal with Resolution Life Group Holdings to sell its individual life operations and some old annuity operations for $1.25 billion. That helps the company narrow its focus to an asset-management operation and selling employee benefits and retirement products.

Debt Repayment

Cigna is concentrating on its core businesses selling health benefits to large employers. The divestiture comes a year after the firm completed its acquisition of pharmacy benefits manager Express Scripts in a $54 billion deal. Selling off the group disability and life business will generate cash to pay down debt from that deal.

Shares of Cigna rose 2.9% to $199.18, adding to this year’s 4.7% advance.

Cigna said it expects the deal to be neutral to earnings per share in 2020 and “modestly accretive” to EPS the following year. The business that Cigna is selling accounted for 13% of pretax income before the Express Scripts takeover, but only accounted for 7% after the acquisition, according to analysts at Cantor Fitzgerald & Co.

First « 1 2 » Next