Aetna to Buy Genworth’s Medicare Supplement Business for $290 Million

Aetna Inc. has agreed to acquire the Medicare supplement and related blocks of in-force business of Genworth Financial Inc. for about $290 million in a deal to expand its presence in the health insurance market for seniors.

The transaction includes the sale of Continental Life Insurance Co. of Brentwood, Tennessee and its American Continental Insurance Co. subsidiary, with Aetna acquiring 100% of Continental Life's stock. It also includes reinsurance agreements to transfer to Aetna the Medicare supplement in-force business sold by certain Genworth life insurance subsidiaries.

Aetna sees huge opportunity as the target demographic in this market -- baby boomers turning 65, said Cynthia Michener, a spokeswoman for Aetna (NYSE: AET).

Currently, the company has 10,000 policyholders in Medicare supplement plans, and with this acquisition, it will add more than 145,000 policyholders, she said. Aetna is the third-largest U.S. health insurer based on medical membership.

Medicare supplement insurance covers deductibles, copayments and other expenses not covered under Parts A and B of the federal government's traditional Medicare program for the elderly and disabled.

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," said Mark T. Bertolini, chairman, chief executive officer and president of Aetna, in a statement.

Continental Life also sells ancillary products, such as accident insurance. The business being acquired had about $317 million in net earned premium for 2010, Aetna said.

Tom Topinka, a spokesman for Genworth (NYSE: GNW) said the Medicare supplement business has been profitable for the company but the exit is part of its strategy to focus on markets such as long-term care insurance, life insurance and annuities, among others, he said.

Earlier this year, Genworth said it was exiting variable annuities as it focused on more profitable businesses (BestWire, Jan. 7, 2011).

"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," said Michael D. Fraizer, chairman and CEO of Genworth, in a statement.

Earlier this year, A.M. Best Co. said Genworth's primary mortgage subsidiary, Genworth Mortgage Insurance Corp., received certain regulatory waivers regarding risk to capital requirements. These revocable waivers allow it to continue to underwrite new U.S. mortgage insurance business with favorable credit risks given tighter underwriting standards since the financial crisis.

Continental Life Insurance Co. of Brentwood, Tennessee and American Continental Insurance Co. currently have Best's Financial Strength Ratings of A- (Excellent).

Shares of Aetna were trading at $42.89 the afternoon of June 13 -- up 0.07% from the previous close.

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])