(Reuters) - Cigna Corp (CI.N) said on Wednesday it had agreed to sell its disability and accidental death insurance unit for company employees to New York Life Insurance Co in a $6.3 billion deal.
Shares of the company were up 2% at $197.40 in early trade.
The health insurer, which bought pharmacy benefits manager Express Scripts for $54 billion last year, said it expects to use deal proceeds of about $5.3 billion to pare debt in 2020.
The company had long-term debt of $34.04 billion, as of Sept. 30.
Evercore ISI analyst Michael Newshel said divestment of a relatively small non-core business makes sense for Cigna as it focuses more on its healthcare business.
The unit, which also offers life and dismemberment coverage, reported adjusted third-quarter revenue of $1.28 billion and has insured 15.4 million people.
Brokerage Cantor Fitzgerald called the deal positive, noting that the unit probably become a drag on the company’s overall growth.
The deal is expected to close in the third quarter of 2020, the companies said.
Similar divestitures have been announced by other health insurers including Aetna Inc, which said in 2017 it would sell its U.S. group life and disability unit for $1.45 billion to Hartford Financial Services Group.
Cigna also raised its share repurchase authority by $3 billion to $4 billion.
BofA Securities is acting as financial adviser to Cigna, Sidley Austin LLP is serving as lead legal counsel, and Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as antitrust counsel. Wachtell, Lipton, Rosen & Katz is also advising Cigna on the transaction.
Reporting by Saumya Sibi Joseph and Trisha Roy in Bengaluru; Editing by Vinay Dwivedi