Cigna Shifting From Traditional Product Lines

Cigna Corp., the last major insurance company to combine health-care and employee benefits with other traditional insurance products, is negotiating to sell its property and casualty business for about $3 billion, the company confirmed Tuesday.

In its efforts to shed this part of its business, Cigna joins other insurers that have decided that the only way to survive in the difficult era of managed care is to specialize.

“Our goal is to become a global employee benefits company,” said Michael Monroe, Cigna’s vice president for corporate communications. The idea, he said, is to position the company to provide not only health care but also other employee benefits for employers, including pension management, investments and life insurance.

“We are focusing on that because of the interaction of all the employee benefit businesses,” Monroe said.

The deal, which has been rumored on Wall Street for about two weeks, is believed by analysts to be nearly complete.

If the sale goes through, Cigna’s property and casualty division would be purchased by Ace Limited, an insurance company based in Hamilton, Bermuda. Though the terms have not been finalized, the parties expect the purchase price to be in excess of $3 billion.

The property and casualty segment is responsible for about a third of Cigna’s $15 billion in revenue, Monroe said.

Kenneth Abramowitz, an analyst with Sanford Bernstein & Co., said that Cigna, based in Philadelphia, has been positioning itself for some time as more of a health-care company than a traditional insurer.

“Years ago, it was commonplace to have multi-line insurance companies,” Abramowitz said. “Now it’s an anomaly.”

The reason, said Abramowitz and others, is that health care has developed into a very different field from traditional insurance.

In the past, insurers ran the health portion of their businesses much like their other lines--by assessing risk and paying claims as they came in. But with the rise of managed care, insurers became more like providers, contracting with doctors and in some cases even owning clinics.

“It’s difficult to do health care and also do other things,” Abramowitz said. “Health care is a hard business even if you are concentrating on it.”

To that end, nearly all of the nation’s major insurance companies have either divested themselves of their health-care units or decided to concentrate mostly on health care or on health-care and employee benefits.

Just two weeks ago, for example, Prudential sold its ailing health-care division to Aetna for $1 billion, saying that it wanted to concentrate on selling investment products, liability insurance and the like. Aetna, for its part, has increased the health-care side of its business while divesting much of its other lines of business.

The Cigna deal would be “a further step in the company’s commitment to health care,” said Todd Richter, an analyst with Morgan Stanley Dean Witter in New York.

But, Richter said, it does not signal the end of the health business’ struggle to reconfigure itself in a changing marketplace--or the end of consolidation in the troubled industry.

“There are still going to be hundreds of deals,” Richter said. “There is no final step.”