Byline: JOSEPH B. TREASTER New York Times
NEW YORK -- Aetna Inc., the giant health insurer, is expected to announce today that it is buying the health care business of the New York Life Insurance Co. for $1.05 billion in cash.
Reflecting some of the negotiating that has gone into the deal and some of the uncertainties in the health care business, Aetna has agreed to pay New York Life as much as $300 million more if the unit, NYLCare Health Plans, meets certain growth targets in the next two years, people close to the transaction said.
The deal would significantly increase Aetna's market share in the metropolitan New York City area, in the Washington-Baltimore area and in Texas.
It also would enable New York Life to concentrate on the sale of life insurance and annuities and on strengthening its money management businesses, including the Mainstay mutual funds.
``This should work out well for both sides,'' said Kenneth Abramowitz, an analyst with Sanford Bernstein & Co.
Spokesmen for Aetna and New York Life said company policy forbade them from discussing reports of pending transactions.
Aetna has been negotiating since late last year to buy NYLCare, which provides health insurance for 2.2 million people, including 1.5 million under managed care. Aetna has 13.7 million health insurance customers.
The merger is not expected to have an immediate effect on costs, benefits or physician relationships for customers of the two companies. Eventually, it should provide a wider choice of physicians.
New York Life is following the lead of several other big life insurers in selling health care businesses in the last few years. Health insurers are buying these companies to gain market share, which gives them leverage in negotiating better prices with doctors and hospitals. And the life insurers are happy to be able to focus on selling life insurance and other financial services.
