CIGNA Corp. is buying a business with experience at selling administrative services to relatively small self-funded health plans.

CIGNA has agreed to pay $1.5 billion in cash to buy Great-West Healthcare from Great-West Life & Annuity, Greenwood Village, Colo. Great-West L&A also will get to keep $750 million it has invested in the U.S. business. Great-West L&A is a unit of Great-West Lifeco Inc., Winnipeg, Manitoba, which, in turn, is a unit of Power Corp. of Canada, Montreal.

The Great-West health care business provides or administers medical coverage for 1.5 million U.S. residents, and it is particularly strong in the “administrative services only” market.

Traditionally, CIGNA has focused on selling health coverage to large groups.

The Great-West Healthcare deal should help CIGNA gain new capabilities, and the business “has historically posted good and steady earnings and margins,” according to analysts in the Chicago office of Fitch Ratings.

Completing the deal also should help CIGNA expand its distribution reach and provider networks in Western United States, says CIGNA Chairman H. Edward Hanway.

CIGNA and Great-West Life & Annuity hope to complete the deal by June 30, 2008.

Great-West Lifeco recently acquired Putnam Investments L.L.C., Boston, from Marsh & McLennan Companies Inc., New York, for $4.6 billion.

The old Great-West L&A retirement services and individual markets businesses have about $127 billion in assets under management, and the Putnam deal has increased the overall total to about $336 billion.

Great-West Life & Annuity plans to keep the Great-West L&A retirement services and individual markets businesses, and it intends to use the cash that the CIGNA deal will generate to repay the loans used to finance the Putnam deal, the company says.

Once the CIGNA deal is completed, Great-West Lifeco will focus its U.S. efforts on expanding the financial services operations, according to Great-West Lifeco President Raymond McFeetors.