Insurance Business Unloads Optical

For the second time in as many months, an insurance company is dumping their eyewear products businesses.  Following Highmark’s divestiture of Viva, WellPoint (NYSE: WLP) today announced it has signed a definitive agreement to sell its online contact lens retail subsidiary 1-800 CONTACTS to private equity firm Thomas H. Lee Partners. Additionally, the company has entered into an asset-purchase agreement for glasses.com and its virtual try-on technology with Luxottica, a leader in the design, manufacture, distribution and sale of fashion, luxury and sports eyewear. Each agreement is subject to customary closing conditions and each transaction is expected to close in the first quarter of 2014.

“1-800 CONTACTS has strong brand recognition and a leading direct-to-consumer model. However, as we prepare for the coming changes to the health care system, we are focused on our core growth opportunities across both our commercial and government business segments. Proceeds from this transaction will support our continued capital deployment strategies,” said Joseph R. Swedish, chief executive officer of WellPoint.

Financial terms of the transaction were not disclosed. In connection with the sale agreements, WellPoint expects to record an impairment charge in the range of $0.52 to $0.57 per share in the fourth quarter of 2013. As a result, WellPoint now expects GAAP net income of at least $7.88 per share for the full year 2013. Excluding the charge, WellPoint continues to expect adjusted net income of at least $8.40 per share for the full year 2013. This guidance includes no investment gains or losses beyond those recorded during the first nine months of 2013 (refer to GAAP Reconciliation table).

And what’s your assessment of why these insurers are dumping their eye products businesses?  Does the fact that Thomas H. Lee Partners is the former owner of Eye Care Centers of America (now Visionworks and owned by Highmark, and which just spun off Viva) have any implications?

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