Cigna and Humana reportedly call off merger talks

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Cigna and Humana have reportedly ended their talks to merge after failing to agree on a price, according to Reuters.

Cigna is continuing to explore the sale of its Medicare Advantage business, the report said. Reuters reported in November that Cigna was exploring the sale of its Medicare Advantage operations, whose performance has disappointed investors.

The structure was for Cigna to acquire Humana, in a deal that would come about by the end of the year, according to The Wall Street Journal.

Instead, on Sunday, Cigna's board of directors agreed to repurchase $10 billion in shares, bringing the company's total share repurchase authority to $11.3 billion. Cigna said it expected this to include the repurchase of at least $5 billion of common stock between now and the end of the first half of 2024. The company has said it intends to use the majority of its discretionary cash flow for share repurchase in 2024. 

"We believe Cigna's shares are significantly undervalued and repurchases represent a value-enhancing deployment of capital as we work to support high-quality care, improved affordability, and better health outcomes," said David M. Cordani, chairman and CEO of the Cigna Group. "As we look at the broader landscape and the strategic opportunities before us, we will remain financially disciplined with a clear focus on executing against our strategy, delivering value for our shareholders, and investing in our future. In light of the current environment, we will consider bolt-on acquisitions aligned with our strategy, as well as value-enhancing divestitures." 

WHY THIS MATTERS

Neither Cigna or Humana made an official comment about the reported speculation of a merger.

A combination would have created a company with a value exceeding $140 billion, based on their market values, Reuters said.

A merger would have created a combined scale to rival bigger insurance players such as UnitedHealthcare, but it certainly would have faced a federal antitrust challenge. 

Six years ago, regulators blocked other insurance merger deals. In 2017, after a federal judge blocked the deal, Aetna agreed to pay Humana $1 billion to walk away from a planned merger. That same year, another mega-merger deal for Anthem, now Elevance Health, to acquire Cigna for $48 billion was blocked 

Aetna is now owned by CVS Health. That merger closed in 2018.

Antitrust scrutiny, interest rates and fears of a recession hampered M&A deals this year, with more economic optimism seen for 2024, according to Akerman healthcare partners Robert Slavkin and Jordan Cohen.

THE LARGER TREND

Cigna would have been able to combine its strong commercial insurance and pharmacy benefit unit to Humana's size in the Medicare Advantage business.

Humana's Medicare business is much bigger and more profitable than Cigna's, but Cigna's $54 billion acquisition of Express Scripts in 2018 made it one of the biggest players in the pharmacy benefits business, WSJ has said. 

Twitter: @SusanJMorse
Email the writer: SMorse@himss.org