Humana puts itself up for sale, reports say

A takeover of the company would likely be the largest health insurance acquisition since the $20 billion merger of Anthem and WellPoint in 2003.

Humana, the former nursing home operator turned Medicare insurance giant, is apparently up for sale in what could the biggest health insurance acquisition ever.

Humana executives are putting the 54-year-old company on the market and have hired Goldman Sachs as an advisor, reported the Wall Street Journal. Humana’s shares hit an all-time high of $219 when the news broke on Friday.

Humana is valued at more than $25 billion, with revenue last year of $48 billion. A takeover of the company would likely be the largest health insurance acquisition since the $20 billion merger of Anthem and WellPoint in 2003.

[Also: Tracking 2015 mergers and acquisitions]

The Wall Street Journal reported that Humana’s possible buyers are Aetna and, in what would be more of a merger, Cigna, which had 2014 revenue of $34 billion.

Louisville-based Humana has the second largest membership in Medicare Advantage, one of the fastest growing insurance segments thanks to the Baby Boomer retirement wave. Humana’s 3 million Medicare Advantage customers and 7 million Part D members added to another national insurer’s membership would rival UnitedHealth Group’s 3.2 million Medicare Advantage population.

Brian Kane, Humana’s CFO since 2014, is also a 17-year Goldman Sachs M&A veteran. Kane worked on deals such as Aetna’s $7.3 billion acquisition of Coventry and Amerigroup’s $4.9 billion sale to WellPoint.

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There is a piece of uncertainty with Humana, though. The Justice Department is investigating  the company’s risk adjustment practices in Medicare Advantage plans. 

With the Affordable Care Act’s medical cost ratio effectively capping insurer’s profit margins, publicly traded insurers are going to have to increase membership to grow earnings in the long-term.

“We view this step as a trigger event in a managed-care industry overdue for consolidation,” as Leerink Partners analysts wrote recently. “We expect the next year will see multiple strategic actions among the major players.”

Twitter: @AnthonyBrino