Cigna walks away from Humana merger to boost Medicare Advantage
REPORTS
Cigna will again come up short on a sought-after merger with Humana, with the Bloomfield giant reportedly ending talks for a combination that would have bolstered its Medicare Advantage membership.
Reuters reported the deal’s collapse on Sunday citing an unnamed source, with the Wall Street confirming the development from multiple sources. The Wall Street Journal had reported the Cigna-Humana talks in late November.
On Sunday, Cigna issued a statement on plans spend $10 billion to buy back shares of its stock on the market, boosting its shares 12 percent to nearly $290 prior to Monday’s opening bell. The stock’s all-time high was $334.31 in December 2022.
“We believe Cigna’s shares are significantly undervalued and repurchases represent a valueenhancing deployment of capital as we work to support high-quality care, improved affordability, and better health outcomes,” Cigna CEO David Cordani was quoted saying in a press release. “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 valueenhancing divestitures.”
Cigna profits were down by half in the third quarter from a year earlier to $1.4 billion, even as it increased revenue 8 percent to $49 billion. Earnings included the impact of a $171 million settlement with the U.S. Department of Justice to resolve litigation over amounts Cigna had sought for reimbursement under its Medicare Advantage book of business.
Under Medicare Advantage, the federal government reimburses insurers for offering coverage to people who would otherwise obtain it directly through Medicare, with many plans including additional coverage beyond basic Medicare. Cigna generated $2.2 billion in Medicare Advantage revenue in the third quarter, a 12 percent increase from a year earlier.
Humana has a dominant share of the Medicare Advantage market, with reporting premiums of $21.8 billion in the third quarter, up 19 percent from a year ago, including a standalone prescription drug program under Medicare Part D. On Monday morning, the Louisville, Ky.-based carrier’s shares were up 2 percent to nearly $492.
“We continue to prioritize zeropremium offerings, low-cost share for highly utilized services, including primary care and Part D, and maintain highly valued supplemental methods like dental and Part B give-backs,” said Humana CEO Bruce Broussard, speaking in November on a conference call.