Cigna confirms it is not pursuing Humana acquisition

Dive Brief:

• Cigna has confirmed it is not pursuing an acquisition of rival health insurer Humana, putting to bed yearlong rumors of a combination.
• “In light of recent and persistent speculation, The Cigna Group expects to communicate that the company is not pursuing a combination with Humana Inc. The Cigna Group remains committed to its established M&A criteria and would only consider acquisitions that are strategically aligned, financially attractive, and have a high probability to close,” the company said in a statement Monday.
• Humana’s stock fell 5% in Monday morning trading following the statement, while Cigna was up 7%.

Dive Insight:

Cigna and Humana opened talks about a potential merger late last year, but tabled discussions amid failure to agree on price and investor uncertainty about a tie-up. However, the two managed care companies revived talks to combine this fall, according to reports.

A deal between Cigna and Humana would have created a healthcare giant with roughly $300 billion in annual revenue and the kind of scale to rival behemoths UnitedHealth and CVS.

However, Cigna CEO David Cordani pushed back on the speculation during an earnings call late last month, saying the health insurer plans to use excess cash to buy back shares instead of on M&A.

Year to date, Cigna has repurchased $6 billion worth of stock, including $1 billion so far in the fourth quarter, and will continue to actively repurchase shares, according to the statement. When the sale of its Medicare business closes, expected in the first quarter of 2025, Cigna also plans to direct “the majority of proceeds” to repurchasing shares.

Cigna’s stipulations that any M&A target be “strategically aligned, financially attractive, and have a high probability to close” does largely count Humana out.

Experts did expect a Cigna-Humana combination would be approved by regulators. However, Humana, which focuses heavily on government plans in Medicare and Medicaid, has struggled with poor financial health this year amid dogged challenges in Medicare Advantage — a business that Cigna is exiting altogether and appears wary of reentering.

Cigna expects to reaffirm 2024 adjusted income from operations guidance of at least $28.40 per share, and adjusted earnings per share growth of at least 10% next year during meetings with investors over the next few weeks, the statement said.

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