Cigna
adding a significant amount to its share buyback program and said Sunday that given the current environment it would consider “bolt-on” acquisitions.
The health insurer said it would buy another $10 billion of its shares, for a total of $11.3 billion, with half of the additional stock to be purchased between now and the middle of 2024. That comes as Cigna steps away from a possible deal to combine with
Humana,
The Wall Street Journal reported earlier on Sunday.
“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 CEO David M. Cordani in a statement on Sunday.
Cigna said in the statement that as it looks across strategic opportunities, “we will consider bolt-on acquisitions aligned with our strategy, as well as value-enhancing divestitures.”
A deal with Humana would have created an estimated $140 billion health-insurance industry giant, the Journal reported.
The two companies couldn’t agree on price and other financial terms, the Journal reported, citing people familiar with the matter. A Cigna representative didn’t respond to a Barron’s request for comment.
The Journal last month reported that Cigna and Humana were discussing a deal in which Cigna would have acquired Humana in a cash-and-stock transaction with a large stock component, the sources said. Cigna shares have dropped nearly 10% since the talks emerged amid questions about paying for the deal with stock.
The stock drop signaled uneasiness about Humana’s willingness to make the deal, and whether that means management believes that “growth could moderate” in the future,
Mizuho
healthcare equity strategist Jared Holz told Barron’s.
It also raised questions about why Humana, which trades at a much richer valuation, would want to combine with larger but slower-growing Cigna, and what that says about the Medicare Advantage market.
Despite the recent decline, Cigna on Friday had a market value of roughly $76 billion, and Humana’s market value was about $59 billion.
Cigna believes that regulators would have permitted the deal, despite the Biden administration’s increased scrutiny of mergers and acquisitions.
Cigna on Sunday reaffirmed its outlook of full-year 2023 consolidated adjusted income from operations of at least $24.75 a share. It said it continues to target consolidated adjusted income from operations of at least $28 a share for full year 2024.
Write to Liz Moyer at [email protected] and Janet H. Cho at [email protected]
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