Cigna, Humana Are Discussing Combination of Insurance Giants

 Cigna Group and Humana Inc. are in talks to combine, but both companies’ shares dropped on the prospects of joining two of the biggest US health insurers in an industry that’s already highly consolidated.

The pair are discussing a cash-and-stock deal but the timing and structure are unclear, according to people familiar with the matter. Deliberations are ongoing and there’s no certainty they’ll result in a deal, according to the people, who asked not to be identified discussing confidential information. Representatives for the two companies didn’t respond to requests for comment.

Cigna closed down 8.1% on Wednesday, its biggest one-day loss in more than two years, while Humana fell 5.5%. The bearish market response signals investors in both companies think a combination, and what it would take to close it, may be worth less than the sum of its parts.

There are strategic reasons for the companies to join up: Cigna owns Express Scripts, one of the largest managers of pharmacy benefits, a line of business where Humana is a less significant player. Humana is one of the biggest providers of private Medicare Advantage plans, while Cigna’s Medicare business is small by comparison. And Humana has said it is going to stop selling employer coverage, where Cigna is strongest.

But the US health insurance industry is already highly concentrated. Cigna’s market cap is just under $80 billion while Humana’s is almost $60 billion. Even if their combination looks far smaller than UnitedHealth Group Inc. — the market leader with a market value of almost half a trillion dollars — it would surely trigger antitrust scrutiny from the competition-conscious Biden administration.

https://finance.yahoo.com/news/cigna-humana-discussing-cash-stock-174554774.html