U.S. health insurer Cigna Group has reportedly reignited discussions to merge with smaller competitor Humana, according to sources familiar with the matter. This comes after the company had previously abandoned the pursuit late last year. The two companies have recently engaged in informal talks about the potential deal.
Following this news, shares of Humana, which has a market capitalization of approximately $32 billion, surged by about 6% in after-hours trading on Friday. On the other hand, Cigna’s shares dropped by around 5%. Cigna’s market value is estimated at about $94 billion.
Both Cigna and Humana declined to provide any comments regarding the merger discussions. Last year, it was reported that Cigna had halted its efforts to acquire Humana due to disagreements over the price. Instead, Cigna announced a $10 billion shares buyback program.
It is important to note that no final decision has been reached, and either Cigna or Humana may choose to delay any potential deal until after the new year or decide not to proceed with the merger at all.
Cigna, known for its focus on employer-sponsored healthcare plans, is currently in the process of divesting its Medicare Advantage (MA) business, which provides government-backed health insurance for individuals aged 65 and older. Earlier this year, the company struck a $3.3 billion deal with insurer Health Care Service Corp to sell its MA business.
Meanwhile, Humana has experienced a significant decrease in its value this year, with a nearly 40% decline. The company is facing various challenges, including declining enrollments in its Medicare plans, increased costs due to higher demand for medical services, and lower-than-expected reimbursement rates from the government.
Although the previous deal talks between Cigna and Humana did not materialize, sources indicated that there could still be a possibility of a merger in the future. However, concerns about potential antitrust scrutiny loomed over the discussions due to the potential consolidation in the U.S. health insurance industry.
Reporting by Mariam Sunny in Bengaluru; Editing by Alan Barona