On the 29th (local time), the US health insurers Cigna and Humana are reportedly considering a merger, according to sources cited by the Wall Street Journal (WSJ). Following the news of the merger talks, the stock prices of both companies have shown a decline during the trading session.
According to reports, the two companies are currently discussing a merger with the goal of finalizing a deal by the end of the year. If the merger is completed, it would create a large health insurance company comparable to UnitedHealth Group and CVS Health. As of this morning, the market capitalization of Cigna and Humana stood at approximately $83 billion and $62 billion, respectively.
The merger talks come after reports that Cigna is seeking to sell its Medicare Advantage business, which manages government health insurance for seniors aged 65 and older. For Cigna, merging with Humana, the second-largest Medicare insurer after UnitedHealth and a company strong in commercial insurance, is expected to create synergies. The WSJ noted, "Cigna has not gained significant momentum in Medicare, which is considered the biggest growth driver in the insurance industry," adding, "A merger with Humana would address this issue and position Cigna as a major healthcare provider."
Cigna and Humana also explored a merger in 2015, but the deal fell through when Humana entered into a merger agreement with Aetna. Subsequently, the Humana-Aetna merger was blocked due to antitrust concerns, and Aetna was acquired by CVS in 2018.
The merger between the two companies is expected to be one of the largest deals in this year's mergers and acquisitions (M&A) market. It is also seen as a new impetus for the sluggish M&A market. According to Dealogic, the scale of M&A in the US has declined by 16% compared to the previous year, totaling around $1.2 trillion so far this year.
However, following the news of the merger talks, the stock prices of both companies have declined. On the New York Stock Exchange this afternoon, Cigna's stock price is trading about 7.5% lower than the previous close. Humana's stock price is also down by around 5%.
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