Cigna Group(NYSE: CI) stock reacted to news that the large health insurer is reigniting its pursuit of a rival. Unfortunately for the company's shareholders, that reaction was largely negative, and the shares closed the trading day nearly 5% lower in price. That fall was far steeper than the 0.2% slide of the bellwether S&P 500 index.
Back to the altar?
In an article published after market close last Friday, Bloomberg wrote that Cigna is in talks with fellow health insurance major Humana(NYSE: HUM) regarding a merger of the two companies. This might sound familiar to insurance industry watchers, as the pair engaged in a series of discussions late last year that ultimately proved fruitless. Cigna was the party walking away after the two sides failed to agree on a price, according to Bloomberg reporting at the time.
Citing unnamed "people familiar with the matter," the news agency said that Cigna and Humana's current discussions are at an early, informal stage. No decision on the matter has yet been made, and it's possible the two companies could wait until 2025 to reach a deal. They might also opt not to merge at all.
Neither Cigna nor Humana has officially commented on the Bloomberg article.
Clear synergies
Humana's specialty is Medicare Advantage plans, which have come under some pressure because of constantly increasing medical costs, combined with tightening payment rules for the program. Theoretically, this business would complement Cigna's suite of offerings, which tend to focus on traditional health insurance and associated products and services. Therefore, this is a deal to watch, even though the initial reaction has been negative.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
