Cigna has reportedly restarted talks with Humana about a merger, nearly a year after the former deemed the price too rich and walked away. Yet Cigna this year has dodged the problems sending managed-care stocks to one of the worst-performances among industry groups. Meanwhile, Humana's struggles with Medicare Advantage cost overruns may have helped bridge the gap over valuation.
Cigna stock fell sharply in early Monday stock market action. Humana rallied moderately. As of Friday, Cigna had a market capitalization of nearly $94 billion, while Humana was valued around $32 billion.
2024 Election: Why It Could Impact Cigna-Humana Deal
The renewed talks are still early, Bloomberg News reported. The Wall Street Journal anticipated another potential attempt by Cigna to land Humana in an Oct. 2 "Heard on the Street" column, while noting that the outcome of the 2024 election loomed large. A victory by former President Donald Trump might lower the bar for a big managed care merger to skirt a government antitrust challenge.
Regulation might also be more favorable to Medicare Advantage under a GOP administration, which could make Humana an even more attractive target, though likely a more expensive one.
Cigna's focus on private, employer-based coverage has been advantageous lately as other managed care players including UnitedHealth Group, Centene and Elevance Health have taken lumps from increased utilization of Medicare Advantage by seniors and worse health, on average, for Medicaid beneficiaries after about 25 million were belatedly dropped from the program after a Covid pause in income limits.
Humana has suffered the biggest fallout among Medicare Advantage players after its biggest plans lost their four-star rating from Medicare early this month. The upshot is that Humana faces a big revenue hole for 2026, unless its appeal of the decision proves successful. While Medicare Advantage is seen as an attractive growth market as baby boomers continue to age, Humana could face a long road to recovery, with HUM stock down 49% from its 52-week high.
Cigna investors celebrated the company's decision to walk away from merger talks with Humana last December, partly because it was announced along with a plan to buy back an extra $10 billion worth of CI stock.
CI, HUM Stock Performance
CI stock fell 3.7% in early Monday stock market action, while HUM stock rose 1.1%. Cigna had been closing in on a buy point until a nearly 5% sell-off on Friday. It's not clear if that selling came as investors began to catch wind of a renewed courtship of Humana.
Humana stock plunged earlier this month to its lowest level since March 2020, but has rebounded the past two weeks as investors went bargain-hunting.
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