Cigna and Humana Call Off Their Merger

Like celebrity marriages, some company tie-ups aren’t meant to last.

Following reports of merger discussions just two weeks ago, health insurance players Humana and Cigna are walking away from what would’ve been the largest deal of the year, according to a report Sunday from the Wall Street Journal. Of course, Cigna had an insurance plan.

Cold Feet

When the Wall Street Journal reported on merger talks at the end of November, the logic behind a deal was simple: Cigna (market cap: $83 billion) would absorb Humana (market cap: $62 billion), and its huge Medicare business alongside Cigna’s massive pharmacy-benefit unit. Together, the two would elbow their way into the big kids’ table with insurance supermajors like United Health and CVS.

But not everyone was on board. Cigna investors quickly balked at the deal. And now Cigna is trying to make it up to them:

• Following last month’s reports, both companies’ market caps plunged, with Cigna’s share price falling by roughly 10% as investors quickly soured on the planned deal.
• With the deal scuttled, Cigna is planning an additional $10 billion in stock buybacks. That brings its buyback total to over $11 billion this year, with a plan for another $5 billion of buybacks in the first half of 2024, according to the WSJ.

Sellout: Humana owns the second-biggest Medicare business in the industry, and a deal would’ve brought Cigna deeper into the increasingly lucrative space. Instead, Cigna is now looking to divest its own relatively small Medicare unit in a deal that could be worth several billions of dollars. It couldn’t marry into Medicare so it’s quitting.