Cigna CEO discusses options if Anthem merger fails

Cigna CEO David Cordani discusses "Collaborative Accountable Care." (Photo: Courtesy of Cigna)

Cigna plans to support Anthem as it fights the Justice Department’s lawsuit against their merger, CEO David Cordani told investors, but he also left the door open for the insurer to re-evaluate its options--including pursuing other growth opportunities if the deal fails.

Anthem CEO Joseph Swedish has made it clear that his company will challenge the DOJ’s complaint, arguing the merger will provide benefits including more competition in the Affordable Care Act marketplaces. Aetna and Humana also are readying for a court battle to defend their merger against a related DOJ suit.

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On a second-quarter earnings call with investors Friday, Cordani pointed out that the court fight is Anthem’s choice.

“To be clear, Anthem has been running the regulatory process, which is consistent with the contract,” he said. “Anthem independently decided to pursue the lawsuit with the DOJ.”

He also noted that following news of the DOJ’s decision, Cigna “stepped back briefly to evaluate our options consistent with our obligations under the merger agreement,” seeking to understand officials’ “various and significant concerns” about the merger.

While Cordani indicated that Cigna is committed to fulfilling its contractual obligations to Anthem to fight for the merger, he also pointed out that it is a “dynamic process” and that in order to protect its shareholders’ interest, the insurer will engage in “ongoing evaluation and monitoring of all options as they unfold.”

If the deal does not go through, Cigna will look into pursuing “additional growth opportunities” as well as “further create shareholder value with the tremendous capital flexibility we have created over the last several years,” which would total $5 billion in deployable cash in the second half of 2017, Cordani added. Some analysts have predicted that a failure of the Anthem-Cigna and Aetna-Humana deals could lead to smaller acquisitions in the insurance industry or stock buybacks.

On the earnings front, Cigna’s Q2 earnings per share lagged behind expectations due to the “disappointing performance” of its group disability and life segments, Cordani said, despite the solid performance of its global healthcare segment.

- here’s the earnings call webcast
- view the Q2 results announcement

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