Cigna, Humana merger talks put on ice: WSJ

Cigna and Humana have ended merger talks amid concern from investors and an inability to pin down key financial terms, according to a media report.

The Wall Street Journal, which initially revealed the talks, reported Sunday that the deal would likely have seen Cigna acquire Humana in a cash-and-stock deal that included "a large stock component," according to sources close to the negotiations.

However, the two insurers were unable to reach an agreement, according to the report. If it had gone through, the merger would have created a $140 billion industry giant that could position itself as a rival to the largest players.

WSJ reported that Cigna will instead be working toward more smaller, bolt-on deals that can build out its capabilities.

With the deal on ice, Cigna announced that it would launch an additional $10 billion in stock buybacks. It had already earmarked some cash for buybacks, for a total of $11.3 billion, the company said.

Cigna "intends to use the majority of its discretionary cash flow for share repurchase in 2024," the insurer said. It expects about $5 billion in stock buybacks to go through before the midpoint of 2024 thanks in part to "an accelerated share repurchase program" in the first quarter.

The company took a 10% hit to its stock price amid conversation about the merger news, as skittish investors expressed concern about a strategy that leaned heavily on stock as currency, WSJ reported.

CEO David Cordani said in the release that the insurer views its shares as "significantly undervalued."

"As we look at the broader landscape and the strategic opportunities before us, we will remain financially disciplined with a clear focus on executing against our strategy, delivering value for our shareholders, and investing in our future," Cordani said. "In light of the current environment, we will consider bolt-on acquisitions aligned with our strategy, as well as value-enhancing divestitures."

WSJ also reported that Cigna is still exploring a sale of its Medicare Advantage, even with the Humana deal now scuttled. It's a relatively small player in MA, and acquiring Humana would have instead positioned it as the second-largest carrier in that market.

The outlet said the Cigna team still sees potential value in acquiring Humana.