Is There a Merger Rift Between Anthem and Cigna?

WASHINGTON -- Newly unsealed court testimony shows health insurers Anthem Inc. and Cigna Corp. have significant disagreements about their proposed merger, revealing new details about a rift that is highly unusual for two companies pressing ahead with a merger request.

A trial on the would-be merger began last week after the Justice Department decided to challenge it on antitrust grounds. Substantial parts of the case have been open to the public, but U.S. District Judge Amy Berman Jackson closed the courtroom for crucial portions of testimony by Anthem CEO Joseph R. Swedish and Cigna CEO David Cordani, after the companies said the sessions would involve potentially confidential business information.

The judge ordered the transcripts of the testimony unsealed Monday, however, after seven media organizations, including The Wall Street Journal, raised objections to keeping it sealed.

Anthem and Cigna have quarreled for months behind the scenes even as their push to combine has moved forward, with each company accusing the other of violating their merger agreement.

In testimony from last Tuesday, reviewed by The Wall Street Journal after the judge ordered it unsealed, Mr. Swedish said Anthem had established a highly confidential team to work on merger integration without Cigna even knowing about it.

The situation appeared to puzzle the judge. "How do you work on integration without talking to the person you're integrating with?" Judge Jackson asked.

Mr. Swedish responded that the team was established only after Cigna quit participating in certain integration efforts on the advice of its lawyers.

The Justice Department, in its questioning of Mr. Swedish, cited several internal documents from the companies. In one from December 2015, Mr. Swedish sent Mr. Cordani a note saying the two companies' execution of their integration plans had been "unacceptable."

Mr. Swedish's testimony also revealed significant tensions between the two sides about the responsibilities Mr. Cordani would have in a postmerger company.

Mr. Swedish said he wasn't sure if Mr. Cordani would stay with the new company at all.

Mr. Cordani, in his own previously sealed testimony, confirmed that Cigna stopped working on merger integration in the summer. He also said that Cigna is concerned that Anthem's plans for the merger would weaken Cigna's network.

If the merger doesn't go through, Cigna could receive a $1.85 billion breakup fee from Anthem.

Cigna declined to comment, and Anthem representatives couldn't immediately be reached for comment.

The Justice Department has sought to make the companies' discord an issue in the case, saying the tension would impede any benefits from the merger. But Mr. Swedish in his testimony said the disagreements wouldn't deter Anthem from moving forward if the court approves the deal.

"I want to underscore all this stuff about conflict or whatever you want to call it -- to me, it's noise that doesn't relate to the state of readiness we now have and our ability to move forward," he said.

Write to Brent Kendall at brent.kendall@wsj.com and Anna Wilde Mathews at anna.mathews@wsj.com