Health insurance stocks climb early, as merger talk centers on possible Anthem-Cigna combo

Industries Associated Press

Major health insurers are trading higher before the opening bell Monday after Anthem went public with a bid to buy Cigna for about $47 billion and a report of another major acquisition surfaced.

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Analysts following the managed care sector have speculated for weeks that the five largest health insurers would become three with major deals brewing.

On Saturday, the Blue Cross-Blue Shield insurer Anthem Inc. said it was raising the offer it had made for Cigna to a combination of cash and stock worth $184 per share. That represents a premium of more than 35 percent to the closing price of Cigna shares in late May, before reports of industry merger talks started heating up.

Also on Saturday, The Wall Street Journal, citing anonymous sources, said Aetna Inc. has made an offer to buy the Medicare Advantage coverage provider Humana Inc., a deal that would join the nation's third and fifth largest health insurers.

Cigna called Anthem's bid inadequate Sunday, said it was skewed in favor of Anthem shareholders and complained about a lack of growth strategy from Anthem.

However, Leerink analyst Ana Gupte said Cigna's concerns appear to be surmountable.

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"We expect that while (Cigna) may negotiate for a modestly higher price, that this deal will be consummated," the analyst wrote.

Gupte said UnitedHealth Group Inc., the nation's largest health insurer, and the Anthem-Cigna, Aetna-Humana combinations will be able to grow revenue more efficiently in a market shaped by the health care overhaul.

Gupte and others have noted that these deals can give insurers more leverage in negotiating rates with care providers and they allow the insurers to spread their costs over a wider customer base, among other advantages.

Shares of Cigna Corp. soared 8 percent, or $12.41, to $167.67, more than an hour before markets opened Monday. Humana Inc. rose 2.3 percent, or about $4.57, to $206.88; Anthem jumped nearly 3 percent, or $4.74, to $169.80; and Aetna Inc. climbed 2.4 percent, or $2.91, to $126.98.

Even UnitedHealth climbed 2 cents to $120.35. The insurer wasn't linked to any weekend deal talk, but The Wall Street Journal also has reported recently that it made a preliminary offer for Aetna.