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Cigna's (CI) Medicare Advantage Unit Draws Acquisition Interest
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The Cigna Group’s (CI - Free Report) medical coverage division for individuals aged 65 and above is reportedly attracting acquisition interest from companies such as Health Care Service Corp. and Elevance Health, Inc. (ELV - Free Report) , according to Bloomberg sources. The final bids for Cigna's Medicare Advantage unit are expected next week, with the potential to generate more than $3 billion from the divestiture.
CI's Medicare Advantage business is projected to incur losses in the current year and the following year, per Bloomberg. The business, which has a comparatively smaller enrollment of 600,000 people as of March, is facing growing competition. In a recent press release, Cigna announced its intention to evaluate bolt-on acquisition opportunities and explore "value-enhancing divestitures."
This strategic decision follows the reported breakdown of Cigna’s merger plan with Humana Inc. (HUM - Free Report) due to disagreements over pricing. According to a Wall Street Journal report, the companies had been considering a cash-and-stock deal, generating both investor interest and concerns. The complexities involved, including anticipated regulatory scrutiny, contributed to the challenges in reaching an agreement.
Healthcare economist Craig Garthwaite from Northwestern University, as reported by Reuters, highlighted that divesting Cigna's Medicare Advantage business could have reduced operational overlap between the involved companies, potentially improving the chances of a successful merger with HUM. The divestment is expected to assist Cigna in streamlining its operations and freeing up capital, thereby allowing the company to focus on its more profitable assets and boost shareholder value.
Cigna recently disclosed an increase of $10 billion to its share buyback program. The company plans to allocate the majority of its discretionary cash flow in 2024 towards share repurchases. With the goal of buying back at least $5 billion worth of shares by the end of the first half of 2024, Cigna is signaling a commitment to returning value to its shareholders through this substantial buyback initiative.
Price Performance
Shares of Cigna have gained 8.1% in the past year compared with the 14.2% rise of the industry it belongs to.
The Zacks Consensus Estimate for Centene’s 2023 earnings indicates a 15.2% year-over-year increase to $6.66 per share. It has witnessed nine upward estimate revisions over the past 60 days against no movement in the opposite direction. The consensus mark for CNC’s 2023 revenues indicates 4.4% growth from a year ago.
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Cigna's (CI) Medicare Advantage Unit Draws Acquisition Interest
The Cigna Group’s (CI - Free Report) medical coverage division for individuals aged 65 and above is reportedly attracting acquisition interest from companies such as Health Care Service Corp. and Elevance Health, Inc. (ELV - Free Report) , according to Bloomberg sources. The final bids for Cigna's Medicare Advantage unit are expected next week, with the potential to generate more than $3 billion from the divestiture.
CI's Medicare Advantage business is projected to incur losses in the current year and the following year, per Bloomberg. The business, which has a comparatively smaller enrollment of 600,000 people as of March, is facing growing competition. In a recent press release, Cigna announced its intention to evaluate bolt-on acquisition opportunities and explore "value-enhancing divestitures."
This strategic decision follows the reported breakdown of Cigna’s merger plan with Humana Inc. (HUM - Free Report) due to disagreements over pricing. According to a Wall Street Journal report, the companies had been considering a cash-and-stock deal, generating both investor interest and concerns. The complexities involved, including anticipated regulatory scrutiny, contributed to the challenges in reaching an agreement.
Healthcare economist Craig Garthwaite from Northwestern University, as reported by Reuters, highlighted that divesting Cigna's Medicare Advantage business could have reduced operational overlap between the involved companies, potentially improving the chances of a successful merger with HUM. The divestment is expected to assist Cigna in streamlining its operations and freeing up capital, thereby allowing the company to focus on its more profitable assets and boost shareholder value.
Cigna recently disclosed an increase of $10 billion to its share buyback program. The company plans to allocate the majority of its discretionary cash flow in 2024 towards share repurchases. With the goal of buying back at least $5 billion worth of shares by the end of the first half of 2024, Cigna is signaling a commitment to returning value to its shareholders through this substantial buyback initiative.
Price Performance
Shares of Cigna have gained 8.1% in the past year compared with the 14.2% rise of the industry it belongs to.
Image Source: Zacks Investment Research
Zacks Rank and A Key Pick
Cigna currently has a Zacks Rank #3 (Hold).
A better-ranked stock in the medical space is Centene Corporation (CNC - Free Report) , which carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Centene’s 2023 earnings indicates a 15.2% year-over-year increase to $6.66 per share. It has witnessed nine upward estimate revisions over the past 60 days against no movement in the opposite direction. The consensus mark for CNC’s 2023 revenues indicates 4.4% growth from a year ago.