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Healthcare company Cigna has entered into a definitive agreement to sell its Medicare Advantage, Supplemental Benefits, Medicare Part D, and CareAries businesses to Healthcare Services Corporation (HCSC) for approximately $3.7 billion.
As part of the transaction, Cigna Group and HCSC have agreed to a four-year service agreement under which Evernorth Health Services, a Cigna subsidiary, will continue to provide pharmacy benefit services to Medicare businesses following the closing of the transaction. did.
The transaction is expected to close in the first quarter of 2025, subject to customary regulatory approvals. There are no financing conditions.
what is the impact
David Cordani, chairman and CEO of Cigna Group, said the move will help the organization drive value for stakeholders, as well as the ability to accelerate growth and investment in its service platform. He said it will help strengthen the.
He said the decision is part of Cigna's portfolio management approach and is aimed at allocating resources to growing Evernorth Health Services and Cigna Healthcare.
“While we continue to believe that the overall Medicare space is an attractive segment of the healthcare market, our Medicare business requires continued investment, focus and focus that is disproportionate to its size within the Cigna Group portfolio. , requires dedicated resources,” Cordani said. “Our Evernorth Health Services business portfolio continues to show significant and meaningful growth opportunities for government services, including Medicare.”
The transaction is expected to be accretive to Cigna Group's adjusted earnings per share in 2025. Cigna also reaffirmed its 2024 outlook, targeting consolidated adjusted operating earnings per share of at least $28 for the full year 2024. The company's annual adjusted earnings per share growth target is 10-13% while maintaining an attractive dividend.
Upon completion of the sale, Cigna Group intends to use the proceeds of the transaction strategically in line with its capital allocation priorities, with a significant portion of the proceeds intended for share repurchases.
bigger trends
Considering a sale of its Medicare Advantage business was one of the reasons Cigna sought to merge with Humana, but the merger was called off in December.
The merger would have created a company worth more than $140 billion based on market value.
Six years ago, regulators blocked another insurance merger deal. In 2017, Aetna agreed to pay Humana $1 billion to exit the planned merger after a federal judge blocked the deal. That same year, another mega-merger deal was blocked, with Anthem (now Elevance Health) acquiring Cigna for $48 billion.
On record
“HCSC is a leader in and expanding access to affordable, high-quality care for people at every stage of life,” said Maurice Smith, CEO, President and Vice Chairman of HCSC. We are strengthening our efforts to do so.” “This acquisition complements our growth strategy in the large and growing Medicare market and provides HCSC and its members with many benefits, including a broader product offering, stronger clinical programs, and broader geographic reach. We look forward to delivering our proven services to even more people as we expand our membership and provider engagement model to even more people. We are excited to welcome the expertise of Cigna's Medicare and CareAllies teams. ”
Jeff Lagasse I am the editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a publication of HIMSS Media.
