Another Health Care Insurance Merger in the Works? (UNH, CI, AET, HUM)

Investing

Published: June 9, 2011 12:49 pm

Last Updated: June 10, 2011 5:34 am

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It is no secret that health care insurance and health care service providers are going to continue to consolidate in the months or years ahead. We have already seen UnitedHealth Group, Inc. (NYSE: UNH) roll up many companies into a $54 billion market value. We are seeing some fresh reports today that CIGNA Corporation (NYSE: CI) and Aetna Inc. (NYSE: AET) may tie the not.

If these two are in real merger talks remains to be seen, but Barclays gave 10 reasons that would justify a merger. Our take is that the companies may be too much a merger of equals (or near-equals). The CIGNA CEO has talked about the merits of a tie-up but we have not delved too deeply into that possibility other than the obvious consolidation trends we expect.

CIGNA was just raised to Outperform at Zacks yesterday and the firm also has a rating on Aetna shares.

We also just saw this morning that Credit Suisse reiterated an Outperform rating on UnitedHealth Group, Inc. (NYSE: UNH) and its target was raised to $69.00 at the firm. At almost $50.00 after a 3.6% gain that still represents much upside.

Aetna was also recently named as a Forbes winner of Obamacare.

We cannot really leave Humana Inc. (NYSE: HUM) untapped in this effort. Humana trades at $79.75 after a 2.6% gain today, its 52-week range is $43.59, and its market cap is $13.4 billion. We still consider Humana as an acquirer rather than as a seller, but we learned long ago that anything is possible in mergers. Add in industry pressure of the magnitude of the last three years and you will understand even more why these companies are looking at inorganic growth opportunities. Humana just acquired CareMore for Medicare coverage expansion mostly in California, Arizona, and Nevada.

CIGNA Corporation (NYSE: CI) is up 4.1% at $50.24 with a 52-week range of $29.12 to $50.45 and its market cap is just over $13.5 billion.

Aetna Inc. (NYSE: AET) is up 3.5% at $43.92 and the 52-week range is $25.00 to $46.01 and its market cap is some $16.6 billion.

You may see a merger tie-up between CIGNA and Aetna. If not, you’ll see other mergers in health care providers. It is only inevitable.

JON C. OGG

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