Humana to Sell the Company; Hinting Consolidation in Health and Insurance Industry

Humana SharesHealth insurer Humana Inc. (NASDAQ/HUM) is considering selling the company, a move that could trigger a widely anticipated wave of consolidation in the health and insurance industry. (Source: The Wall Street Journal, May 29, 2015.)

Humana has received indications of takeover interest and is working with advisers at The Goldman Sachs Group, Inc. (NASDAQ/GS). Aetna Inc. (NASDAQ/AET) and Cigna Corporation (NASDAQ/CI) are among those that have held preliminary discussions with the company.

Shares of Humana jumped 17% to $209.49 in Friday’s afternoon trading. The stock hit a new 52-week high of $211.25 following the news. It had risen 42% over the past year, before the latest news, as The Affordable Care Act, which requires individuals to have health insurance, has been spurring demand.

Humana is engaged in providing health insurance and Medicare plans. The company offers health and supplemental insurance plans to serve individuals, families, seniors, servicemen and servicewomen, and veterans. Humana gets the bulk of its revenue from patients using Medicare, the federal health-insurance regime for older Americans that is often administered by private insurers. (Source: Reuters, May 29, 2015.)

Humana is one of the five health insurers that bankers and analysts have long considered ripe for consolidating the industry. Besides Aetna and Cigna, the other major insurers are UnitedHealth Group Incorporated (NASDAQ/UNH), the largest by revenue, and Anthem, Inc. (NASDAQ/ANTM)

Aetna shares rose 2.3% in afternoon trading Friday. Cigna jumped 4.3%, UnitedHealth gained 1.2% and Anthem added 3.1%.

Since Obamacare came into effect in 2013, it has generated millions of potential new customers by requiring American citizens to have health insurance.

On March 23, 2010, President Obama signed The Affordable Care Act. The law put in place comprehensive health insurance reforms that put consumers back in charge of their health care. (Source: U.S. Department of Health and Human Services, last accessed May 29, 2015.)