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October 08, 2021 at 12:41 PM
What You Need to Know
- Cigna has a market cap of about $68 billion.
- It spent $4.1 billion on share buybacks in 2020, and $4.1 billion in buybacks through Aug. 4 in 2021.
- Cigna and Chubb hope to complete the deal by Dec. 31, 2022.
Cigna Corp. has agreed to sell life, accident and supplemental health benefits businesses in seven markets to Chubb for $5.75 billion.
The Bloomfield, Connecticut-based health insurer said Thursday it expects to come away from the deal with $5.4 billion in cash.
David Cordani, Cigna’s CEO, said in a statement that the sale will help the company advance its strategic focus.
Evan Greenberg, Chubb’s CEO, said the deal will help his company get a bigger share of its revenue from markets in Asia.
Share Buybacks
For U.S. agents and brokers, the deal may mean that Cigna’s U.S. Medicare plan and commercial health plan operations will face a little less pressure to generate the cash needed to reward shareholders this year.
Cigna plans to use the Chubb deal proceeds mainly to buy back shares of its own stock.
“The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternate uses of capital,” the company said.
Many shareholders like buybacks, because buybacks tend to push up the price of the shares still in outside investors’ hands.
The total value of Cigna’s outstanding stock, or market capitalization level, is about $68 billion. If Cigna spent $5.4 billion on share buybacks today, and the purchases had no influence on the price of the stock, the company could, in effect, buy about 8% of itself back from outside shareholders.
