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Cigna Makes $5.75B Deal With Chubb

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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.

Cigna spent $4.1 billion on share buybacks in 2020, according to its earnings release for the fourth quarter of 2020.

This year, the company has already spent more than $4 billion on sharebuybacks, according to its latest earnings release.

The company has scheduled its earnings release for the third quarter for Nov. 4.

Deal Details

The markets involved in the Chubb deal include Turkey, where Cigna has a joint venture, and Hong Kong, Indonesia, Korea, New Zealand, Taiwan and Thailand.

The operations generated about $3 billion of Cigna’s $160 billion in 2020 revenue.

Cigna is keeping its expat health insurance business; its local insurance businesses in the Middle East, Europe, Hong Kong and Singapore; and joint ventures in Australia, China and India.

The expat health business serves people who spend time working and living outside their home countries.

Cigna and Chubb hope to complete the deal by Dec. 31, 2022.

David Cordani (Photo: Victor J. Blue/Bloomberg)