Cigna Committed To Fighting Antitrust Lawsuit, But Keeps Options Open

July 30--Cigna will continue to work with its would-be buyer Anthem as the companies seek to convince a federal judge and regulators that their merged insurance giant would not be detrimental to consumers.

The CEO of Bloomfield-based Cigna, David Cordani, told analysts during an earnings call Friday that it is "clearly our intent and commitment" to continue contributing significant time and resources to work on finalizing the $54 billion acquisition by Indianapolis-based Anthem.

The U.S. Department of Justice and several state attorneys general filed a lawsuit last week to block the proposed deal and a separate lawsuit that would also block Aetna's proposed acquisition of Humana. The DOJ argues that the insurance company deals would hurt consumers because they are anti-competitive.

Anthem said it was committed to fighting the lawsuits immediately following their filings. Cordani said Anthem "independently decided" to fight the suit.

Cordani also told stock analysts that "if there is not a combination to be had," an independent Cigna will continue to work on innovation, growth and its financial performance.

Should the deal not go through, Cordani noted Cigna would have more than $5 billion in cash after receiving a termination fee. He said the top priority for that money would be supporting the business, buying other companies and completing share repurchases.

Analyst A.J. Rice from UBS asked Cordani, "Am I hearing you right, that now Cigna's view is we're going to play out the litigation through to its conclusion?"

Cordani said, "Yes and a 'but.'"

He said, "The 'but' is, it's a dynamic process."

He did not address whether Cigna would agree to extend the deal deadline past April 30. Anthem told a federal judge that it needed the trial to begin in October in order to meet that deadline. Government antitrust lawyers argued that the trial cannot begin that soon on such a complex case, and that the deadline in the merger agreement is not relevant, since the parties can extend it if they wish.

Most of the questions on the call were about losses in insurer's disability and life insurance group, which caused a drop in earnings.

Net income excluding one-time items was $515 million, or $1.98 a share in the second quarter, compared with $664 million, or $2.55 per share, for the same period in 2015. Analysts polled by Bloomberg were expecting $2.37 per share.

The disability and life insurance division swung from a 10 percent profit margin in 2015's second quarter to a 1.1 percent loss this year.

Cigna is working to resolve problems the Centers for Medicare and Medicaid Services identified in both its Medicare prescription plan administration and its Medicare Advantage plans. The company sells Medicare plans in 15 states, Puerto Rico and the Virgin Islands, and has been barred from signing up new customers under sanctions imposed in January. The Centers for Medicare and Medicaid Services said "Cigna's conduct poses a serious threat to the health and safety of Medicare beneficiaries," because of its pattern of delays and denials of claims.

The company said the costs of that audit, as well as medical cost pressure in its individual health division, weighed on profits.

A Goldman Sachs analyst asked Cordani to say whether he was optimistic that Cigna could satisfy Medicare regulators, and get the ban lifted before the open enrollment period.

Cordani did not express optimism. He said that the team knows how important it is to get it resolved as quickly as possible and comprehensively. But he said in response to another question, if the sanctions continue through the end of the year, he does not expect a sharp loss of customers, because current customers can stay with the company, and attrition has not been especially high.

He said the company will have to decide in the next month or so whether it will be buying advertising, expanding call center capacity and implementing other marketing plans for the open enrollment season. Cordani said he could not speculate on when CMS would clear them to sell again.

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