As a string of big-ticket acquisitions spring up across the health insurance industry, one major insurer, Anthem, is sitting on the sidelines — a move that could pay off for them financially, The Wall Street Journal argues.
Several large, pending deals in the insurance sector have emerged recently, including CVS Health's proposed acquisition of Aetna, Cigna's plans to purchase pharmacy benefits manager Express Scripts, and Walmart's possible purchase of Humana. In addition, insurance giant UnitedHealth Group recently acquired several surgical care centers and physician staffing groups.
The insurance industry's expected slowdown in membership growth is one reason insurers are rushing into these deals, according to the WSJ. However, one key industry player, Anthem, has largely sat out of these big-ticket acquisitions.
Anthem's "laggard" status actually places the insurance giant in a position of strength, argues the WSJ.
Here are six reasons the WSJ thinks Anthem may benefit from its patience.
1. The recent large insurance deals are not guaranteed to close and must overcome various regulatory hurdles. This lengthy process will limit capacity for other acquisitions.
2. The deals are not necessarily popular with investors. CVS, Cigna and Walmart haven't traded higher on the stock exchange since reports of the deals emerged. In particular, Cigna's shares have fallen 13 percent over the past month.
3. The deals aren't guaranteed to be beneficial. With these deals entering uncharted territory for the insurers, there are issues with successfully integrating these significantly different business combinations.
4. By using patience, Anthem has avoided the regulatory and integration problems for now, and will be exposed to plenty of additional opportunities to generate growth.
5. Anthem has the balance sheet wiggle room — a debt load at 35 percent of total capital — to grow if it wishes. The WSJ explains the insurer could very well purchase and integrate midsize insurers like Molina Healthcare, Centene or WellCare to expand its membership.
6. Even if Anthem's competitors gain the necessary approvals, there are still plenty of potential targets to acquire. Anthem recently announced a new PBM division, which will launch after its contract with Express Scripts expires. Acquiring smaller PBM businesses could help Anthem's PBM business grow. Anthem could also approach Walgreens Boots Alliance or a hospital system for a partnership.
Read the full WSJ report here.