So what: Consolidation rumors have been rampant among health insurers this year. The industry is enjoying a wave of premium revenue growth tied to demand for Medicare products and healthcare reform.
Reportedly, Anthem has been courting Cigna for months, and it made two offers to Cigna in the past 10 days, including an offer valued at $175 per share.
Cigna President and CEO David Cordani is one reason a deal between the two companies hasn't happened yet. Cordani, who has held the top spot at Cigna since 2009, apparently wants the top spot at the newly combined company.
Now what: If Anthem and Cigna can come to terms, then Anthem would land itself a leading provider of commercial health-insurance plans with nearly 14 million members.
Cigna would also bump up Anthem's exposure to healthcare reform. During the second open enrollment period, which ended this past February, Cigna offered health-insurance plans in eight states through the exchanges. Cigna would add exposure to Medicaid programs in Texas and Illinois, too.
But what might be more intriguing to Anthem could be the chance to diversify itself into other businesses such as supplemental insurance, group disability, and life insurance, which accounted for $1.7 billion of Cigna's $9.5 billion in sales last quarter.
Last year, Cigna's sales and net income grew 8% and 9.4% year over year, respectively.
Whether Anthem can win over Cigna's board remains to be seen, but investors may still do well owning Cigna even if they don't. That's because Cigna is expected to report net income from operations of between $8.15 and $8.50 this year, up from $7.43 in 2014.
Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool recommends Anthem. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.