Cigna has authorized a $450 million investment in Cigna Ventures, its venture capital arm, as part of a series of strategies aimed at increasing the company’s shareholder value, while facilitating its expansion.
The global health services company said it will focus on targeted acquisitions of small businesses, as it also contributes to start-ups, as well as the areas of analytics, digital health and service delivery. care.
“Cigna continues to successfully execute our strategic growth plan and is committed to improving shareholder returns as we provide affordable, predictable and simple healthcare to our customers and customers around the world,” said David Cordani, CEO of Cigna, in a press release.
In addition to its investment in Cigna Ventures, the company plans to fund industry innovations, with $1.25 billion in capital spending.
As of December 31, 2021, Cigna Ventures had seven venture capital partners and 15 existing direct investments, according to Cigna’s 2021 Securities and Exchange Commission report.
In 2022, Cigna expects to raise approximately $12 billion in capital, of which $5.4 billion will come from the sale of its international life, accident and supplemental insurance businesses, the company declared.
It will be interesting to watch how Cigna chooses various companies to help it incubate, accelerate or integrate its platform, said Rick Kes, principal healthcare analyst at RSM.
Typically, in smaller-scale acquisitions, organizations look for companies that leverage their business and services in different markets, Kes said.
Another area Cigna has said it wants to build on is its stock buyback.
At a board meeting in February, the company’s directors approved Cigna to increase its share repurchase power from $4 billion to $10 billion in total.
However, Cigna expects to spend slightly less on its stock buyback program in fiscal year 2022 — about $7 billion — compared to fiscal year 2021 where the company spent $7.7 billion.
By reinvesting in itself and having fewer shares outstanding, Cigna will potentially increase its value per share, Kes said. Yet, at the same time, the investment will also result in less capital being available for other purchases.
“There are public rumors that (Cigna was looking) to acquire Centene, and now, with that, it’s probably a pretty good signal that these kinds of large-scale acquisitions are probably not in the near term for Cigna. “, said Kes.
So far in 2022, Cigna has already repurchased 5 million shares for $1.2 billion, according to Cigna’s 2021 financial report, the same amount spent on IT assets, equipment and software for the whole of last year. .
“We see significant value in Cigna’s equity and will prioritize share buybacks in 2022 over large-scale mergers or acquisitions,” Brian Evanko, Cigna’s chief financial officer, said in a press release. “Our strong capital position and cash flow continue to give us financial flexibility and an option for strategic investments and targeted targeted acquisitions.”