Cigna has authorized $450 million for investment into Cigna Ventures—its venture capital arm—as part of a series of strategies intended to increase the company's shareholder value, while also facilitating its expansion.
The global health service company said it will focus on targeted acquisitions of smaller companies, as it also contributes to early-stage enterprises, along with areas of analytics, digital health and care delivery.
"Cigna continues to successfully execute against our strategic growth plan, and is committed to improved shareholder returns as we deliver health care that is affordable, predictable and simple for our customers and clients around the world," said David Cordani, Cigna's chairman and CEO, in a news release.
In addition to its investment in Cigna Ventures, the company is planning to fund industry innovations—with $1.25 billion in capital expenditures.
As of December 31, 2021, Cigna Ventures has seven venture capital partners and 15 existing direct investments, according to Cigna's 2021 Securities and Exchange Commission report.
During 2022, Cigna expects to generate around $12 billion in capital, $5.4 billion of which will come by selling its international life, accident and supplemental benefits businesses, the company stated.
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It will be interesting to observe how Cigna chooses various companies to help incubate or accelerate or roll into its platform, said Rick Kes, a healthcare industry senior analyst at RSM.
Typically, in smaller scale acquisitions, organizations are looking for companies that operate their businesses and services in different markets, Kes said.
Another area Cigna said it wants to build on is its share repurchase.
At a February Board of Directors meeting, the company's directors approved Cigna to increase its share repurchase authority from $4 billion to $10 billion in total.
However, Cigna plans to spend slightly less on its share repurchase program in fiscal year 2022—an estimated $7 billion—compared with fiscal year 2021 when the company spent $7.7 billion.
By reinvesting in itself and having less 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 on hand for other purchases.
"There are public rumors that (Cigna was) looking to acquire Centene, and now, with this, it's probably a pretty good signal that those types of large scale acquisitions are probably off the table for the near term for Cigna," Kes said.
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 it spent on property, equipment and computer software during the entirety of last year.
"We see meaningful value in Cigna's equity, and will prioritize share repurchase in 2022 over large-scale mergers or acquisitions," said Brian Evanko, chief financial officer at Cigna, in a news release. "Our strong capital position and cash flow continues to give us financial flexibility and optionality for strategic investments and targeted bolt-on acquisitions."
