Humana stock climbs following Trump win - WDRB 41 Louisville News

Humana stock climbs following Trump win

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LOUISVILLE, Ky. (WDRB) --  Last week’s surprise election of Donald Trump to the presidency is good news for Louisville-based Humana Inc. and for Aetna – the Connecticut company that plans to swallow Humana for $37 billion.

At least, investors seem to think so.

Both health insurers’ stocks are up about 10 percent since the Nov. 8 election, compared to a 2 percent gain in the broader S&P 500 index.

Humana closed at $198.82 on Tuesday after climbing 11 percent in the week following the election, while Aetna gained 9.5 percent over the same period to close at $123.59, according to Yahoo Finance.

Aetna CEO Mark Bertolini said last week that the post-election run-up in his company’s share price indicates that investors think Aetna’s bid to acquire Humana – which President Obama’s Justice Department is challenging in court -- is more likely to go through. 

“It’s over the deal,” Bertolini said during a conference hosted by the New York Times on Nov. 10. “(The Department of Justice) is blocking our deal with Humana – they are suing us -- and so everybody is now running the arbitrage on the deal.”

Competitors Anthem Inc. and Cigna Inc. – whose pending merger is also being held up by the Justice Department – have seen similar bumps in their share prices in the last week.

But the fate of the Aetna-Humana merger could be decided even before Trump takes office on Jan. 20. The companies are set to go to trial with the Justice Department on Dec. 5 under an expedited schedule that calls for a ruling by U.S. District Judge John D. Bates in late January.

Ana Gupte, a healthcare analyst with Leerink Partners in New York, said in an email that Aetna and Humana shares have gone up based on “fundamentals” rather than any anticipated change in the Justice Department’s opposition to the deal.

Humana’s stock had already climbed a bit following its latest quarterly earnings report on Nov. 4, in which the company’s profit slightly exceeded expectations.

In a research note published Monday, Gupte said Humana is in particularly good position to benefit from Republican control of the House, Senate and White House because of its bread-and-butter business, Medicare Advantage.

Humana is the nation’s second-biggest provider of Medicare Advantage plans, which are privately run versions of the government’s healthcare program for seniors. Medicare Advantage makes up about two-thirds of Humana’s $54 billion annual revenue.

Under Trump, Humana should enjoy a “friendlier regulatory environment” with the government agency that controls the program, the Centers for Medicare and Medicaid Services, and under the Republican-controlled Congress, Gupte said.

And Gupte expects “accelerated privatization” of Medicare under Republican rule, meaning Humana’s business – already poised to grow as more seniors age into Medicare – could expand even faster.

Bertolini said in the Nov. 10 interview that Medicare Advantage could be extended, with government subsidies, to people in their early-to-mid 50s as a possible freplacement for the coverage provided under the Affordable Care Act, which Republicans have vowed to repeal.

Even if the Aetna takeover falls through, Humana is “unlikely to face increased regulations under a Republican administration” and its Medicare Advantage business “should continue to grow profitably” as the Baby Boomer generation continues aging into the program, according to a Nov. 9 research note from Thomas Carroll, an analyst at Stifel, Nicolaus & Co. in Baltimore.

Humana’s potential acquisition by Aetna has big implications for Louisville, where Humana provides more than 12,000 white-collar jobs and serves as the biggest corporate headquarters in Kentucky.

Company executives have said Louisville will maintain and perhaps gain jobs as the home base of Aetna’s government insurance business, including Medicare Advantage.


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