Cigna Corp. continues to look for growth by acquiring health-care companies in the U.S. and abroad, and the company maintains that India and Turkey are ripe for growth.
The Bloomfield-based health insurer added to its employment base and generated more revenue than ever. Consolidated revenues were up 31 percent to $7.4 billion for the three-month period ending Sept. 30, compared with $5.6 billion during the same period last year.
Some of that growth is organic, meaning the company is growing its existing business segments, and some is inorganic, meaning the revenue is from newly acquired businesses. In January, Cigna completed its acquisition of HealthSpring for $3.8 billion.
Cigna CEO David M. Cordani spoke to The Courant recently about future expansion, federal reforms and the public health exchanges created by the Affordable Care Act, which allow people to shop online for health insurance starting in the fall of 2013.
What follows is a partial transcript of that conversation, edited for clarity and length.
The Courant: Do you see the pace of acquisitions slowing, plateauing or quickening in the year to come?
Cordani: When we put our strategy forward three years ago, which is what we’ve been executing, we laid out three M&A (mergers and acquisitions) priorities. We indicated that we would be actively pursuing M&A that further our global footprint. Second, was to enter the U.S. seniors’ market with some leading clinical capabilities, and, third, to expand our retail capabilities, which we’ve successfully been able to do over the last three years.
When we laid out our growth profile, we had a strategic objective that our growth profile would be about 50-50 organic and inorganic. We’ve grown the company by about 50 percent top-line (revenue) and bottom-line (profit) over the last three years and that’s been split, almost 50-50 between the two.
As we look to the future, M&A will be a part of our future. I can’t tell you whether there’ll will be more or less because M&A tends to be a little opportunistic. Our strategic categories haven’t changed. So, we will continue to look for, and we do continue to look for global expansion opportunities, the ability to expand our seniors — and now off the back of our seniors capabilities: dual-eligible capabilities, and then, thirdly, additional retail-based capabilities.
Q: On global expansion, where are you looking? Are there places in Latin America where you see growth?
A: We have not prioritized Latin America as a top priority growth point for us. Our growth to date, if you look at our non-U.S. acquisitive, or inorganic, activity, it has really been two-fold.
One — we bought some additional capabilities. We bought First Assist that gives us a great travel program for globally mobile individuals, and think about both the health and then related services around travel. We purchased Vanbreda, which brought globally mobile capabilities for what are referred to as inter-governmental organizations. Think of the United Nations as an example of an intergovernmental organization. And then, lastly, we identified two key geographies that were key strategic (entry) points: one being Turkey and two being India. And that’s where our focus has been thus far.
Q: In terms of the public health exchanges that will be in place in the fall of 2013 for people buying 2014 health plans, what are the changes that need to happen between now and next fall?
A: We look at the exchanges as an opportunity for our company, largely because the marketplace that will be served at least for the first several years by the exchanges, broadly, are both the U.S. individual market and the U.S. small-employer market.
Cigna historically has not played there. So, that creates a new market with a different distribution mechanism, the exchanges, that creates some attractive opportunities. Really, what we’ve been about is, one: casting a whole variety of go-to-market strategies over the last two-and-a-half years in ten key markets around the U.S. Two: building out some of the technology necessary to connect into both the state and federal exchanges. And, three: working with the state regulators around the final decisions on essential benefits and the configuration of the go-to-market strategy. That work will continue over the next several quarters as well.
Q: As the public health exchanges evolve over time, will employers shift to a defined-contribution method: offering money to workers to buy a health plan on their own rather than employers providing group health plans for workers? Does that mean people will face higher premiums on exchanges as individuals than they do as members of a group plan?
A: I think they’re two different items. The public exchange versus defined contribution are two different items.
Employers present a very important and efficient way to help to coordinate health care and health services. Why?
You reference one — you get some sort of aggregate purchasing leverage, but let me hold that aside because you could get that through an exchange or otherwise. An employer brings a culture, a sense of community, a communication infrastructure, an ability to leverage incentives that work for that respective employment population, the ability to have on-site access to care delivery, care coaching, etc. We think that needs to be an important part of the equation as we go forward.
Defined contribution starts to cap the amount that an employer will pay year in, year out, and puts more individual responsibility on a person. We believe that that trend is going to evolve under a whole variety of circumstances, which is why our strategy is to ‘Go Deep, Go Global, Go Individual.’ The ‘Go Individual’ aspect suggests that we believe that you ultimately have to focus on service delivery through the individual’s eyes because individuals will have more decision making responsibility, financial responsibility and need for personalization. And that’s the direction we’ve been taking the company.