Does Aetna-Coventry deal signal end of M&A activity?

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The merger between Aetna and Coventry, which was just announced Monday, may be one of the last big deals where major insurers acquire smaller Medicare- and Medicaid-focused companies.

Based on the stock activity of such Medicare and Medicaid providers as Centene, Molina and WellCare, analysts and investors are predicting that the recent increased merger and acquisition activity, which included Cigna's purchase of HealthSpring and WellPoint's buyout of Amerigroup, may be over.

Centene's shares traded down more than 7 percent in the few days since Aetna announced its acquisition of Coventry. Molina and WellCare, meanwhile, both lost more than 2 percent, reported MarketWatch.

"Centene and Molina may lose some premium post-the Amerigroup deal, as no clear buyers of these government payers exist," Thomas Carroll, an analyst with Stifel Nicolaus, said in a note to clients Monday.

What's more, insurers initially interested in buying these Medicare and/or Medicaid companies may no longer be in a position to make such large purchases. UnitedHealth, for example, already has staked out a large portion of the Medicaid market, and could grow organically if it chooses, The Wall Street Journal reported.

But some M&A activity may live to see another day, particularly if it involves Medicare Advantage, according to Robert Kang, an analyst and fund manager at Highmark Capital Management. "The Medicare Advantage program is a very attractive insurance product for seniors," he told Bloomberg. "With the aging of the population, there is a secular trend that favors that particular line of business."

To learn more:
- see the MarketWatch article
- read the Wall Street Journal article
- check out the Bloomberg article

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