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CVS-Aetna deal would form health conglomerate; Irma claims top $6B in Florida

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CVS-Aetna deal would form health conglomerate; Irma claims top $6B in Florida

The $69 billion deal between health insurer Aetna Inc. and retail pharmacy chain CVS Health Corp. is widely believed to have been motivated by the looming threat of retail giant Amazon's rumored foray into the pharmacy business, but BMO Capital Markets analyst Matthew Borsch believes it is actually driven by a "bold strategy" to match the healthcare/pharmacy benefit management integration strategy of UnitedHealth Group Inc., Bloomberg News reported.

Elsewhere, Jeff Jonas, a portfolio manager at Gabelli & Co., said the CVS-Aetna merger may pressure other stand-alone insurers to combine and two other major deals look imminent, Bloomberg said in a separate report. A merger between Cigna Corp. and Humana Inc. is "most likely," and health insurers may also choose to acquire smaller players like walk-in urgent-care clinics, Jones said. Meanwhile, BMO Capital Markets' Borsch expects insurers offering government plans such as WellCare Health Plans Inc. and Centene Corp. to become potential targets, according to the report.

Tax reform deliberations in Congress and their potential implications played a part in the landmark deal, executives said during a call to discuss the transaction.

A tie-up between CVS and Aetna would create a healthcare conglomerate with a national scale, positioning the company to expand medical treatments with CVS' MinuteClinics and Aetna's vast insured population, according to an S&P Global Market Intelligence report.

Insurance claims resulting from Hurricane Irma have further risen in Florida and now total nearly $6.30 billion, according to the latest data from the state's Office of Insurance Regulation. A total of 853,356 claims had been filed as of Dec. 4.

Keefe Bruyette & Woods analyst Meyer Shields believes the Senate's vote on tax reform makes the passage of the measure "more likely, with few changes to the provisions" he considers most relevant to P&C companies. In a research note, Shields said he expects domestic reinsurers and specialty to be the primary beneficiaries of the tax reform, particularly Berkshire Hathaway Inc., RLI Corp. and W. R. Berkley Corp.

James River Group Holdings Ltd. plans to pay a special cash dividend of 50 cents per common share.

State Farm Mutual Automobile Insurance Co. will stop marketing new long-term care insurance policies in most states in March 2018, the company confirmed. A spokeswoman cited a variety of factors for the decision, including challenges within the current regulatory environment, difficulty in predicting claims experience and the negative impact on affordability from the premium rate increases the company has employed in an attempt to maintain rate adequacy.

Featured news

Allergan tumor drug under scrutiny; Lilly arthritis treatment gets FDA nod: The European Medicines Agency launched a review of Allergan plc's uterus tumor drug Esmya after four patients suffered serious liver injuries.

Financial news in other parts of the world

Asia-Pacific: Australia shelves superannuation changes; My Credit Union gets nod for merger

Europe: Portugal's Centeno to head Eurogroup; Basel rules deal seen this week

Middle East & Africa: Mashreqbank gets new Bahrain license; Access Bank eyes West Africa expansion

Latin America: BBVA accepts Scotiabank offer; Indusval to develop digital platform

The day ahead

Early morning futures indicators pointed to a mixed opening for the U.S. market.

In Asia, the Hang Seng dropped 1.01% to 28,842.80, while the Nikkei 225 slid 0.37% to 22,622.38.

In Europe, around midday, the FTSE 100 gained 0.16% to 7,350.74 and the Euronext 100 fell 0.39% to 1,038.59.

On the macro front

The international trade report, the Redbook, the PMI Services Index and the ISM Non-Mfg Index are due out today.