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CVS-Aetna deal could face scrutiny, spur more mergers; ACA mandate dealt a blow

CVS Health Corp. and Aetna Inc.'s official announcement of a deal grabbed headlines over the weekend.

CVS announced a massive bid to purchase Aetna for about $69 billion, or $207 per share — higher than the $66 billion price tag rumored in recent media reports. Connecticut Insurance Commissioner Katharine Wade said the insurance department for Connecticut, where Aetna is domiciled, will "thoroughly review" the proposed transaction.

Aetna's medical expertise coupled with CVS' vast physical store presence would enable the combined company to reign in growing healthcare costs, CEOs of both companies said in a joint interview, The Wall Street Journal reported. Referring to the Justice Department's recent suit to block AT&T Inc.'s planned purchase of Time Warner Inc., Aetna CEO Mark Bertolini said the CVS-Aetna combination is very different from the proposed AT&T deal from an antitrust perspective. Another Journal report quoted Bertolini as saying "We've done our homework on antitrust issues."

Both CVS and Aetna have downplayed the prospects of regulators moving to block the transaction, but some analysts and merger experts warn that the so-called vertical merger could be blocked by antitrust officials over concerns that it may reduce competition, The New York Times' DealBook reported.

The transformational deal may also spark further consolidation. Leerink Partners analyst Ana Gupte has said that a potential CVS-Aetna deal may prompt a merger between Walgreens Boots Alliance Inc. and Humana Inc., or between Humana and Wal-Mart Stores Inc., Reuters reported.

In more deal news, The Hartford Financial Services Group Inc. has agreed to sell its run-off life and annuity businesses, Talcott Resolution Inc., to a group of investors for $2.05 billion. The total deal consideration comprised of cash from the investor group, a preclosing cash dividend, debt included as part of the sale, and a 9.7% ownership interest in the acquiring company.

And, Aon plc closed the acquisition of Henderson Insurance Broking Group, a U.K.-based independent broker.

The U.S. Senate approved the Republicans' tax reform bill which includes a provision to repeal the Affordable Care Act's individual mandate which requires all Americans who meet a certain criteria to obtain health insurance or pay a tax penalty, Reuters reported. The Senate voted 51-49 to pass the Tax Cuts and Jobs Act.

In capital offerings, Advantage Insurance Inc. expects to sell 10 million common shares at its IPO for a price of between $9 and $11 apiece.

Certain shareholders may offer and sell up to 2,222,215 shares of Heritage Insurance Holdings Inc.'s common stock from time to time.

Arch Capital Group Ltd. has completed a public offering of 4 million depositary shares, each of which represented a 0.001 interest in a 5.45% noncumulative series F preferred share.

New Jersey Insurance Director Peter Hartt wants the National Association of Insurance Commissioners to look to other financial supervisors' plans to potentially improve state receivership and insolvency plans.

The International Association of Insurance Supervisors, the insurance supervisory standard-setting body, is positioning itself to monitor risks in financial technology, cybersecurity and climate-related financial exposure while at the same time prioritizing the recognition of emerging markets, according to its new secretary general, Jonathan Dixon.

The challenges associated with the 2017 North Atlantic hurricane season, which came to a close Nov. 30, were not solely financial in nature. As Citizens Property Insurance Corp. detailed in materials to be presented during a forthcoming meeting of the claims committee of its board of governors, the state-run insurer faced several significant operational impediments in its response to Irma, the first major hurricane to strike Florida in 12 years.

Featured news

Philippines probes Sanofi dengue vaccine; China approves Lundbeck antidepressant: The U.S. Food and Drug Administration approved Amgen Inc.'s Repatha as the first PCSK9 inhibitor to prevent heart attacks, strokes and coronary revascularizations in adults with cardiovascular disease.

Financial news in other parts of the world

Asia-Pacific: Banco Santander closes Australian ops; Nippon Life to buy stake in TCW

Europe: Talpa to sell TMG stake; Spotify, Tencent in stakes swap talks

Middle East & Africa: Bahrain downgraded; Angola ups rate; Barclays further cuts Barclays Africa stake

Latin America: Honduran election uncertainty; Bci plans capital hike for TotalBank deal

The day ahead

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

In Asia, the Hang Seng was up 0.22% to 29,138.28. The Nikkei 225 slid 0.49% to 22,707.16.

In Europe as of midday, the FTSE 100 added 0.53% to 7,338.92, and the Euronext 100 was up 1.04% to 1,041.13.

On the macro front

The factory orders report and the TD Ameritrade Investor Movement Index are due out today.