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BUSINESSWednesday 23 September
Stocks drop as oil, other commodities sink CEOs of Aetna, Anthem make the
case for health insurance mergers
MATTHEW CRAFT have battered financial Index up 0.9 percent. Mar-
AP Business Writer markets throughout the kets in Japan remain closed TOM MURPHY
NEW YORK (AP) — Another summer. The S&P 500, the for a three-day holiday. MARCY GORDON
bout of turbulence swung most widely used measure Back in the U.S., ConAgra AP Business Writers
the U.S. stock market to of U.S. investments, has lost Foods tumbled 7 percent WASHINGTON (AP) — Leaders of two major health in-
a loss Tuesday as raw- more than 8 percent in after posting a $1.2 billion surers planning multibillion dollar acquisitions made
material producers sank three months. quarterly loss. Sales for the their case to Congress that bigger can mean better in
along with prices for oil and Investors will get another maker of Chef Boyardee, their industry, but concerns are being raised in Wash-
copper. The selling swept look at China’s economy Hebrew National hot dogs ington about how these deals will affect consumers
across every industry, with on Wednesday when Caix- and other packaged food and competition.
all 10 sectors of the S&P 500 in’s manufacturing index also fell short of analysts’ Blue Cross-Blue Shield insurer Anthem plans to buy Cig-
taking a fall. comes out. Last month, it forecasts. ConAgra’s stock na for $48 billion, and rival Aetna is looking to acquire
Medicare Advantage coverage provider Humana for
Trader Richard Deviccaro, left, works on the floor of the New York Stock Exchange. Another bout about $35 billion in a wave of consolidation that swept
of turbulence swung the U.S. stock market to a loss Tuesday as raw-material producers sank along through the industry this summer. The deals came un-
with prices for oil and copper. der scrutiny Tuesday at a Senate Judiciary subcommit-
tee hearing.
(AP Photo/Richard Drew) Senators pressed Aetna CEO Mark Bertolini and his An-
them counterpart, Joseph Swedish, for explanations of
JJ Kinahan, TD Ameri- hit a six-year low. Federal sank $3 to $39.40. how their deals would not stifle competition and give
trade’s chief strategist, said Reserve officials cited Chi- After the market closed them too much power. Anthem Inc.’s combination
lingering uncertainty over na’s slowdown as one rea- on Monday, Mosaic said with Cigna Corp. would create the nation’s largest
China’s slowdown and son it decided to delay rais- it would cut production of health insurer based on enrollment. Aetna Inc. already
the timing of the Federal ing interest rates last week. its fertilizers as falling pric- is the third-largest insurer.
Reserve’s first interest-rate The scandal at Volkswagen es for crops have hurt the Before the deals can close, the Justice Department
hike in nearly a decade AG, the world’s top-selling company’s sales. Mosaic must pass judgment on whether the mergers would
has made investors skittish. carmaker, deepened after pointed to swings in curren- make the companies so dominant that they could cre-
“I think it’s really just the fact it said some 11 million of its cies and financial markets ate a competitive imbalance. That review is expected
that nobody knows what to diesel vehicles worldwide as other culprits. Its stock to last several months. In the meantime, senators want-
do,” Kinahan said. “When were fitted with software lost $2.56, or 7 percent, ed to weigh in although Congress doesn’t rule on the
things are this uncertain, to cheat U.S. emissions to $33.88. U.S. govern- mergers.
the reaction is sell first and test. The company said it ment bond prices jumped, “I want to make sure these deals do not harm con-
see what happens later.” was setting aside around knocking the yield on the sumers by increasing premiums or reducing benefits,”
Without any big news to 6.5 billion euros ($7.3 bil- 10-year Treasury note down Sen. Amy Klobuchar of Minnesota, the panel’s senior
drive trading, the indexes lion) to cover the fallout. Its to 2.13 percent, from 2.20 Democrat, told the CEOs
slumped throughout the U.S.-listed shares plunged percent late Monday. Bertolini told the senators that “robust choice and
morning, bottomed out in $4.66, or 15 percent, to In commodity trading, most competition will remain in the Medicare market” even
the afternoon and then $25.44, extending Volkswa- industrial and precious met- after Aetna buys the nation’s second-largest provider
spent the rest of the day re- gen’s losses to 30 percent als settled with steep losses. of Medicare Advantage plans. Swedish said consum-
covering their losses. over two days. In Europe, Copper lost 9 cents, or 4 ers would benefit from expanded access to care in its
The Standard & Poor’s 500 markets across the conti- percent, to finish at $2.30 combination with Cigna.
index dropped 24.23 points, nent closed with big losses. a pound. Gold dropped Insurers have said these combinations can help them
or 1.2 percent, to 1,942.74. Germany’s DAX dropped an even $8 to $1,124.80 an save money by cutting overlapping costs and improv-
The Dow Jones industrial 3.8 percent, and France’s ounce, and silver sank 47 ing their technology, which is becoming more impor-
average fell 179.72 points, CAC-40 dropped 3.4 per- cents to $14.76 an ounce. tant in monitoring patient health and helping custom-
or 1.1 percent, to 16,330.47, cent. Britain’s FTSE 100 index Benchmark U.S. crude oil ers find care. The acquisitions also are a way to quickly
and the Nasdaq compos- closed with a loss of 2.8 per- fell 85 cents to close at push into new markets and gain negotiating leverage
ite declined 72.73 points, or cent. Major indexes in Asia $45.83 a barrel in New York. over care providers like hospitals that have been grow-
1.5 percent, to 4,756.72. ended higher, with Hong Brent Crude, an interna- ing and adding their own negotiating muscle in recent
Mounting concerns about Kong’s Hang Seng up 0.2 tional benchmark, rose 16 years.
slowing growth in China percent and mainland Chi- cents to close at $49.08 a But the consolidation wave could lead to fewer choic-
and around the world na’s Shanghai Composite barrel in London. q es for consumers in some markets. Several provider and
patient advocate groups have raised concerns about
that. The actual impact on consumers likely won’t be
felt for at least a year because insurers have largely
ironed out their 2016 coverage plans.
“I am deeply concerned about these mergers,” Sen.
Richard Blumenthal, D-Conn., told the CEOs.
He said both proposed mergers raise “serious competi-
tive concerns,” and he expressed skepticism that cost
savings realized by the companies through the combi-
nations would be passed on to consumers.
Bertolini said Aetna and Humana complement each
other, and he has little worry about leaving enough
competition. He noted that there are at least 10 other
competitors on public insurance exchanges in markets
where Aetna and Humana overlap.
“We are not at all concerned about the lack of com-
petition in local markets,” he said.
Swedish noted that a small, newer insurer named Os-
car has had some success selling coverage in the New
York City area.q
