Cognizant Shares Tumble on Possible End of Health Net Contract

Cognizant Technology Solutions Corp. fell the most in almost a year after the company said a $2.7 billion services contract with Health Net Inc. was likely to be canceled if the health insurer is bought by Centene Corp.

Centene announced Thursday that it would buy Health Net for $6.3 billion, in what could be the first in a series of deals in the U.S. health insurance industry. Cognizant said a merger will cause overlaps in the services it provides, and cause Health Net to cancel a seven-year agreement that was to begin this year.

Cognizant shares fell 4 percent to $59.62 at 11:22 a.m. in New York, after earlier tumbling as much as 7.1 percent in the biggest intraday drop since August 2014. The company sells technology services that help insurers track claims and adhere to regulations.

The technology company reaffirmed its forecast for the year and said 2015 sales would be $12.2 billion.

“Despite the anticipated loss of approximately $100 million in incremental revenues during the second half of 2015, we are pleased to reaffirm our guidance,” Chief Financial Officer Karen McLoughlin said in a statement. “Today’s announcement by Health Net will not impact our ability to achieve our goals.”

The company said it will continue support some of Health Net’s services through 2020, through a separate agreement worth about $520 million.

Cognizant sells has been expanding its health business with offerings to health insurers and in September, Cognizant bought TriZetto Corp. for $2.7 billion to gain access to its health-care software.

Health-care services accounted for 26 percent, or $2.69 billion, of Cognizant’s revenue last year, its largest segment after finance-industry services. The Teaneck, New Jersey-based company has said its contract with Health Net was its largest ever.

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