Tags: Cigna | CI | AET | UNH

Cigna Results at Odds with Stock Price

By    |   Monday, 29 Aug 2011 11:18 AM

The release of much better than expected second quarter results did not slow an abrupt, month-long price decline for the share price of insurer Cigna (CI). Some of the share price decline can be attributed to the overall market and healthcare sector declines during the same time frame (July into August). However, the more than 20 percent share price drop in a period of weeks was 10 percent worse than the overall healthcare sector.

Cigna is one of the country's largest health insurers, competing with companies like Aetna (AET), UnitedHealth Group (UNH), WellPoint (WLP), and Humana (HUM). These companies range in size from $12 billion to $50 billion, market-cap wise, and Cigna is at the small end of the size range. The company has approximately 12 million members in its health insurance plans.

For the second quarter, Cigna reported net income of $1.53 per share, up from $1.38 a year earlier and well above the consensus estimate of $1.29. The company has handily beaten the Wall Street consensus for at least the last four quarters. Unless the wheels fall off, Cigna should also beat the full-year consensus of $5.07 per share, since $2.90 is already in the bank for the first half.

Diversified lines

One thing that sets Cigna apart from some of the other health insurance companies is its additional lines of business. The company's disability, life, and accident insurance divisions have provided about 20 percent of net income for the first half of the year. International insurance plans and products have chipped in 18 percent of profits. Both of these divisions have higher profit margins than the health insurance business.

There is no readily apparent reason for the recent price drop in CI. Consider it a buying opportunity if you favor the stock. Recent analyst reports from Deutsche Bank and UBS all pre-date the recent price fluctuations and reiterate buy ratings. Oppenheimer analysts provided the most recent rating change, moving up to outperform from perform. The company reports next on Oct. 29.

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The release of much better than expected second quarter results did not slow an abrupt, month-long price decline for the share price of insurer Cigna (CI). Some of the share price decline can be attributed to the overall market and healthcare sector declines during the same...
Cigna,CI,AET,UNH
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2011-18-29
Monday, 29 Aug 2011 11:18 AM
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