Cigna (CI), despite the uncertainties posed by healthcare reform under way, should be in a position to prosper, analysts believe. They cite the company’s acquisitions and its focus on self-insured plans for corporate clients as strengths in an otherwise turbulent healthcare market.
Cigna is a global health services organization with insurance subsidiaries which are providers of medical, dental, disability, life and accident insurance and related products and services.
In the United States, the majority of these products and services are offered through employers and other groups, such as unions and associations. In selected international markets, Cigna offers supplemental health, life and accident insurance products and international healthcare coverage and services to businesses, governmental and non-governmental organizations and to individuals.
In addition to its ongoing operations described above, the company also has certain run-off operations, including a Run-off Reinsurance segment.
Cigna had consolidated shareholders’ equity of $8.3 billion and assets of $51 billion as of Dec. 31, 2011, and revenues of $22 billion for the year.
Cigna’s revenues are derived principally from premiums, fees, mail order pharmacy, other revenues and investment income. Cigna offers a variety of products and services to employers and other groups that sponsor group health plans.
Approximately 90 percent of its medical customers are enrolled in self-insured and experience-rated plans where lower medical costs directly benefit corporate clients and their employees. Cigna also offers guaranteed-cost medical and dental insurance to individuals.
In January 2012, Cigna acquired HealthSpring, one of the largest Medicare Advantage providers in the United States, management reported in a recent filing. HealthSpring offers Medicare-eligible beneficiaries health care benefits, including prescription drugs, through managed-care health plans. HealthSpring also operates a national stand-alone prescription drug plan in accordance with Medicare Part D.
Cigna has a market cap of $12.65 billion in a sector, healthcare providers and services, where the average company size is $4.5 billion. Its trailing 12-month P/E ratio is 9.63 and its five-year projected price-to-earnings-growth (PEG) ratio is 0.94, compared to 1.16 for the sector.
Its projected earnings per share growth for the coming year is 10.77 percent, compared to a sector average of 12.56 percent.
Wall Street is broadly positive on Cigna. Buy or outperform ratings are in from Citigroup, Morgan Stanley, Merrill Lynch, Jefferies, Standard & Poor’s, UBS, and Deutsche Bank.
“On the commercial front, we expect CI to continue to enjoy healthy membership gains, given its customer service focus and ASO plan with a stop-loss option.We see HealthSpring poised for rapid growth via the aging population, geographic expansion, and the potential penetration of the dual-eligible (beneficiaries of both Medicare and Medicaid) population,” S&P analysts recently wrote.
“The International segment should also continue to grow strongly as CI penetrates Europe and the emerging markets.”
Cigna next reports on Aug. 2.
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