On Jun 21, 2013, shares of
) hit a 52-week high of $71.40. The momentum was driven by
favorable operating results over the past many quarters,
effective execution of its long term growth strategy and the
strength of its diverse portfolio of businesses.
We have increased confidence about the company and believe it
as an attractive investment opportunity due to its exposure to
strong growth areas, relative protection from healthcare reform
and diversification into a number of products.
Cigna is performing well in its business segments. In
commercial health care, the company has continuously grown its
target markets by achieving strong customer retention, expanding
its existing customer relationships and adding new customers.
In the Global Supplemental Benefits business, Cigna delivered
a healthy increase in revenue and earnings, reflecting solid
customer growth, effective cost management and contributions from
We also view Cigna's more significant International exposure
favorably and see the company as having lower direct exposure to
key health reform risks given its limited exposure to the
Cigna is also poised for significant earnings accretion in
2013 from its recent acquisition of HealthSpring as well as a
strategic decision on its captive pharmacy Benefits Management
Additionally we are impressed with the company's recent
transaction with which it has exited from the Run-Off Reinsurance
segment. This step will reduce the company's future earnings
Cigna has also been delivering positive earnings surprise for
past many quarters. For the second quarter the Zacks Consensus
Estimate for EPS stands at $1.59. The long term earnings growth
is expected to be 11.3%.
Valuation for Cigna looks reasonable. The shares are trading
at a discount to peer group average on a price-to-earnings basis
but on a premium on a price-to-book basis. The return on equity
is much above the peer group average. Additionally, the 1-year
return from the stock came at 57.3%, much above the S&P's
return of 19.2%.
Cigna carries a Zacks Rank #2 (Buy). Multi-line insurers
Assured Guaranty Ltd.
Eastern Insurance Holdings, Inc.
Old Republic International Corporation
) carry favorable Zacks Rank #1 (Strong Buy) and are worth
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