For Immediate Release
Chicago, IL - April 20, 2012 - Today, Zacks Equity Research
discusses the Health Insurance Industry, including
Aetna
(
AET
),
Cigna
(
CI
),
WellPoint
(
WLP
),
Humana
(
HUM
) and
UnitedHealth
(
UNH
).
A synopsis of today's Industry Outlook is presented below. The
full article can be read at
http://www.zacks.com/stock/news/73377/health-insurance-stock-outlook-april-2012
Over the next few years, growth opportunity for the players in
the health insurance sector will be driven by:
- Higher health expenditures and increased
reliance on managed care. According to the government, national
health spending is expected to touch $4.6 trillion by the end of
this decade from $2.6 trillion currently, representing a CAGR of
nearly 7%. This clearly points to the fact that the health care
industry will most certainly outstrip broader economic growth.
Moreover, over the same time frame, managed care penetration is
expected to grow to about 1/2 of the total national health care
spending, up from approximately 1/3rd at present, driven by
increased reliance on insurers in managing government's
fee-for-service Medicare and Medicaid products.
- 2010 Census figures show that seniors
constitute a larger share of the American population than ever
before. The trend will only gain steam in the years ahead.
Consequently, the aging population is expected to drive industry
demand as they would aim to reduce their health-related
costs.
We expect most of the companies within our coverage to benefit
from the trend.
Aetna
(
AET
) has been beating our estimates for the past several quarters, on
the back of declining utilization, strong performance across all
the product lines, disciplined pricing and medical cost trends. The
company is also making strong progress in its Medicare business.
The lifting of sanctions from the Center of Medicare and Medicaid
Services and the acquisition of Genworth's Medicare Supplement
business will upgrade its Medicare platform.
The company is also aggressively looking to generate incremental
fee revenues by managing the infrastructure necessary for care
organizations. It is growing its international business for
diversification benefits. Moreover, its deployment of $1.2 billion
for acquisitions will position it well to deal with the
consequences of the Health Care Reform. A solid balance sheet,
well-controlled debt and adequate liquidity will provide overall
strength.
Our next pick would be
Cigna
(
CI
). Though the company was heavily biased towards commercial
business, it made timely acquisitions to ramp up the government
business, placing itself amongst the top five providers of Medicare
products. Its unique and growing international presence is also a
positive differentiator. A strong balance sheet and adequate
liquidity will further lead to continued share buybacks, thereby
contributing to the bottom line.
WellPoint
(
WLP
) comes next in line. With over 34 million members, the company is
a dominant player with a vast provider network. WellPoint has
strengthened its portfolio through the acquisition of CareMore
Health Group in order to expand its presence in the U.S. government
program for the elderly.
The company has been witnessing substantial earnings growth over
the past few quarters, spurred by membership gains, improvements in
operating cost structure, strategic acquisitions and capital
transactions. The company is also well poised to benefit from
economies of scale and favorable demographic trends.
Being the second-largest provider of Medicare Advantage
plans,
Humana
(
HUM
) also offers potential for solid growth going forward. The company
has been surpassing earnings estimates for the past several
quarters and management raised its fiscal year 2012 guidance,
citing better-than-expected operating trends.
UnitedHealth
(
UNH
) has also been beating the Zacks Consensus Estimate for the past
several quarters and has recently raised its fiscal year 2012
guidance. It has strengthened its position in the Medicare
Advantage (
MA
) market with the acquisition of XLHealth.
We believe the company's diversified business model in the managed
care industry, with a leading market share in the Commercial,
Medicare and Medicaid markets, a solid balance sheet, a highly
conservative investment portfolio and expansion into higher margin
Health Services segments (Optum) will provide investors with a high
risk -- return investment opportunity over time.
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AETNA INC-NEW (
AET
): Free Stock Analysis Report
CIGNA CORP (
CI
): Free Stock Analysis Report
HUMANA INC NEW (
HUM
): Free Stock Analysis Report
UNITEDHEALTH GP (
UNH
): Free Stock Analysis Report
WELLPOINT INC (WLP): Free Stock Analysis Report
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