On Jul 14, 2014, health insurer Cigna Corp. (CI) jumped to a 52-week high of $95.17 with 1.91 million shares traded during the course of the session.
The rally in the stock was brought about by investor optimism on the news that the company has reached its Accountable Care Organization (:ACO) goal for 2014 and received a positive rating from Fitch. The company been also been performing consistently, unfazed by the challenges grappling the health insurance industry.
Over the past year, the stock has soared 24% compared to a 17.5% increase in the S&P 500.
Last week, Cigna announced that it has successfully reached its 100 ACO goal announced in 2012. Cigna will serve more than one million members via these arrangements, thereby reducing the overall medical cost and aiding its bottom line.
On Jul 10, Fitch Ratings upgraded Cigna’s long-term IDR to 'A-' from 'BBB+' and unsecured senior debt ratings to 'BBB+' from 'BBB.' In addition, Fitch upped the Insurer Financial Strength ratings of various Cigna subsidiaries to 'A+' from 'A.' The rating outlook was Stable, and acknowledged strong operating performance by the company.
Cigna has been able to keep its earnings streak alive in the challenging industry, by following an intelligent approach to business which includes developing business organically as well as inorganically. One good example of the company’s inorganic growth step was the acquisition of HealthSpring in 2012 that marked its foray into government business. Two years down the line, results reflect accrual from the deal in the form of higher earnings as well as increased enrollment.
Investors are also encouraged by the steps taken by Cigna’s step to fortify its capital by addressing variable annuity and under-funded pension obligation issues which has built its inherent strength.
Cigna is expected to release second-quarter earnings on Jul 31, before the market opens. The Zacks Consensus Estimate for the second-quarter earnings per share is pegged at $1.84, which translates into year-over-year growth of 3.5%.
Cigna carries a Zacks Rank #3 (Hold). Better-ranked players include MetLife, Inc. (AIZ), CNO Financial Group Inc. (CNO) and Radian Group Inc. (RDN). All these stocks carry a Zacks Rank #2 (Buy).
Read the Full Research Report on AIZ
Read the Full Research Report on CNO
Read the Full Research Report on RDN
Zacks Investment Research
- Finance Trading
- Health Care Industry
- Accountable Care Organization
- Fitch Ratings