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Health Insurance Up 24% in a Year: Will the Rally Continue?

Zacks Equity Research

Health Insurance Innovations, Inc. HIIQ shares have gained 24.2% in a year against the industry's decrease of 11.2%. The Zacks S&P 500 composite recorded a gain of a meagre 0.8%. With a market capitalization of nearly $573 million, average volume of shares traded in the last three months was 1.1 million.

Reasons Behind the Rally

The company delivered a positive earnings surprise in all the four reported quarters of 2018 with the average beat being 9.02%.

Higher revenues helped the company deliver solid results. Revenues improved 40%. Policies in force improved 2.9% over the same time frame. The bottom line increased 55.7% year over year in 2018.

Its return on equity was 31.1%, much higher than the industry average of 9.5%. Health Insurance Innovations also boasts a solid debt free balance sheet. Its sturdy cash flow supported the completion of the initial $50 million stock buyback.

Banking on operational strength, management projects 2019 revenues in the range of $430-$440 million, translating to 22-25% growth year over year. Adjusted EBITDA is expected between $72 million and $77 million, up 21-30% increase over 2017.  Adjusted earnings per share are projected between $3.20 and $3.35, up 23-29% over 2017.


Why the Bull Run Should Continue

Health Insurance Innovations is well poised to capitalize on the growing demand for affordable health insurance solutions. Also, the company is focusing more on longer duration products with significantly higher lifetime value.

The company thus believes successful strategic shift toward higher lifetime value plans and e-commerce will favorably impact results.

Also, The Department of Health and Human Services of the U.S. government implemented a rule on Oct 2, 2018 that changed the maximum duration of short-term medical policies to less than one year from the present duration of less than three months. Also, the rule allows more affordable health insurance options. The company expects to gain from favorable regulatory outcomes.

Health Insurance Innovations currently sports a Zacks Rank #1 (Strong Buy). With optimism surrounding the stock’s healthy performance, the Zacks Consensus Estimate for 2019 and 2020 has moved 3% and 6.1% higher, respectively, in the past 30 days.

Health Insurance Innovation belongs to the Zacks Life Insurance industry, which is currently in the top 25% of the Zacks Industry Rank.

The stock carries a favorable VGM Score of A. This helps to identify stocks with the most attractive value, best growth rate and solid momentum.

The Zacks Consensus Estimate for earnings and revenues indicates year-over-year improvement of 47.2% and 18.3%, respectively for 2019. For 2020, earnings and revenues are estimated to increase 14.2% and 5.6%, respectively year over year. The stock carries an impressive Growth Score of A. This style score analyzes the growth prospects of a company. Back-tested results show that stocks with Growth Scores of A or B when combined with Zacks Rank of 1 or 2 offer the best upside potential.

Other Stocks to Consider

Investors interested in insurers can look at Aflac Incorporated AFL, Arch Capital Group Ltd. ACGL, and Torchmark Corporation TMK.

Aflac provides voluntary supplemental health and life insurance products. It came up with a four-quarter average positive earnings surprise of 7.50%. It carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arch Capital Group provides property, casualty and mortgage insurance and reinsurance products worldwide. The company delivered positive surprise in all the last four reported quarters, with the average being 14.72%. The company has a Zacks Rank of 1.

Torchmark provides various life and health insurance products and annuities in the United States, Canada and New Zealand. It came up with a four-quarter average positive earnings surprise of 2.00%. It carries a Zacks Rank #2.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?

From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.

This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.