Zacks Industry Outlook Highlights: CIGNA, Aetna, Humana, Health Net and UnitedHealth Group
CHICAGO, July 17, 2013 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. Health Insurance, including CIGNA Corp. (NYSE:CI-Free Report), Aetna Inc. (NYSE:AET-Free Report), Humana Inc. (NYSE:HUM-Free Report), Health Net, Inc. (NYSE:HNT-Free Report) and UnitedHealth Group Inc. (NYSE:UNH-Free Report).
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Industry: Health Insurance
Link: http://www.zacks.com/commentary/28154/health-insurance-stock-outlook-july-2013
The health insurance industry has confronted many external challenges in the recent past such as federal, state legislative and regulatory reforms; a challenge to meet the demand of more price- and service-conscious consumers, a fiercely competitive market, shift of customer mix and uncertain economic conditions in the U.S. and abroad, just to name a few.
Notwithstanding the headwinds, the industry is "thriving under stress." Most of the top players -- including CIGNA Corp. (NYSE:CI-Free Report), Aetna Inc. (NYSE:AET-Free Report), Humana Inc. (NYSE:HUM-Free Report) and Health Net, Inc. (NYSE:HNT-Free Report) -- reported ahead of the Zacks Consensus estimates in 2013 Q1, while UnitedHealth Group Inc. (NYSE:UNH-Free Report) reported in line. The earnings outperformance was driven by lower medical inflationary trends and strong operating performance.
Following the first quarter results, most of the carriers raised their 2013 earnings estimates, reflecting optimism for the rest of the year. We, however, expect narrower margins in 2013 compared to the strong margins in the 2010-2012 period, when favorable prior-period claim development and continued lower-than-expected utilization helped the industry witness strong margins.
Margins are anticipated to decline in 2013 and beyond as medical costs will likely return to more normal levels and pricing may not increase to that extent.
About the Industry
Despite a huge sum of money being spent on health care, millions of Americans lack health insurance coverage or are underinsured. This is largely due to a dysfunctional health care system, in place for decades. To rein in wastage and make health care more accessible, effective and affordable, the current administration came out with a major reform in the shape of the Affordable Care Act, commonly referred to as Obamacare. This massive piece of legislation has elicited mixed responses from the get-go, largely along partisan lines, and is still not fully functional.
Industry Ranking
Within the Zacks Industry classification, Health Insurance is broadly grouped into two sectors: Medical and Finance. The Medical HMO industry is within the Medical sector while the Multi-line Insurance industry is within the Finance sector. The Multi-line insurance industry houses within its category all kinds of operators that have multiple lines of insurance business, including healthcare.
We rank all the industries in the 16 Zacks sectors based on the earnings outlook for the constituent companies in each industry. The ranking is available on the Zacks Industry Rank page. http://www.zacks.com/stocks/industry-rank
As a point of reference, the outlook for industries with Zacks Industry Rank #88 and lower is 'Positive,' between #89 and #176 is 'Neutral' and#177 and higher is 'Negative.' The current Zacks Industry Rank for the Medical HMO industry is #18, down 8 spots in the last week, while the Multi-line Insurance industry is currently ranked #17, up 10 spots over the past week. With both these industries located towards top of the Zacks Industry Rank list, the outlook for the healthcare insurance space remains positive.
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