Tuesday, January 17, 2012

Sector Snap: Health insurers

NEW YORK (AP) — Starting with UnitedHealth on Thursday, health insurers will report their fourth-quarter results over the next two weeks, and a Jefferies & Co. analyst expects the companies and their stocks to do well in early 2012.

Analyst David Windley said he expects to see "solid" fourth quarter results because health care use is still low. He expects that trend to continue in early 2012, causing the stocks to trade higher.

Consumers are visiting the doctor less often and having fewer elective medical procedures as they try to save money, so health care use has been rising more slowly than companies expected when they set their premiums. That means health insurers will profits will be larger than expected.

Windley said enrollment in Medicare Advantage plans should be strong. Medicare Advantage plans are privately run versions of the government's Medicare insurance for the elderly and disabled. Interest in those plans is expected to grow as baby boomers age and become eligible.

The analyst said UnitedHealth Group Inc., the largest health insurer in terms of revenue, "has the best risk/reward profile in a still risk-averse market" because of its size and its advantages in pricing. He raised his price target for its shares to $68 from $60 and maintained a "Buy" rating for stock in the company, which is based in Minnetonka, Minn.

Windley also rates shares Aetna Inc., Cigna, Humana Inc., and WellPoint Inc. at "Buy." He rates Health Net Inc. at "Hold."

Windley expects Cigna and WellPoint to give 2012 annual guidance when they report their quarterly results. WellPoint is the largest health insurer in terms of membership, and analysts expect it to report a profit of $7.76 per share in 2012, according to FactSet. For Cigna, analysts expect a profit of $5.64 per share.

WellPoint reports its fourth-quarter results on Jan. 25, while Cigna will make its report on Feb. 2.

Here's how the industry's stock performed Tuesday as the overall markets rose modestly:

— Shares of UnitedHealth rose 72 cents to $53.42 in afternoon trading;

— WellPoint stock picked up 88 cents to $72.79;

— Cigna shares gained $1.24, or 2.7 percent, to $46.85;

— Humana shares rose 54 cents to $95.25;

— Aetna stock climbed 86 cents, or almost 2 percent, to $44.56; and

— Health Net shares rose 60 cents to $35.19.


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