For Immediate Release
Chicago, IL – November 15, 2011 – Zacks.com announces the list
of stocks featured in the Analyst Blog. Every day the Zacks Equity
Research analysts discuss the latest news and events impacting
stocks and the financial markets. Stocks recently featured in the
blog include WellPoint Inc. (
WLP), UnitedHealth Group Inc. ( UNH),
Aetna Inc. ( AET), HealthSpring
Inc. ( HS) and Cigna Corp. ( CI).
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Here are highlights from Monday’s Analyst
Blog:
Insurance Major Eyes Acquisition
Media reports revealed that XL Health Corp. is being chased by
WellPoint Inc. ( WLP), UnitedHealth Group
Inc. ( UNH) and Aetna Inc. ( AET), as
each of these big insurers are eyeing the company’s Medicare
Advantage business, which is expected to grow overwhelmingly
over the next five years.
It is also reported that the purchase consideration may range
between $1.5 billion and $2 billion for Matlin Patterson Global
Advisers owned XLHealth Corp., a provider of managed care for
chronically ill Medicare members.
The acquisition of XLHealth Corp. will follow the similar
strategic acquisition of HealthSpring Inc. (
HS) by Cigna Corp. ( CI) for $3.8 billion in late
October.
Rationale of the Acquisition
A Medicare Advantage Plan is offered by private health insurance
companies for the elderly and disabled.
The first baby boomers will hit their retirement ages soon and
will opt for managed care plans. Health Insurers will thus look to
acquire providers of managed care plans which in turn will help
them generate higher revenues.
Also, according to reports, managed-care plans for Medicare, the
U.S. health program for the elderly and disabled will generate
incremental revenue of $10 billion by 2015, which would justify
such acquisitions.
The companies earlier have acquired providers of chronically ill
coverage. Brentwood-based Inspiris was acquired by UnitedHealth in
March 2011 while CareMore Health Group was purchased by WellPoint
in June 2011.
Capital Position of Prospective Acquirers
UnitedHealth Group ended the third quarter with cash and cash
equivalents of $13.7 billion, almost a 50% increase over 2010
level. Year to date cash from operation totaled $7.4 billion, a 53%
year-over -year increase.
Aetna exited the third quarter with cash and cash equivalents of
$1.9 billion, a 5% increase over the 2010 level. Year- to -date,
cash from operations totaled $2 billion, a whopping year-over- year
increase of 138%.
WellPoint exited the quarter with cash and cash equivalents of
$2.5 billion, an increase of 39% from 2010 end level. Year-to-date,
operating cash flows totaled $3.3 billion, up 300% year over
year.
The companies’ solid capital position will enable it to fund the
acquisition once it materializes.
Earnings Recap of Prospective Acquirers
Aetna has posted third quarter 2011 earnings of $1.40 per share,
significantly ahead of the Zacks Consensus Estimate of $1.14 as
well as the year-ago quarter’s earnings of $1.00.
Declining utilization, strong performance across all the product
lines, disciplined pricing and medical cost trends accounted for
the earnings upside.
WellPoint reported third-quarter adjusted income of $1.77 per
share, striding ahead of the Zacks Consensus Estimate of $1.69.
Results were also 1.7% higher than $1.74 earned in the year-ago
quarter.
The quarter benefited from improved membership growth and a
decline in selling, general and administrative expenses.
UnitedHealth reporting third quarter earnings of $1.17 per
share, higher than the Zacks Consensus estimate of $1.12. Earnings
also compared favorably with $1.14 reported in the prior-year
quarter.
The out-performance was driven by strong revenue growth from
UnitedHealthcare, as well as from the Optum businesses, partially
offset by higher medical cost.
Zacks Rank
The quantitative Zacks #1 Rank (short-term Strong Buy rating)
for Aetna Inc. indicates upward pressure on the stock over the near
term.
The quantitative Zacks #2 Rank (short-term Buy rating) for
WellPoint indicates upward pressure on the stock over the near
term.
The quantitative Zacks #3 Rank (short-term Hold rating) for
UnitheHealth indicates no clear directional pressure on the stock
over the near term.
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AETNA INC-NEW (AET): Free Stock Analysis Report
CIGNA CORP (CI): Free Stock Analysis Report
HEALTHSPRING IN (HS): Free Stock Analysis Report
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
WELLPOINT INC (WLP): Free Stock Analysis Report
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