Zacks Industry Outlook Highlights: CIGNA, Aetna, Humana, Health Net and
CHICAGO, July 17, 2013
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
Industry: Health Insurance
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
About the Industry
The health and medical insurance industry is an integral part of the U.S.
economy. According to the Centers for Medicare and Medicaid Services, U.S.
health expenditures account for approximately 18% of the country's GDP.
According to the World Health Organization, health care expenditure per person
in the U.S. is the highest in the world.
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.
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
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.
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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