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We are reiterating our Neutral recommendation on CIGNA Corp. (CI - Analyst Report) following the second quarter results, which included a 12% positive earnings surprise. Over the past four quarters, this health insurer delivered positive surprise with an average beat of 16%. Cigna carries a Zacks Rank #2 (Buy).
 
Why Reiterate?
 
On Aug 1, Cigna reported second-quarter 2013 net operating earnings of $1.78 per share, which outpaced the Zacks Consensus Estimate of $1.59 per share. Moreover, the results surged nearly 19% year over year.
 
Better-than-expected results came on the back of improved top-line, favorable operating expenses and medical costs.
 
Cigna has a well diversified business profile with reach in different markets and a broad product portfolio. 
 
Moreover, Cigna has strengthened its market position through strategic acquisitions, most notably HealthSpring. 
 
The company also has significant overseas business which is generating strong earnings.   
 
Cigna’s strong results reflect its solid balance sheet and free cash flow outlook for 2013. The company is comfortably poised to further enhance shareholder value.  
 
Also, Cigna continues to strengthen its physician partnerships through more than 66 Collaborative Accountable Care initiatives. 
 
On the flip side, Cigna is witnessing a decline in margin in its health care and disability segments due to a challenging market place. We expect the trend to continue over the near term as the health insurance market place undergoes significant changes in the face of the Health Care Reform. 
 
Cigna has been witnessing rising earnings estimates. Over the last 60 days, the Zacks Consensus Estimate for 2013 moved up by 2.8% to $6.62 as 11 out of 12 estimates moved north. The same for 2014 rose 2.1% to $7.16 as 10 of 12 estimates were raised over the same time frame. The expected long term earnings growth is 12.0%. 
 
Other Stocks 
 
Eastern Insurance Holdings, Inc. , Kemper Corp. (KMPR - Snapshot Report), FBL Financial Group Inc. (FFG - Snapshot Report) under our coverage carry Zacks Rank #1 (Strong Buy) and are worth considering. 

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