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Will Public Exchanges, Regulators Thwart Anthem's Growth?
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On Aug 30, we issued an updated research report on Anthem Inc. .
Anthem is one of the largest publicly traded managed care organizations in the U.S, which serves customers in all the 50 states through its subsidiaries. The company is also the largest BCBS (Blue Cross Blue Shield) plan provider in the U.S.
In order to further grow its size and scale Anthem has been keenly interested to acquire Cigna Corp. (CI - Free Report) . The transaction would have complemented Anthem`s Medicaid franchise, Medicare supplement and Medicare advantage business owing to Cigna’s strong focus in dental, vision and behavioral health and wellness. However, Anthem has been sued by the Department of Justice over its pending acquisition of Cigna on grounds of several market oriented issues. Objection from the regulatory authorities have tied the company up in months of litigation and the deal, which was scheduled to close by 2016, has been deferred.
Nonetheless, successful acquisitions, commencement of health insurance exchanges, penetration of national accounts into the commercial segment and Medicaid expansion in the government segment have improved membership base. This has prompted the company to project medical membership for 2016 in the range of 39.6–39.8 million.
The company’s effective capital management is reflected by consistent dividends payouts and stock repurchases. However, Anthem has temporarily suspended share buybacks owing to the pending acquisition of Cigna. Anthem’s operational efficiency is reflected by its cash flow projection of more than $3 billion for 2016.
However, the public exchange business that has been underperforming of late. This has compelled the company to lower 2016 membership projection by 300,000 in its individual business. Moreover, the sustained low interest rate environment has adversely affected its net investment income over the past few years.
The continuous deterioration of debt-to-capital ratio clearly indicates the company’s high level of leverage, mainly due to the borrowing made for several acquisitions. The company is undertaking strategic initiatives to de-lever its balance sheet as evidenced by the reduction in debt level in the first half of 2016. . Zacks Rank & Stocks to Consider
Anthem presently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Health maintenance Organization industry include Humana Inc. (HUM - Free Report) and United Health Group Incorporated. (UNH - Free Report) Both of these stocks sport a Zacks Rank #2 (Buy).
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Will Public Exchanges, Regulators Thwart Anthem's Growth?
On Aug 30, we issued an updated research report on Anthem Inc. .
Anthem is one of the largest publicly traded managed care organizations in the U.S, which serves customers in all the 50 states through its subsidiaries. The company is also the largest BCBS (Blue Cross Blue Shield) plan provider in the U.S.
In order to further grow its size and scale Anthem has been keenly interested to acquire Cigna Corp. (CI - Free Report) . The transaction would have complemented Anthem`s Medicaid franchise, Medicare supplement and Medicare advantage business owing to Cigna’s strong focus in dental, vision and behavioral health and wellness. However, Anthem has been sued by the Department of Justice over its pending acquisition of Cigna on grounds of several market oriented issues. Objection from the regulatory authorities have tied the company up in months of litigation and the deal, which was scheduled to close by 2016, has been deferred.
Nonetheless, successful acquisitions, commencement of health insurance exchanges, penetration of national accounts into the commercial segment and Medicaid expansion in the government segment have improved membership base. This has prompted the company to project medical membership for 2016 in the range of 39.6–39.8 million.
The company’s effective capital management is reflected by consistent dividends payouts and stock repurchases. However, Anthem has temporarily suspended share buybacks owing to the pending acquisition of Cigna. Anthem’s operational efficiency is reflected by its cash flow projection of more than $3 billion for 2016.
However, the public exchange business that has been underperforming of late. This has compelled the company to lower 2016 membership projection by 300,000 in its individual business. Moreover, the sustained low interest rate environment has adversely affected its net investment income over the past few years.
The continuous deterioration of debt-to-capital ratio clearly indicates the company’s high level of leverage, mainly due to the borrowing made for several acquisitions. The company is undertaking strategic initiatives to de-lever its balance sheet as evidenced by the reduction in debt level in the first half of 2016.
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Zacks Rank & Stocks to Consider
Anthem presently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Health maintenance Organization industry include Humana Inc. (HUM - Free Report) and United Health Group Incorporated. (UNH - Free Report) Both of these stocks sport a Zacks Rank #2 (Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>