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In accordance with its long-term strategy of accelerating international operations, health insurer CIGNA Corp. (CI - Analyst Report) has announced a 50:50 joint venture with Saudi Arabian Insurance Company B.S.C (C) (SAICO).
Under the new agreement, both the companies will expand their health, wellness and insurance products. The regional and multi-national employers and organizations across the Middle East will be the target customers of this alliance.
According to CIGNA, SAICO would be the best fit for its health insurance business since the latter boasts a strong brand reputation and a deep reach in the Middle East market. Moreover, both the companies have been working together for over a decade.
CIGNA had been eyeing the Middle East market for quite some time, since it is a huge market and offers long-term growth.
Owing to the significant regulatory pressures back home in the face of the Health care reform, health insurers are moving toward new markets. To unburden itself from such pressures, CIGNA has been diversifying its operations in China, India, Turkey and other Middle Eastern countries.
CIGNA’s international business is expected to fuel its future growth. Moreover, we believe that the company’s distinctive presence in the emerging markets will bolster its earnings and expand margins. Further, its international business offers faster growth (high-double digits) and higher margins (high-single digits to low-double digits) than its commercial book. Given the aggressiveness, with which CIGNA is focusing on its strategy “Go Global”, we expect that the contribution of its international business to total earnings would rise approximately by one-third from one-fifth currently.
CIGNA’s peers Aetna Inc. (AET - Analyst Report) and UnitedHealth Group Inc. (UNH - Analyst Report) are also growing their international businesses. Going forward, we expect to see more international deals as carriers are eying growing economies of Asia and the Middle East.
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