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We are reiterating our Neutral recommendation on CIGNA Corp. (CI - Analyst Report) following the fourth quarter earnings release. Cigna reported a solid fourth quarter which included a 6.08% positive earnings surprise.

The year 2012 was the third consecutive year of profitable growth.  Over the last 3 years, the company delivered 17% compound revenue growth and 15% compound earnings per share growth. However, a number of challenges in the health insurance market related to the Heath Care Reform may pose uncertainty over the company’s performance in 2013.   

Why reiterate?

Cigna has a well diversified business profile with reach in different markets besides 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 result for 2012 reflects its solid balance sheet and free cash flow outlook for 2013. This multi-line insurer with a Zacks Rank #2 (Buy) is comfortably poised to further enhance shareholder value.  

Cigna continues to strengthen its physician partnerships through more than 50 Collaborative Accountable Care initiatives that span 22 states, which when combined with the HealthSpring senior solutions, already serve nearly 1 million customers.

On the flip side Cigna is witnessing a decline in margins 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.  

Other stock

Assured Guaranty Ltd. (AGO - Snapshot Report), AEGON N.V. (AEG - 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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