On May 30, 2013, shares of CIGNA Corp.
(CI - Analyst Report
) hit a 52-week high of $69.87. The momentum was driven by a strong first quarter, which included a 20.3% positive surprise, effective execution of its strategy and the strength of its diverse portfolio of businesses.
On May 2, 2013, Cigna reported first-quarter 2013 net operating earnings of $1.72 per share, which outpaced the Zacks Consensus Estimate of $1.43 per share. Moreover, the results surged nearly 39% year over year. The better-than-expected results came on the back of improved top-line, favorable operating expenses and medical costs, including favorable prior-year reserve development in the Global Health Care business.
Cigna’s first quarter consolidated revenues increased by 21% to $8.2 billion.
With respect to earnings trend, Cigna witnessed positive earnings surprises in each of the last 4 quarters with an average beat of 13.8%. The company expects to deliver operating earnings of $1.735–$1.865 billion or $6.00–$6.45 per share in 2013.
The company is also performing well in its business segments. In commercial health care, Cigna has continuously grown its target markets by achieving strong customer retention, expanding its existing customer relationships and adding new customers.
In the Global Supplemental Benefits business, Cigna delivered a healthy increase in revenue and earnings, reflecting solid customer growth, effective cost management and contributions from recent acquisitions.
Recently, Cigna also enhanced its financial flexibility through the exit of its Run-off Reinsurance business.
Valuation for ACE Limited looks reasonable. The shares are trading at a 10.8% discount to the peer group average on a forward price-to-earnings basis but at a 189% premium to peer group average on a price-to-book basis. Return on equity is 147.5% higher than the peer group average. However, the 1-year return from the stock is 56.7%, higher than the S&P 500’s return of 25.5%.
Cigna carries a Zacks Rank #2 (Buy).
Multi-line insurers Hartford Financial Services Group Inc.
(HIG - Analyst Report
) , American International Group Inc.
(AIG - Analyst Report
) , and CNO Financial Group Inc.
(CNO - Analyst Report
) , among others are carrying the same Zacks Rank and are worth considering.