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Cigna (CI) Poised for Growth Despite Regulatory Hurdles

CI HUM UNH ANTM

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On Nov 7, we updated our research report on CIGNA Corp. (CI - Free Report) . The company’s third-quarter 2016 consolidated revenue increased 5% year over year to $9.9 billion. It reported adjusted income from operations of $503 million or $1.94 per share, reflecting strong performance in its Commercial Health Care and Global Supplemental Benefits business lines and improving results in its Group Disability and Life segment.

The company is consistently making investments in value-based care programs and incentive payment models to provide quality care at affordable cost. It tries to achieve this via collaborative accountable care (CAC) arrangements. It has 160 such arrangements in place across 29 states, serving over two million customers. Its CAC initiatives have also helped in controlling medical cost.

Also, the company’s Global Health Care and Global Supplemental Benefits businesses are performing strongly with high customer retention levels and solid revenue and earnings growth.

Cigna has been growing it membership for the past many quarters. The company ended the third quarter with more than 15.2 million medical members, up 2.2% year over year. We expect a rise in membership going forward, driven by organic growth in Cigna’s Middle Market, International, Select, and Medicare segments. For 2016, the company expects global medical membership to increase in the low single-digit percentage range.

CIGNA CORP Price and Consensus

CIGNA CORP Price and Consensus | CIGNA CORP Quote

Nevertheless, the company faces a ban on selling private Medicare plans this enrollment season because of an investigation by U.S. regulators. The ban was imposed because the company was found guilty of non compliance with rules relating to Medicare policies.

The company has also been sued by the Justice Department over its acquisition by Anthem Inc. (ANTM - Free Report) .

Cigna carries a Zacks Rank #3 (Hold). Other health insurers that have reported better-than-expected third-quarter earnings like Cigna include UnitedHealth Group Inc. (UNH - Free Report) and Humana Inc. (HUM - Free Report) both with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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