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Cigna Considers Divesting Its Non-Health Insurance Business

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News about the potential sale of Cigna Corp.’s (CI - Free Report) non-health insurance unit is doing the rounds. The company is mulling over divesting its business that sells life, accident and disability-income insurance to employers for their employees.

The above piece of information might possibly come true through a deal, given the fact that Cigna is looking to reduce its debt level, which swelled after the buyout of Express Scripts for $54 billion, last year. The deal required Cigna to borrow funds.

Also Cigna’s priority is to focus on its core business related to healthcare, which expanded further after the purchase of Express Scripts. The company desires to strengthen its Medicare business, which presents a huge business opportunity on the back of its ever-increasing demand from the baby boomer population.

Meanwhile, insurers are getting attracted to the deal for business diversification at a time when their core products like life insurance and retirement-income annuities are losing demand due to persistently low interest rates. Also, this business is less capital intensive and provides stable cash flows.

New York Life Insurance Co. has been reportedly leading the race in the deal with MetLife, Inc. (MET - Free Report) and Sun Life Financial Inc. (SLF - Free Report) in tow.

The employers’ insurance markets present  growing business opportunities for insurers given its low capital reserving nature and stable cash flow generation capability. Prospects of this business attracted insurers like Lincoln National Corp. (LNC - Free Report) and the Hartford Financial Services Group Inc., who fortified their presence in this space recently via mergers and acquisitions.

We view this deal to be a net positive for the company. Cigna’s niche base in the healthcare industry with the recent buyout of Express Scripts also seems favorable in the long run. Also, the company's broadening international business provides proliferation and shields against stiff regulations governing its businesses in the United States.

Cigna’s stock has rallied 21.3% in the past six months compared with its industry’s growth of 1%.

The stock has witnessed an upward revision in 2019 earnings estimates over the past 30 days. For the to-be-reported quarter, the company’s earnings are expected to soar 70.7% on revenue growth of 156.7%.
Cigna caries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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