The current inflationary environment, with the Consumer Price Index rising 8.3% in April, and the Fed’s hawkish stance on increasing rates to combat inflation has been fueling U.S. Treasury yields. Earlier this month, the Fed raised its benchmark interest rate by 50-basis points and indicated that further rate hikes are in the offing.
Furthermore, this month the 10-year Treasury yield note rose to its highest level since November 2018 amid concerns about surging inflationary pressures and slowing economic growth. Higher interest rates and rising yields bode well for insurance companies because they allow them to generate higher returns. These companies generally hold high-quality, long-term bonds to meet their promised returns to policyholders. Thus, higher bond yields should benefit them.
Given this backdrop, we think it could be wise to add the stocks of quality life insurance companies Anthem, Inc. (ANTM), Cigna Corporation (CI), UnitedHealth Group Incorporated (UNH), Molina Healthcare, Inc. (MOH), and Humana Inc. (HUM) to one’s portfolio.
Anthem, Inc. (ANTM)
ANTM in Indianapolis, Ind., offers a spectrum of network-based managed care health benefit plans to large and small groups, individuals, Medicaid, and Medicare markets. The company operates through four segments: Commercial & Specialty Business; Government Business; IngenioRx; and Other.
On May 5, ANTM acquired Integra Managed Care, a New York State managed Long Term Care Plan designed for adults living with long-term disabilities. With this acquisition, the company aims to expand its Medicaid business and healthcare services across New York.
ANTM’s total revenue increased 17.6% year-over-year to $38.10 billion in its fiscal first quarter (ended March 31). Its net income grew 7.7% from its year-ago value to $1.80 billion, while its net income per share increased 10.1% from the year-ago value to $7.39.
The $7.75 consensus EPS estimate for its fiscal second quarter (ending June 30, 2022) represents a 10.2% improvement year-over-year. The $38.04 billion consensus revenue estimate for the current quarter indicates a 14.3% increase from the same period last year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 28.1% in price to close its last trading day at $505.29.
ANTM’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has a B grade for Growth, Value, Stability, Sentiment, and Quality. Among the 11 stocks in the A-rated Medical - Health Insurance industry, it is ranked #1. Click here to see the POWR ratings of ANTM for Momentum.
Cigna Corporation (CI)
CI is an insurance service provider operating through two segments: Evernorth; and Cigna Healthcare. The Bloomfield, Conn.-based company offers a range of coordinated and point solution health services and intelligence solutions to health plans, employers, government organizations, and health care providers through its Evernorth segment. Its Cigna Healthcare segment offers products and services, including medical, pharmacy, behavioral health, dental, vision, and health advocacy programs for insured and self-insured customers.
On May 5, CI launched Provider consult services powered by Evernorth to drive better outcomes for cancer patients. The service is expected to enhance the company’s suite of integrated oncology solutions, which drives better health outcomes at lower costs for patients.
In its fiscal year 2022 first quarter (ended March 31, 2022), CI’s total revenues increased 7.4% year-over-year to $44.01 billion. Its adjusted income from operations increased 16% from the year-ago value to $1.93 billion, while its net income grew marginally year-over-year to $1.18 billion. The company’s net income per share came in at $3.68, representing an 11.5% year-over-year improvement.
Analysts expect CI’s EPS and revenue to increase 5.6% and 2.8%, respectively, year-over-year to $5.54 and $44.33 billion in its fiscal second quarter (ending June 30, 2022). CI has surpassed the consensus EPS estimates in each of the trailing four quarters. CI has gained 25.8% in price over the past six months.
CI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. CI has a B grade for Growth, Value, Stability, Sentiment, and Quality. The stock is ranked #3 of 11 stocks in the Medical - Health Insurance industry. Click here to see the ratings of CI for Momentum.
UnitedHealth Group Incorporated (UNH)
UNH in Minnetonka, Minn., is a diversified health care and insurance company that offers a broad spectrum of products and services through UnitedHealthcare and Optum platforms. The company provides employers with products and resources to plan and administer employee benefit programs.
On March 29, Optum, which is a part of UNH and LHC Group (LHCG), a national patient-focused provider of high-quality in-home health care services, announced their combination to extend value-based care into patients' homes. The company expects this strategic combination to accelerate its ability to deliver integrated care, improving outcomes and patient experiences.
UNH’s net revenues increased 14% year-over-year to $80.15 billion in the first quarter ended March 31, 2022. The company’s net earnings increased 3.4% from its year-ago value to $5.15 billion, while its earnings from operations grew 3.1% year-over-year to $6.95 billion. UNH’s EPS rose 3.7% from the prior-year quarter to $5.27.
For its fiscal second quarter (ending June 30, 2022), UNH’s revenue is expected to increase 12% year-over-year to $79.88 billion, respectively. Its EPS is expected to increase 11% to $5.22 in the current quarter. The stock has surpassed the consensus EPS estimates in each of the trailing four quarters. NH has gained 21.1% over the past year to close yesterday’s trading session at $497.56.
The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. It is no surprise that UNH has a B grade for Growth, Stability, Sentiment, and Quality. In the Medical - Health Insurance industry, it is ranked #2 of 11 stocks.
Beyond what we have stated above, we have also given UNH grades for Value and Momentum. Get all the UNH ratings here.
Molina Healthcare, Inc. (MOH)
MOH provides managed health care services to low-income families and individuals under Medicaid and Medicare programs and through state insurance marketplaces. The Long Beach, Calif.-based company operates through four segments: Medicaid; Medicare; Marketplace; and Other. It offers healthcare services through contracts with providers, independent physicians and physician groups, hospitals, and ancillary providers.
On January 3, MOH acquired Cigna’s Texas Medicaid contracts. With this acquisition, the company is expected to continue to bring superior benefits to members in Texas and propel growth.
During its fiscal first quarter (ended March 31, 2022), MOH’s net revenue increased 19.1% year-over-year to $7.77 billion. Its operating income rose 11% from its year-ago value to $372 million. Its net income grew 13.2% from the same period last year to $258 million, while its net income per share came in at $4.39, representing a 12.9% increase year-over-year.
Analysts expect MOH’s revenues to increase 13.1% year-over-year to $7.69 billion in its fiscal second quarter (ending June 30, 2022). Its EPS is expected to increase 28% to $4.35 in the current quarter. It is no surprise that the company has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 23.1% in price to close the last trading session at $312.59.
MOH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. MOH also has an A grade for Quality and a B grade for Value. The stock is ranked #5 of 11 stocks in the Medical - Health Insurance industry. Click here to see the other ratings of MOH for Growth, Stability, Sentiment, and Momentum.
Humana Inc. (HUM)
HUM operates as a health and well-being company through three segments: Retail; Group and Specialty; and Healthcare Services. The Louisville, Ky.-based company offers medical and supplemental benefit plans to individuals. It also provides insured medical and specialty health insurance benefits and pharmacy solutions. As of Dec. 31, 2021, HUM had approximately 17 million members in medical benefit plans, as well as nearly five million members in specialty products.
In the first quarter, ended March 31, 2022, HUM’s total revenue increased 16% year-over-year to $23.97 billion. Its net income increased 12.3% from its year-ago value to $930 million, while its EPS came in at $7.29, representing a 14.1% year-over-year improvement.
The $7.66 consensus EPS estimate for its fiscal second quarter (ending June 30, 2022) represents an 11.2% improvement year-over-year. The $23.40 billion consensus revenue estimate for the present quarter represents a 13.3% increase from the same period last year. HUM surpassed the EPS estimates in each of the trailing four quarters, which is excellent. And over the past five days, the stock has gained marginally, closing yesterday’s trading session at $440.42.
It is no surprise that HUM has an overall A rating, which translates to Strong Buy in our proprietary rating system. It also has a B grade for Growth, Value, Sentiment, and Quality. The stock is ranked #6 of 11 stocks in the Medical - Health Insurance industry. To see the other ratings of HUM for Stability, and Momentum, click here.
ANTM shares were trading at $503.60 per share on Wednesday afternoon, down $1.69 (-0.33%). Year-to-date, ANTM has gained 8.95%, versus a -16.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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