Last year, the health insurance industry witnessed strong enrollment growth in the individual market. However, high medical costs and elevated expenses due to COVID-19 and inflation have put pressure on the industry’s bottom line.

However, the industry is expected to witness better growth this year due to proposed subsidies in the individual market as part of President Biden’s Build Back Better bill proposal, and the lesser impact of the COVID-19 omicron variant. Furthermore, the Affordable Care Act, which ensures lower healthcare costs and expanded insurance coverage through Medicare, Medicaid, and Children’s Health Insurance Program (CHIP), is expected to help the industry grow substantially. Indeed, the global health insurance market is expected to grow at a 9.8% CAGR to reach $3.40 trillion by 2027.

Given this backdrop, we think it could be wise to invest in fundamentally sound health insurance stocks UnitedHealth Group Inc. (UNH), Anthem, Inc. (ANTM), Cigna Corporation (CI), and Centene Corporation (CNC).

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 Dec.1, 2021, UNH introduced a new health plan to consumers in Southwest Arizona that offers personalized and seamless customer support and the opportunity to save up to 15% on premiums. By providing access to quality, affordable, patient-focused health care for people with employer-sponsored health coverage, UNH expects to witness high enrolment in this plan in the coming months.

UNH’s revenues for its fiscal 2021 third quarter, ended Sept. 30, 2021, increased 11.9% year-over-year to $72.34 billion. The company’s earnings from operations came in at $5.71 billion for the quarter, representing a 22.8% year-over-year improvement. Its adjusted net earnings were $4.32 billion, up 27.8% from the year-ago period. Its adjusted EPS increased 28.8% year-over-year to $4.52. And the company had $21.09 billion in cash and cash equivalents as of Sept. 30, 2021.

Analysts expect the company’s EPS to increase 11.7% year-over-year to $18.85 in its fiscal year 2021, ended Dec.31, 2021. It surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. The $286.55 billion consensus revenue estimate for the same fiscal year represents an 11.4% rise from the prior-year period. UNH’s EPS is expected to grow at a 14.2% rate per annum over the next five years. Over the past three months, the stock has gained 13.3% in price to close yesterday’s trading session at $465.

In terms of forward EV/S, UNH is currently trading at 1.61x, which is 70.7% lower than the 5.50x industry average. Likewise, the stock’s 1.51x forward P/S is 76.4% lower than the 6.40x industry average.

It is no surprise that UNH has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has an A grade for Sentiment and a B grade for Growth, Stability, and Quality. Click here to see the additional ratings for UNH’s Value and Momentum.

UNH is ranked #1 of 11 stocks in the B-rated Medical – Health Insurance industry.

Anthem, Inc. (ANTM)

ANTM in Indianapolis, Ind., operates as a health benefits company that offers a broad spectrum of network-based managed care plans and services to large and small groups, individuals, Medicaid, and Medicare markets. The company offers an array of specialty and other insurance products and services, such as pharmacy and radiology benefits management, dental, vision, life and disability insurance benefits, and analytics-driven personal health care.

On Nov. 10, 2021, ANTM agreed to acquire Integra Managed Care, a managed long-term care plan that is designed for adults living with long-term disabilities. Currently serving more than  40,000 Medicaid members, Integra’s acquisition aligns with ANTM’s goal of growing its Medicaid business and will be added to ANTM’s Government Business Division upon closing its acquisition by the end of the 2022 second quarter.

ANTM’s total revenues for its fiscal 2021 third quarter, ended Sept. 30, 2021, increased 15% year-over-year to $35.82 billion. The company’s pre-tax income was $2 billion, up 413.1% from the prior-year period. ANTM’s adjusted net income came in at $1.67 billion, up 56.5% from the year-ago period. Its adjusted EPS increased 61.7% year-over-year to $6.79. And the company had $5.49 billion in cash and cash equivalents as of Sept. 30, 2021.

The $26.01 consensus EPS estimate for its fiscal year 2021, ended Dec. 31, 2021, represents a 15.7% rise from the prior-year period. It surpassed the consensus EPS estimates in each of the trailing four quarters. Analysts expect ANTM’s revenue to rise 14% year-over-year to $137.72 billion in that  fiscal year. ANTM’s EPS is expected to grow at a 13.4% rate  per annum over the next five years. Over the past three months, the stock has gained 14.3% in price and ended yesterday’s trading session at $437.83.

ANTM’s 0.90x forward EV/S is 83.6% lower than the 5.50x industry average. In terms of forward P/S, the stock is currently trading at 0.77x, which is 88% lower than the 6.40x industry average.

ANTM’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The stock has an A grade for Growth, and a B grade for Value, Stability, Sentiment, and Quality. Click here to see the additional ratings for ANTM’s Momentum. The stock is ranked #2 in the Medical – Health Insurance industry.

Cigna Corporation (CI)

CI in Bloomfield, Conn., is a health services company that offers medical, dental insurance, and related products and services. The company distributes its products and services through insurance brokers and consultants, directly to employers, and through private and public exchanges.

On Dec. 20, 2021, CI and Spartanburg Regional Healthcare System, one of South Carolina’s largest healthcare systems, reached a multi-year agreement that enables CI customers to gain access to Spartanburg Regional’s hospitals, facilities, and physician network for quality care, effective Jan. 1, 2022. Both companies are looking forward to delivering affordable and high-quality care to the people in the upstate community.

CI’s adjusted revenues for its fiscal 2021 third quarter, ended Sept. 30, 2021, increased 8.6% year-over-year to $44.31 billion. The company’s income from operations was $2.29 billion, representing an 8.8% year-over-year improvement. CI’s adjusted net income came in at $1.94 billion for the quarter, indicating a 19.7% rise from the year-ago period. And its adjusted EPS was $5.73, up 29.9% from the prior-year period. The company had $3.48 billion in cash and equivalents as of Sept. 30, 2021.

Analysts expect the company’s EPS to be $20.41 for its fiscal year 2021, ended Dec. 31, 2021, representing a 10.6% rise from the prior-year period. It surpassed the Street’s EPS estimates in three of the trailing four quarters. A $172.18 billion consensus revenue estimate for the same fiscal year indicates a 7.6% year-over-year improvement. CI’s EPS is expected to grow at an 11% rate per annum over the next five years. Over the past three months, the stock has gained 13.9% in price and closed yesterday’s trading session at $233.69.

CI’s 0.63x forward EV/S is 88.5% lower than the 5.50x industry average. In terms of forward P/S, CI is currently trading at 0.45x, which is 93% lower than the 6.40x industry average.

CI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has a B grade for Value. Click here to see the additional ratings for CI (Stability, Sentiment, Quality, Momentum, and Growth). CI is ranked #5 in the Medical – Health Insurance industry.

Centene Corporation (CNC)

CNC operates as a multi-national healthcare enterprise that provides programs and services to government-sponsored and commercial healthcare programs, focusing on under-insured and uninsured individuals. The St. Louis, Miss.-based company provides its services through primary and specialty care physicians, hospitals, ancillary providers, primarily through Medicaid, Medicare, and commercial products.

On Jan. 4, 2022, CNC completed its acquisition of Magellan Health, Inc., a for-profit managed health care company. The acquisition allows CNC to provide whole-health, integrated healthcare solutions to deliver better health outcomes at lower costs for complex, high-cost populations.

CNC’s total revenues for its fiscal 2021 first quarter, ended September 30, 2021, increased 11.4% year-over-year to $32.41 billion. While its adjusted net earnings increased marginally year-over-year to $745 million, its adjusted EPS remained unchanged at $1.26. The company had $13.42 billion in cash and cash equivalents as of Sept. 30, 2021.

A $5.12 consensus EPS estimate for its fiscal year 2021 ended Dec. 31, 2021, represents a 2.4% rise from the prior-year period. For the same fiscal year, analysts expect CNC’s revenue to improve 13.5% from the prior-year period to $126.10 billion. The company’s EPS is expected to grow at a 10.8% rate per annum over the next five years. Over the past three months, the stock has gained 19.3% in price and closed yesterday’s trading session at $77.84.

The stock’s 0.43x forward EV/S is 92.2% lower than the 5.50x industry average. In terms of forward P/S, CNC is currently trading at 0.35x, which is 94.5% lower than the 6.40x industry average.

CNC’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which equates to Buy in our proprietary rating system.

CNC has a B grade for Growth and Value. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for CNC’s Momentum, Stability, Quality, and Sentiment here. CNC is ranked #4 in the Medical – Health Insurance industry.

UNH shares rose $4.10 (+0.88%) in premarket trading Tuesday. Year-to-date, UNH has declined -6.58%, versus a -1.81% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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