Cigna Considers Divesting Its Non-Health Insurance Business
Zacks Investment Research | Dec 11, 2019 10:56PM ET
News about the potential sale of Cigna Corp.’s (NYSE:CI) 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 (NASDAQ:ESRX) 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. (NYSE:MET) and Sun Life Financial Inc. (TSX:SLF) 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. (NYSE:LNC) and the Hartford Financial Services Group (NYSE:HIG) 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).
Get The News You Want
You can see .
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.