The shares of Cigna Corp. (CI) scaled a 52-week high of $109.24 on Jan 20, 2015. This bullish run came on the back of its continuous Collaborative Care Program deals. With roughly 1.17 billion shares traded in the last session, the stock finally closed at $108.46, gaining 0.53%.
The one-year return of Cigna came in at 21.23%, significantly ahead of the S&P return of 10%.
On Jan 20, Cigna announced four collaborative care initiatives with Facey Medical Foundation, UCLA Medical Group, Broward Health system, and Memorial Health Network and Scripps, respectively, to provide patient access to health care, enhance care coordination, achieve improved health outcomes, lower total medical costs and increase patient satisfaction.
Cigna’s Collaborative Care program is similar to an Accountable Care Organization (ACO). An ACO is a group effort by health care providers, voluntarily forming alliances to provide coordinated and affordable high-quality care to patients.
Cigna has been moving aggressively with this healthcare delivery model because of the promising results achieved. The company finds this one of the most effective approaches of controlling costs to manage members’ medical expenses.
Since 2008, Cigna has been leading the Accountable Care Organization movement. Presently it has 114 Cigna Collaborative Care arrangements with 1.2 million commercial customers.
The ACO wave is sweeping across the health insurance industry as these help insurers reduce medical cost. Under health reform, insurers have lost flexibility in the ways of coping with rising medical expenses. They can no longer rely on many of their traditional medical underwriting strategies, such as exclusion of pre-existing conditions.
The most effective approach for insurers now is to rely exclusively on current cost-control mechanisms to manage members’ medical expenses. An ACO helps insurers like Cigna to accomplish these objectives.
Cigna is scheduled to report its fourth-quarter and 2014 results on Feb 5, 2015. Our proven model shows that Cigna is likely to beat earnings because it has the right combination of two key ingredients – Zacks Rank and Earnings ESP.
Currently, HCA Holdings carries a Zacks Rank #2 (Buy), increasing the possibility of an earnings beat. The Zacks Rank along with an Earnings ESP of +1.21%, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, makes us confident of an earnings beat this release.
Other Stocks to Consider
Other stocks from the multiline insurance sector include MGIC Investment Corp. (MTG), Ping An Insurance (Group) Company of China, Ltd. (PNGAY) and Assured Guaranty Ltd. (AGO). While both MGIC Investment and Ping An Insurance sport a Zacks Rank #1 (Strong Buy), Assured Guaranty holds a Zacks Rank #2 (Buy).
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