The health insurance industry’s outlook appears promising, driven by increasing demand for health insurance. With rising medical costs and a rapidly aging population, the need for affordable health insurance has never been more critical.
Given this backdrop, investors could consider investing in shares of fundamentally sound health insurance stocks Elevance Health, Inc. (ELV), The Cigna Group (CI), and Centene Corporation (CNC) to capitalize on the medical industry’s tailwinds.
Healthcare spending is expected to reach its highest growth rate in 13 years, according to the latest research by PwC. PwC’s Health Research Institute forecasts an 8% year-over-year increase in medical costs for the Group market and 7.5% for the Individual market in 2025.
This surge is projected to be largely driven by inflationary pressures, rising prescription drug costs, and increased utilization of behavioral health services.
On the other hand, with a rising aging population, health insurance needs are really high right now. According to the World Health Organization (WHO) forecasts, the proportion of people over the age of 60 will nearly double by 2050, marking an increase in demand for specialized healthcare.
Factors such as these are fueling the growth of the health insurance market as more people pursue coverage in response to regulatory changes and economic pressures. According to a study by Mordor Intelligence, the U.S. health and medical insurance market is projected to reach $2.01 trillion by 2029, growing at a CAGR of over 6%.
Considering these conducive trends, let’s look at the fundamentals of the three Medical – Health Insurance picks, starting with number #3.
Stock #3: Elevance Health, Inc. (ELV)
ELV operates as a health benefits company. It operates through four segments: Health Benefits; CarelonRx; Carelon Services; and Corporate & Other. The company supports consumers, families, and communities across the entire care journey, connecting to the care, support, and resources to lead healthier lives.
On April 15, ELV and Clayton, Dubilier & Rice (CD&R) announced their partnership to drive innovation in primary care delivery, enhance the healthcare experience, and improve health outcomes.
The new payer-agnostic platform is expected to serve nearly one million consumers and expand ELV’s access to advanced primary care across its Commercial, Individual Exchange, Medicaid, and Medicare health plans, growing its customer base significantly.
On March 11, ELV announced the completion of its acquisition of Paragon Healthcare, Inc., a company focused on delivering life-saving and life-enhancing infusible and injectable therapies.
With the acquisition, ELV would be able to utilize Paragon Healthcare’s assets to provide affordable, convenient access to specialty medications for those living with chronic and complex illnesses and remain true to its mission of providing its customers with affordable healthcare, increasing its popularity further.
In the fiscal second quarter that ended on June 30, 2024, ELV’s total revenues increased marginally year-over-year to $43.89 billion. Moreover, its adjusted shareholders’ net income came in at $2.36 billion, up 9.9% year-over-year, while adjusted shareholders’ EPS grew 11.9% from the year-ago value to $10.12.
Street expects ELV’s revenue for the fiscal third quarter (ending September 2024) to increase 1.6% year-over-year to $43.16 billion. Its EPS for the same period is expected to register an 8% growth from the prior year, settling at $9.71. In addition, the company surpassed the consensus EPS estimates in all four trailing quarters.
Shares of ELV have gained 9.2% over the past six months and 20.9% over the past year to close the last trading session at $544.40.
It’s no surprise that ELV has an overall rating of B, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
ELV has a B grade for Stability and Sentiment. Out of 10 stocks in the A-rated Medical – Health Insurance industry, ELV is ranked #3.
Beyond what is stated above, we’ve also rated ELV for Growth, Value, Momentum, and Quality. Get all ELV ratings here.
Stock #2: The Cigna Group (CI)
CI provides medical insurance and related services. The company operates through two segments: Evernorth Health Services and Cigna Healthcare. In addition, it provides permanent insurance contracts tailored for corporate clients, covering employees’ lives to support future benefit obligations funded by employers.
On January 31, CI announced a definitive agreement for Health Care Service Corporation (HCSC) to acquire its Medicare Advantage, Cigna Supplemental Benefits, Medicare Part D, and CareAllies businesses for $3.7 billion.
The transaction allows CI to enhance its services platform, driving growth while positioning its Medicare businesses and CareAllies for continued success under HCSC.
CI’s adjusted revenues for the fiscal 2024 second quarter ended June 30, 2024, increased 24.4% year-over-year to $60.47 billion. Its adjusted income from operations rose 4.9% from the year-ago value to $1.91 billion. Furthermore, the company’s adjusted income from operations per share amounted to $6.72, up 9.6% year-over-year.
Analysts expect CI’s revenue for the quarter ending September 2024 to increase 21.4% year-over-year to $59.56 billion. Its EPS for the same quarter is expected to grow 9% year-over-year to $7.38. Moreover, the company topped the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of CI have gained 6.7% over the past six months and 27.4% over the past year to close the last trading session at $355.12.
CI’s strong fundamentals are mirrored in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Value, Stability, and Quality. It is ranked #2 out of 10 stocks within the same industry.
Beyond what we stated above, we also have given CI grades for Momentum and Sentiment. Get all the CI’s ratings here.
Stock #1: Centene Corporation (CNC)
CNC is a healthcare enterprise offering services to government-sponsored and commercial healthcare programs, with a focus on underinsured and uninsured individuals. The company operates through four segments: Medicaid; Medicare; Commercial; and Other.
On July 25, CNC announced that Astrana Health, Inc. (ASTH), a provider-centric, technology-powered healthcare company, entered into a definitive agreement to acquire CNC’s Collaborative Health Systems (CHS).
Serving over 129,000 beneficiaries across 17 states, the deal positions CNC for stronger growth by expanding CHS’ payer-agnostic care capabilities, enhancing provider empowerment, and unlocking new opportunities for scalable, high-quality care delivery across diverse markets.
On May 2, CNC’s Medicare business, Wellcare, announced a multi-year partnership with Wellvana to enhance affordable, patient-centered care for Medicare Advantage members in Georgia, Tennessee, and Texas.
The partnership benefits CNC by expanding its value-based care reach, improving clinical outcomes, and strengthening relationships with independent primary care physicians, driving growth and better health outcomes for its Medicare Advantage members.
In the fiscal second quarter that ended June 30, 2024, CNC’s total revenues increased 5.9% year-over-year to $39.84 billion. Its earnings from operations rose 5% from the year-ago value to $1.23 billion. The company’s adjusted net earnings and adjusted EPS grew 11.1% and 15.2% from the prior year’s period to $1.28 billion and $2.42, respectively.
The consensus revenue and EPS estimates of $156.26 billion and $6.85 for the fiscal year ending December 2024 exhibit a year-over-year rise of 1.5% and 2.6%, respectively. Moreover, the company has topped the consensus revenue and EPS estimates in all the four trailing quarters, which is noteworthy.
Shares of CNC have gained 4.3% over the past three months and 17.4% over the past year to close the last trading session at $72.66.
CNC’s POWR Ratings reflect its robust prospects. The stock has an overall grade of A, translating to a Strong Buy in our proprietary rating system.
CNC has an A grade for Value and a B for Quality and Growth. It has topped the 10-stock Medical – Health Insurance industry.
To see the other ratings of CNC for Sentiment, Stability, and Momentum, click here.
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ELV shares were unchanged in premarket trading Friday. Year-to-date, ELV has gained 16.17%, versus a 16.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal’s passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor’s degree in finance and is pursuing the CFA program.
She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More…
