Health Premiums and Insurance Stocks: UnitedHealth Group Inc. (UNH) and More

CIGNA Corporation (NYSE:CI)

Again, not one of the biggest firms on this list, Cigna is also one that should be most interesting for investors looking for some quicker growth. In November it raised its guidance for its 2012 earnings, and in February it raised its guidance for 2013 earnings. That sort of thing catches the eye of shareholders and makes them smile.

Unlike UnitedHealth, Cigna hasn’t seen the ups and downs in its share price this year. It did decline a bit from April to July but since then has grown 48% from $39.66 to $58.71. The P/E sits at 11.20, which is pretty high for a major insurance firm, too. There’s still value to be had for an investor.

Aetna Inc. (NYSE:AET)

Aetna is, at least to me, the most visible of the firms on this list. At least it’s the one I hear mentioned most around my circle of friends. Still, the firm isn’t the absolute biggest insurer. From the 2011 data it sits at #4 in market share. The firm has been having some issues absorbing #7 Coventry Healthcare – that’s a big bite to swallow – but nothing it shouldn’t be able to get through.

Share price for Aetna saw a significant trough last summer as it dropped from $46.69 in February to a low of $35.32 in July. However, since then and following the announcement of the Coventry acquisition, shares have increased to $47.58. A dividend yield of 1.68% is helpful, too. Still, there are real issues surrounding Aetna and the amount of leverage it is taking on with the Coventry acquisition. Only invest here if you think it’ll come through it well.

Insurance can feel, in these times of media and political hype surrounding health costs, as if it was a scary, lonely thing to invest in. But I think a rational person can look at the Affordable Care Act and see that it will benefit insurers in the long run. Cost controls, combined with an influx of new people to insure, will do wonders for the balance sheets of insurers both nimble and flexible enough to control both their own costs and prices. That’s where you should be investing.

Good luck!

Follow Nate on Twitter: @natewooley

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The article Health Premiums and Insurance Stocks originally appeared on Fool.com and is written by Nate Wooley.

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