The Best In Health Insurance – UnitedHealth Group Inc. (UNH): CIGNA Corporation (CI), Aetna Inc. (AET)

CIGNA Corporation (NYSE:CI) is one of the leaders in employee benefit plans, with 14 million covered lives. They are not much of a dividend payer, however they have performed well for their shareholders lately.

In fact, Cigna has outperformed the other two companies mentioned by a significant amount over the past five years. A $10,000 investment in Cigna exactly five years ago would be worth $13,159 today, assuming all dividends were reinvested. UnitedHealth performed fairly well, and would be worth $12,006 now. Aetna Inc. (NYSE:AET) shareholders actually lost some money, and their $10k would be worth $9,934 today.

Let’s look at the valuation of these companies for a minute. The cheap valuation is one of my favorite things about UnitedHealth, trading at just 10.1 times earnings. According to the consensus, earnings are projected to grow by 10% annually going forward, more than justifying the valuation. In fact, it looks downright cheap.

For comparison purposes, Cigna is projected to grow at a 9% rate and trades at 10.7 times earnings. Aetna Inc. (NYSE:AET) trades at 9.9 times earnings with 8% forward growth. To get one set of numbers to compare the relative valuations of these companies, I’ll take the ratio of the growth rate to the P/E (higher is better) and I arrive at 0.81 for Aetna, 0.84 for Cigna, and 0.99 for United Health.

The bottom line

So, on a valuation and growth rate basis, UnitedHealth Group Inc. (NYSE:UNH) is the “cheapest” investment right now. All three of these are very good, stable companies and are very close in terms of investability. It is also interesting to note that CIGNA Corporation (NYSE:CI) and Aetna Inc. (NYSE:AET) are trading right at or around their 52-week highs, while UnitedHealth is 11.4% off of its high, and is actually just $3 above its low. Any of the three would become very interesting on any pullbacks in share price, however at current levels I think UnitedHealth offers the best value to play the sector.

The article The Best In Health Insurance originally appeared on Fool.com.

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