UNH Acquires Medicare Advantage Biz - Analyst Blog
25 Novembre 2011 - 5:10PM
Zacks
On Tuesday, UnitedHealthcare, a division of UnitedHealth
Group (UNH), announced its plan to acquire XLHealth Corp,
a sponsor of Medicare Advantage health plans. With this
acquisition, the company is expected to remain a step ahead of its
competitors including WellPoint Inc. (WLP)and
Aetna Inc. (AET) in acquiring Medicare Advantage
(MA) business.
Also, as the MA business is expected to grow considerably over
the next five years, the latest acquisition will be a big advantage
for the company to strengthen its financials.
The all-cash deal, which is valued at approximately $2 billion,
is expected to close in the first half of 2012. Immediately after
the closure, the deal will be accretive to UnitedHealth Group’s
earnings. UnitedHealth currently enjoys the leading position in the
MA market with 18.4% market share, followed by Humana
Inc. (HUM) with 16.1% market share. The deal is expected
to further strengthen its
position in the MA market.
We have been witnessing
increasing thrust in the MA space, for quite some time. An MA plan
is a government program, but is offered by commercial insurers to
the Medicare beneficiaries.
The first baby boomers will hit their retirement age soon and
will opt for managed care plans. Health Insurers are thus looking
to acquire providers of managed care plans to the seniors which in
turn will help them generate higher revenues. Also, managed-care
plans for Medicare is expected to generate incremental revenue of
$10 billion by 2015, which would make such acquisitions
valuable.
Carriers in the health insurance sector are in a race to win MA
market share and the fastest way of doing this is to plan for such
acquisitions. An overview of the recent deals will provide us some
idea on the pace of M&A activity in this arena.
In late October, CIGNA Corp. (CI) announced its
intention to acquire HealthSpring Inc. (HS) for
$3.8 billion. HealthSpring has a niche presence in the MA market.
Following the closure of the deal, CIGNA’s current rank of 52 (with
market share of 0.3%) in the MA market would jump to rank 6 (market
share of 3%), thereby, enhancing its presence in the MA market as
compared to its peers.
Similarly, Humana struck two deals for small Medicare Advantage
plans during the third quarter 2011. In August, it announced an
agreement to acquire Arcadian Management Services. Later in
September, it signed a deal for MD Care. Both deals are expected to
close before the year-end and enhance Humana’s MA membership by
4.1%, upon completion.
On October 1, Aetna closed on its acquisition of Genworth’s
Medigap business for $290 million.
Also, during the first half of the year, Brentwood-based
Inspiris, which provides care and care management services to
elderly patients in Medicare, Medicaid and commercial insurance
populations, was acquired by UnitedHealth, while CareMore Health
Group was purchased by WellPoint. Thus, we can clearly conclude
that Medicare Advantage has been an attractive area for
consolidation recently.
Coming back, UnitedHealth ended the third quarter with cash and
cash equivalents of $13.7 billion, almost a 50% increase over 2010
level. The company’s cash from operation increased 53% year over
year to $7.4 billion. Going forward, we expect the company’s strong
cash position to help it pursue further acquisitions.
UnitedHealth currently retains a Zacks # 3 Rank, which
translates into a short-term Hold rating. However, considering its
fundamentals, we are maintaining our long-term Outperform
recommendation on the shares.
AETNA INC-NEW (AET): Free Stock Analysis Report
CIGNA CORP (CI): Free Stock Analysis Report
HEALTHSPRING IN (HS): Free Stock Analysis Report
HUMANA INC NEW (HUM): Free Stock Analysis Report
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
WELLPOINT INC (WLP): Free Stock Analysis Report
Zacks Investment Research
Healthspring (NYSE:HS)
Graphique Historique de l'Action
De Mai 2024 à Juin 2024
Healthspring (NYSE:HS)
Graphique Historique de l'Action
De Juin 2023 à Juin 2024