We are upgrading our recommendation on the shares of CIGNA (CI) to Buy as we believe the recent acquisition of Vanberda international will boost the company’s thriving international operations, which is key to the growth of the company.
Moreover, CIGNA has lower exposure to reform risks than other insurers, and thus has an edge with respect to the Health Care Reform Act. A strong balance sheet and adequate liquidity will lead to continued share buybacks, contributing to the bottom line.
CIGNA has benefited from an effective execution of growth strategy and strong earnings from diversified businesses, and is poised to attain its full year 2010 financial goals. Our six-month target price of $36.00 equates to about 8.2x our earnings estimate for 2010. We view $0.04 per common share annual dividend as secure, implying an return of about 21% over that period.