Healthcare Stocks

[MWM]

Managed-Care Stocks Rise On Upgrade; Cigna Leads Way
DECEMBER 7, 2009, 12:09 P.M. ET
By Kerry Grace Benn Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Shares of managed-care companies rose after an upgrade from Goldman Sachs, which said it expects Senate moderates will prevail in curbing parts of the health-overhaul legislation that threaten the future of private-health insurance.

Goldman said Cigna Corp. (CI) is its favorite stock of the group, as it has the lowest valuation but a solid outlook and the least exposure to health-overhaul risk.

Cigna earlier Monday backed its full-year outlook for this year and next, sending its shares up 4.5% to $33.62. Aetna Inc.'s (AET) shares followed closely, rising 4.4% to $30.27.

Goldman said it continues to see the passage of "comprehensive health reform legislation as more than 50% likely."

Senate Democrats over the weekend wrestled with a new proposal on a government health-insurance plan that would give private entities a central role in running the program, which would extend health insurance to tens of millions of Americans not now covered.

In closed-door negotiations Sunday, Democrats were nearing agreement on an alternative that would empower the government's Office of Personnel Management to run a new national health plan, congressional aides told The Wall Street Journal. The office already oversees the federal employee health plan, and administration officials have pointed to it as an example of how the government can successfully run a health-insurance program.

Goldman said it thinks an end to the uncertainty around health-care overhaul will be positive, bringing investors back to the sector.

"We believe downside risk from the commercial underwriting cycle is now mostly behind us," Goldman said, adding checks with the industry have shown conservative underwriting to be the norm in most markets.

Meanwhile, Wells Fargo issued a downgrade to the managed-care sector, cutting it to market weight from overweight, saying the recent rally in managed-care stocks is likely to reverse going into the end of the year on health-care changes.

Health Net Inc. (HNT) shares gained 3.2% to $21.98, Humana Inc. (HUM) rose 2.4% to $41.28, WellPoint Inc. (WLP) shares grew 2.5% to $55.21 and UnitedHealth Group Inc. (UNH) gained 2.8% to $28.22.

Health Management Associates Inc. (HMA) also gained 3.2% to $6.78 after a separate upgrade to outperform from market perform from Wells Fargo on continuing operational improvement. The firm said the selloff in the stock from about $8 at the beginning of October offers a buying opportunity.

-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353; [e-mail]