AET Aetna Inc. (delisted)

Putting an end to CIGNA Corp.’s (CI) quest for a new permanent Chief Financial Officer (CFO), Ralph Nicoletti will assume the post effective June 20, 2011. Nicoletti will replace the current acting CFO Thomas McCarthy.

On September 1, 2010, McCarthy, the then Vice President and Treasurer, was named as the acting CFO of CIGNA upon the sudden resignation of the then CFO Annmarie Hagan.

Nicoletti will be joining CIGNA from Alberto-Culver Inc., where he has acted as the Executive Vice President and the Chief Financial Officer. Alberto-Culver Inc, a maker of personal care products, is a subsidiary of Unilever Group.

We believe the management change over the past one year is a result of the current CEO David Cordani’s aim to put his stamp on the company. Cordani, who was named CEO in January 2010, seems keen on forming his own team. Hagan was appointed by the former CEO Edward Hanway in May 2009.

CIGNA has showed a solid performance in the first quarter of 2011 by recording earnings of $1.37 per share, which outpaced the Zacks Consensus Estimate of $1.09 per share and the prior-year quarter’s figure. Strong earnings from across the board, coupled with lower share count over the prior year, accounted for the remarkable earnings upside.

Given the solid results and a favorable operating environment, management revised its earnings guidance provided in the previous quarter. It expects adjusted income from operations in the range of $1.3–$1.4 billion, up from the range of $1.2–$1.3 billion forecasted earlier. Consequently, the EPS guidance range has also been increased to $4.65–$5.00 from $4.30–$4.70 provided earlier.

Philadelphia-based CIGNA competes with UnitedHealth Corp. (UNH), Wellpoint Inc. (WLP), and Aetna Inc. (AET).

CIGNA has shown operating momentum and gained commercial risk membership for five consecutive quarters. Going forward, we expect the company to keep up this momentum as it is relatively safe with respect to its exposure to minimum medical loss ratio regulations, unreasonable rate reviews and health insurance exchanges. Also, the recently completed Vanbreda acquisitions by the company should accelerate its 2012 international earnings growth.

Currently, CIGNA carries a Zacks Rank # 2, which translates into a Buy rating over the short term.  Over the longer term (6+ months), we rate the shares Neutral.        

 
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