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TheStreet.com

3 March 2009 Tuesday 05:30 AM EST

SECTION: NEWS & ANALYSIS; Nation's Top 25 health insurers

LENGTH: 454 words


TITLE: Five health insurance to avoid stocks

Signature: Richard Widows, TheStreet.com Ratings Financial Analyst.

Richard Widows is a senior financial analyst for TheStreet.com Ratings. Before joining TheStreet.com, Widows was senior product manager for quantitative analysis at Thomson Financial. After receiving an MBA from Santa Clara University in California, his career, the development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the UK and East Asia.

President Barack Obama's proposed health care shake-up a no prisoners last week.

The President's plan, which could stimulate competition among insurers, has pushed the Dow Jones U.S. Health Care Providers Index down 10% on Thursday, the worst decline as industry days. Humana (HUM: NYSE) has lost 20%, while UnitedHealth Group (UNH: NYSE) fell 13% and Aetna (AET: NYSE) fell 11%.

Obama aims to reform the Medicare Advantage plans, through which 11 million elderly people receive medical and prescription drugs. Refunds for companies that administer these plans are 15% higher on average than those for Medicare services. The new hotel aims to save $ 175 million over 10 years, by requiring insurers to offer to participate in these plans.

Investors should exercise caution before purchasing shares of these companies, including five on the table. These stocks received in all classes C, the equivalent of a "hold" recommendation.

Even before the President's budget was made public, TheStreet.com Ratings has four of these stocks range D-classes of risk on a scale of A to E-plus-minus. The only exception, Wellpoint (WLP: NYSE), took a C-minus is a milestone of "very cautious" territory.

Stocks were trading below 10 times earnings expected by analysts this year. In light of the Obama proposals, investors should look hard at the business higher than the average class of risk. TABLE 1
Health and SERVICES STOCKS: AVOID THE TEMPTATION OF LOW P / E RATIOS
TABLE 2
Business
AETNA INC.
CIGNA CORP
HUMANA INC.
UnitedHealth Group Inc.
Wellpoint INC
Ticker
AET
CI
HUM
UNH
WLP
TheStreet.com Ratings Grade Award
B --
C +
B
B
C +
TheStreet.com Rating Risk Grade
D +
D
D +
D +
C
TheStreet.com Ratings Overall Grade
C
C --
C +
C
C
TheStreet.com Ratings Recommendation
Hold
Hold
Hold
Hold
Hold
Recent price
29.82
18.67
40.54
27.98
41.45
Market Cap ($ Mil).
13,750.0
5,073.1
6,839.5
34,012.9
20,658.2
Total Assets ($ Mil).
50,724.7
40,065.0
13,041.8
55,815.0
48,403.2
Total Debt ($ Mil).
3,269.2
1,793.0
1,937.0
12,794.0
8,841.6
Latest Fisc. Yr. Revenue ($ Mil).
27,599.6
17,623.0
28,946.4
81,186.0
61,251.1
Cash flow from operating activities ($ Mil).
2,065.5
1,342.0
982.3
4,238.0
2,535.4
Earnings before interest and taxes ($ Mil).
2,912.7
1,753.0
1,073.1
6,300.0
3,733.6
EPS - Last Free. 12 Mos.
2.83
1.04
3.83
2.40
4.76
EPS - Curr. Year Consensus
3.90
3.90
5.95
3.00
5.70
EPS - Next Yr. Consensus
4.29
4.20
6.30
3.29
6.18
Price / Book Ratio
N / A
1.4x
1.5x
1.6 x
1.0x
Ret'n on equity (%)
17.6
6.2
14.5
14.3
11.6
P / E - Current Year
7.6 x
4.8x
6.8x
9.3x
7.3x
P / E - Next Year
7.0x
4.4x
6.4x
8.5x
6.7x
Dividend Yield (%)
0.13
0.00
0.00
0.11
0.00
TABLE 3
Source: TheStreet.com Ratings (Data as of 2/20/2009).

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