Insurance Weekly Notes: MetLife, Prudential, UnitedHealth
During this week through Thursday, December 18, insurance stocks traded fairly well. In this note we take a look at the recent developments for the insurance companies leading to new businesses and enhancements in various product lines. MetLife (NYSE:MET) continued to add more business to its portfolio of pension products. Prudential (NYSE:PRU) pushed its strategy to advance the retirement business, while UnitedHealth (NYSE:UNH) launched a pilot project to test newer payment models in cancer care.
MetLife
MetLife has vociferously opposed the notification from the Financial Stability and Oversight Council (FSOC) on Thursday approving the designation of MetLife as a non-bank Systemically Important Financial Institution (SIFI). [1] We have written about this previously in several articles. Earlier in the week, MetLife signed an agreement with TRW, a subsidiary of TRW Automotive Holdings, to transfer pension benefits of over 7,000 retirees and present beneficiaries in a $440 million transaction. [2] As part of the agreement, MetLife will be responsible for pension payments to retirees and beneficiaries covered. On the part of TRW, this deal is part of the company’s strategy to to reduce its pension liabilities in the U.S., U.K. and Canada.
MetLife’s stock traded in positive territory through Thursday. Up by more than 2% at the end of Thursday’s trading session, the company’s stock is now about 10% below our price estimate of $59.
See our Complete Analysis of MetLife here
Prudential
In a bid to advance its retirement and financial security business, Prudential announced the creation of Gibraltar Ventures earlier in the week. The newly created organization has the mandate to explore, develop and invest in new business strategies in order to strengthen Prudential’s retirement products and business. Prudential Retirement, which is a subsidiary of Prudential, caters to the retirement solutions needs of private, public and nonprofit organizations and had $356 billion in account values as of September 30.
The company opened the week’s trading at $88 and by market close on Thursday had gained nearly 4% to touch $90. We have a price estimate of $102 for Prudential’s stock, valuing the company at $47 billion.
See our Complete Analysis of Prudential here
UnitedHealth To Test New Payment Model For Cancer Care
UnitedHealth launched a pilot project in association with the University of Texas MD Anderson Cancer Center to explore a new payment model for cancer care. The model, which covers neck and head cancer, aims to improve patient care quality and outcomes. The new bundled payments architecture reimburses a care provider or hospital for a defined period of care in a single fee or payment. [3] This is in contrast with the current model, wherein the care provider is paid for each appointment, test, treatment or drugs. Cutting out multiple steps, the model enables a more focused approach to improve patient outcomes and lower costs. As part of the launch, there will be eight payment bundles tested during the three year life of the project. The project will be carried out at the MD Anderson Head and Neck Center and will cover cancers of the salivary glands, oral cavity (including the mouth, lips, tongue, soft palate), throat and larynx.
UnitedHealth’s stock continued to build on the back of gains made last week, to further surge ahead by nearly 3.5% during the week. We have a price estimate of $89 for UNH’s stock, valuing the company at approximately $80 billion compared to the current market cap of nearly $86 billion.
See Full Analysis For UnitedHealth Group Here
Notes:- SEC 8-K Filing, December 18 2014 [↩]
- TRW SIGNS PENSION BUYOUT AGREEMENT WITH METLIFE, MetLife Press Release [↩]
- MD Anderson, UnitedHealthcare Launch New Cancer Care Payment Model, UnitedHealth Press Release [↩]