The Health of Health Insurers

When it comes to political attention, only a couple of sectors in the market have received more than the healthcare space. As the nation's largest insurers begin to release their quarterly earnings, investors will be able to see just how healthy these companies are at the moment and what may lay on the horizon. Here is a look at four of the industry's biggest players.

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Lean and Mean
UnitedHealth Group (NYSE:UNH) has already checked in with its Q2 results and there were several positive takeaways from the insurer's performance. Enrollment ticked up slightly and the company's medical care ratio improved by 220 basis points. UnitedHealth's commercial segment suffered a slight loss in enrollment.

If it was not for the close scrutiny being placed over the industry by Washington, I would say that this stock is beginning to look attractive. Solid Q2 results coupled with a stock that is trading at a forward P/E of 8.8 makes for a compelling value prospect. Shares of UnitedHealth are flat so far this year. (Learn more about value investing, see The Value Investor's Handbook.)

On Tuesday after the market close, Aetna (NYSE:AET) is slated to announce its Q2 results. Analysts are expecting the company to announce an 8.8% improvement in EPS despite a 2.1% projected drop in total revenue when compared to the year-ago quarter. Shares of this insurer have fallen over 10% so far this year. The company has said it expects to beat estimates due in part to lower medical costs. We will have to wait to see if this prediction in fact turns out to be the case.

Value Plays or Value Traps
One of Aetna's rivals, WellPoint (NYSE:WLP) will follow Aetna in reporting its own Q2 results on Wednesday before the market open. The consensus on Wall Street is that the insurer will report a 3.3% increase in EPS on a 4.3% decrease in total revenue. WellPoint's stock price has declined 10.0% year-to-date.

The political flak that this company has taken has knocked its price to book ratio to just 0.93. For investors looking for a stock with a margin of safety in the sector, WellPoint is definitely worth a second look. If the concerns that investors have relating to Capitol Hill turn out to be overdone, it would not be surprising at all to see this stock outperform its peers in the long run.

Cigna (NYSE:CI) does not announce its quarterly results until early August, but the company is expecting to report double-digit top line growth which is commendable in the current operating environment that the company finds itself in. Analysts are predicting EPS will come in at $1.01 versus $1.14 in Cigna's prior year quarter. Shares of CI have dropped 10.3% so far in 2010.

The Bottom Line
It appears that each of the major insurers have been able to adapt remarkably well to leaner times. Most of these companies have managed to grow EPS despite experiencing pressure on revenue and feeling heat from DC. It is understandable that investors might be nervous about diving into the sector with the uncertainty that surrounds it, but the heavy hitters in the industry have been pulling through from an operational standpoint. It may just be a matter of time before the stock prices of these insurers reflect their resilience. (To learn more about the health care space, see Investing In The Healthcare Sector.)

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