This article seeks to provide a comprehensive comparison between Clover Health Investments, Corp. (CLOV) and The Cigna Group (CI), the leading insurance companies in the U.S., evaluating their financial performance, growth potential, and other factors. After a thorough analysis, CI emerges as the preferred investment choice, as elucidated throughout this article.

Escalating need for cost containment, the presence of an aging population, advancements in technology, and the evolution of reimbursement models are expected to boost the global insurance industry.

Skyquest's latest research report indicates that the global Healthcare Insurance market is projected to attain a valuation of $4 trillion by the year 2030, expanding at a CAGR of 4.4%.

In addition, higher wages and interest rates in advanced markets are bolstering growth and profitability in the life insurance industry. This includes increased demand for annuities and pension risk transfer products.

The gross written premium of the US life insurance market was $1.4 trillion last year and is expected to proliferate at a CAGR of more than 5% during 2023-2027.

Moreover, the property and casualty insurance sector is evolving rapidly due to the increasing adoption of digital solutions. The rise in natural disasters is also expected to propel the growth of the property and casualty insurance market going forward.

The global P&C insurance market is expected to reach $2.47 trillion in 2027, growing at a CAGR of 7.6%.

CI has gained 13.2% over the past three months, whereas CLOV gained 28.6%. Moreover, CI has declined 2.3% year-to-date, compared to CLOV’s 35.6% return.

However, here are the reasons why I think CI is the bigger buy:

Latest Developments

On August 2, CLOV announced that it had received formal notice from The Nasdaq Stock Market, LLC, stating that the company had regained compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5450(a)(1).

As previously disclosed, the company received a written notice from Nasdaq on April 20, 2023, notifying that it had failed to meet the $1 per share minimum bid price requirement for continued inclusion on The Nasdaq Global Select Market.

Conversely, on August 17, CI announced that its dental customers could use their smartphone to screen for potential oral health issues, such as cavities and gum disease. SmartScan powers the no-cost screenings and aims to encourage the millions of people who suffer from anxiety around dental visits to get informed about their oral health from the comfort of their homes.

On August 10, CI announced that it was partnering with Virgin Pulse, a global digital-first health and well-being engagement company, to offer a connected and more personalized health experience to support the vitality of approximately 11 million customers.

The new platform, available on myCigna, is part of CI's commitment to empower individuals and workforces as a whole to make better health choices and develop better habits throughout their health journey.

Recent Financial Results

CLOV’s total revenue decreased 39.3% year-over-year to $513.63 million for the fiscal second quarter that ended June 30, 2023. Also, its loss from operations and the company’s net loss stood at $28.81 million.

In contrast, CI’s adjusted revenues for the fiscal second quarter that ended June 30, 2023, increased 7% year-over-year to $48.62 billion. The company’s adjusted income from operations amounted to $1.82 billion. Also, shareholders’ net income per share rose marginally year-over-year to $4.92.

Past and Expected Financial Performance

CLOV’s revenue has grown at a CAGR of 70.6% over the past three years. Analysts expect CLOV’s revenue to decline 43.6% in the current quarter, 46.6% in the next quarter, and 42.4% in the current year. Moreover, its EPS is expected to amount to negative $0.10 in the current quarter, negative $0.13 in the next quarter, and negative $0.38 in the current year.

On the other hand, CI’s revenue and EPS have grown at a CAGR of 6.4% and 16.1% over the past three years. Analysts expect CI’s revenue to rise 6.5% in the current quarter, 6.2% in the next quarter, and 6.3% in the current year. Moreover, its EPS is expected to amount to $6.71 in the current quarter, $6.60 in the next quarter, and $24.80 in the current year.

Profitability

CI’s trailing-12-month gross profit margin of 12.59% is higher than CLOV’s 6.98%. CI’s trailing-12-month EBIT and EBITDA margins of 4.29% and 5.30% are higher than CLOV’s negative 9.77% and 9.74%, respectively.

Additionally, CI’s trailing-12-month ROCE, ROTC, and ROTA of 14.54%, 6.30%, and 4.43% compare with CLOV’s negative 68.76%, 48.94%, and 20.70%, respectively.

Thus, CI is more profitable.

Valuation

CI’s forward P/B multiple of 0.51 is lower than CLOV’s 2.38. In terms of trailing-12-month Price/Cash flow, CI is trading at 6.41, lower than CLOV, which is currently trading at 24.94x.

Hence, CI is more affordable.

POWR Ratings

CLOV has an overall C rating, which equates to Neutral in our POWR Ratings system, whereas CI has an overall rating of B, translating to a Buy. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. CI's Stability grade of B aligns with its 60-month beta of 0.66, while CLOV's F grade is supported by its 60-month beta of 2.05.

Among the 12 stocks in the A-rated Medical – Health Insurance industry, CLOV is ranked #9, while CI is ranked #6.

Beyond what we’ve stated above, we have also rated both stocks for Growth, Value, Quality, Momentum, and Sentiment. To access CLOV’s ratings, click here. Get all ratings of CI here.

The Winner

Rising healthcare costs, driven by medical advances, expensive drugs, and chronic diseases are boosting the health insurance industry.

Furthermore, insurance companies tend to thrive during periods of rising interest rates and economic downturns, and with the Federal Reserve's focus on reducing inflation, the possibility of more interest rate hikes looms, potentially benefiting the insurance industry. CLOV and CI are well-positioned to benefit from these industry trends.

However, considering CI's low beta, favorable bottom-line forecasts, robust profitability, and discounted valuation multiples, it becomes apparent that the stock is the bigger buy compared to CLOV.

Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Medical – Health Insurance industry here.

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CI shares were unchanged in premarket trading Monday. Year-to-date, CI has declined -14.97%, versus a 15.91% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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