Cigna Offers Cleaner Growth Than Other Health Insurers, Says Analyst

BofA Securities flagged rising cost pressures, unpredictable swing factors and heightened uncertainty around earnings estimates for managed care organizations, noting that Medicare poses greater risk than Medicaid and that reported EPS may not fully reflect underlying earnings power.

Despite limited near-term visibility, the firm sees meaningful long-term upside, arguing that most managed care organizations are currently earning below their true potential.

• Cigna Group stock is holding steady today. What’s next for CI stock?

Analyst Kevin Fischbeck wrote Cigna Group (NYSE:CI) offers a clean exposure to commercial health insurance, the only segment consistently performing well, alongside a scaled pharmaceutical platform.

Through its pharmacy benefit manager and specialty pharmacy businesses, Cigna is effectively leveraged to rising drug spend — including obesity therapies, biosimilars, and gene and cell therapies — without needing to bet on individual products.

While 2026 marks a reset year for the Pharmacy Benefits Manager model, the company is positioned to deliver 10%–15% annual EPS growth thereafter.

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The stock trades at roughly a 12% free cash flow yield and carries materially less government exposure than peers, supporting a similar 10%–15% return profile.

At 8.1x 2027 earnings, valuation appears compressed relative to de-risked estimates. The revamped Pharmacy Benefits Manager structure should reduce regulatory overhangs, supporting a re-rating toward Cigna's historical 10x–12x multiple, with potential upside to the upper end of that range.

BofA is also positive on Alignment Healthcare, Inc. (NASDAQ:ALHC), which the analyst expects to continue to capture market share profitably with 20%+ member growth given tailwinds from Stars in 2026.

UnitedHealth Group Inc (NYSE:UNH): BofA views UNH as well-positioned over the next several years, contingent on a supportive Medicare Advantage rate environment.

The firm is awaiting the 2027 Medicare Advantage rate proposal, due by Feb. 18, to assess whether additional coding changes — such as V29 adjustments, elimination of home risk assessments and greater reliance on encounter data — will be included.

If regulators signal stability, UNH could meaningfully expand margins in 2027, as the roughly $6 billion (~$5.25 EPS) V28 headwind expected in 2026 would roll off.

Centene Inc. (NYSE:CNC) and Molina Healthcare Inc. (NYSE:MOH): Ongoing Medicaid enrollment declines continue to reshape the risk pool, making rate setting more challenging for states and limiting margin expansion for Medicaid-focused insurers.

The BofA analyst wrote on Tuesday that accurately pricing exchange risk for 2026 remains highly uncertain given shifting membership trends and evolving risk pools.

As a result, the market is unlikely to reward execution until at least the second quarter of 2026.

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