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Cigna Buys Zurich Insurance to Expand in UAE, Shares Gain

Zacks

Global health services company, Cigna Corp. CI has acquired Zurich Insurance Middle East. The deal which was completed last month will provide Cigna a stronger foothold in the Gulf countries of UAE, Lebanon, Kuwait and Oman.

The newly acquired entity will be renamed “Zurich Insurance Middle East, a Cigna-owned company”, to reflect the acquirer’sbrand name.

The news was well received and pushed up the share price by 0.94% in last trading session.

Cigna has been present in the Middle East for the last 15 years and operates there in partnership with multinational companies. It delivers group health products and services for small businesses and family-owned enterprises.

The new unit will enable Cigna to offer even more personalized products to individuals, employers and government entities. It will also provide easy reach to customers via 24/7 customer support; multilingual call centers located across nine global location. Specialized clinical services and access to one million medical and healthcare professionals and facilities worldwide will help its customers get superior medical help.


Cigna is tapping substantial business growth potential in the Gulf region, which is witnessing a changing perception toward healthcare. Rapid growth in population and a sedentary approach to lifestyle, have led to a sharp increase in health-related issues. National agendas and regulatory reforms in the region, emphasizing the importance of healthcare will lead to a surge in demand for health care products.

Cigna boasts profitable international operations as evident by 12% CAGR in global health benefit premium to $1.9 billion in 2016 from $0.9 billion in 2009.

This sort of a deal was highly anticipated since at a recent investor conference, Cigna made it clear that will accelerate growth via capital deployment in a number of avenues. One among the ways to expedite growth was making strategic mergers and acquisitions to expand globally. This explains the recent deal.

Year to date, the company’s shares have added 28.3%, significantly outpacing the 5.8% gain by the Zacks categorized Insurance – Multi line industry. Shares outperformed despite the failed merger of Cigna with Anthem Inc. ANTM, as investors gained confidence in the company’s ability to grow as a stand-alone entity, after it outlined its growth plans.

Also, there has been a growing trend among other companies — UnitedHealth Group Inc. UNH, Aetna Inc. AET and Humana — in the health insurance industry to expand internationally.

A very compelling reason for this is to achieve growth from outside, at a time when the U.S markets are intensely competitive and burdened with stringent regulations.

Cigna sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

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