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Health Insurer Review Results in Higher Valuations

Our Anthem and Humana fair value estimates get a boost.

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We have completed our review of the U.S. health insurance industry and have a fresh take on Anthem (ANTM) and Humana (HUM). After the review, we raised our fair value estimates for both companies to reflect higher cash flow assumptions and recently generated cash flow since our last update. We are reiterating our narrow economic moat and stable trend ratings for Anthem and Humana, putting them in line with the rest of their managed-care peers.

Our narrow-moat view of the industry is informed by an analysis of potential changes to the U.S. healthcare system. Polling suggests that about half of the U.S. population is supportive of a “Medicare for All” scenario. In a Medicare for All scenario where U.S. insurers have no place in the U.S. insurance market, private insurers’ operations could be in jeopardy. However, we believe this scenario represents a very low-probability risk (5% or less) within our 10-year forecast period, as it would require significant shifts in current federal government control, including a filibuster-proof Democratic majority position in the Senate and a new president from the left wing of the Democratic Party, as Republican voters remain significantly opposed to such a plan.

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Julie Utterback does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.