NEW YORK (TheStreet) -- After meeting with Aetna's (AET) management, research firm Leerink Swann said that it was encouraged by what it heard. The firm added that consolidation remains likely, adding that a deal between Aetna and Cigna (CI) or Humana (HUM) are both "meaningfully accretive" and "imminent" possibilities.
WHAT'S NEW: The firm's meeting with Aetna management alleviated fears about the impact of higher Medicare Advantage utilization trends, Leerink analyst Ana Gupte reported. Medicare Advantage trends should continue to moderate, commercial utilization trends are still well-controlled, and the insurer is continuing to be disciplined when it comes to commercial pricing, Gupte reported. Meanwhile, Aetna's public exchanges continue to be profitable, and the insurer believes that Congress will enact a "fix" if the Supreme Court strikes down federal Affordable Care Act subsidies, the analyst said. CEO Mark Bertolini asserted that government business is the focus for inorganic growth, while compatible cultures for post-merger synergies were viewed as the driver in all transactions. Cheap debt makes a deal with either Humana or Cigna "meaningfully accretive possibilities and imminent," wrote Gupte, who raised her price target on Aetna to $135 from $130 and maintained an Outperform rating on the shares.
PRICE ACTION: In late morning trading, Aetna gained 0.5% to $109.85, Humana advanced 3% to $171.65 and Cigna rose 2.7% to $131.70.