Insured Buyback Bets

09/09/2013 9:00 am EST

Focus: STRATEGIES

David Fried

Editor, The Buyback Letter

Our Buyback Premium Portfolio is beating the S&P 500 by more than 92% since its inception in 2000; two of the latest new additions to this portfolio are leading players in the insurance sector, reports David Fried, editor of The Buyback Letter.

We dabbled in WellPoint (WLP) a couple of times in 2009 and 2011. It is the second-largest health insurer in the US.

The company has more than 36 million members in its affiliated health plans and 68 million individuals served through subsidiaries. In fact, one of every nine Americans is a member of a WellPoint affiliated health plan.

After the recent introduction of healthcare reforms, the health insurance industry in the US is expected to benefit from rising demand.

Healthcare reforms, such as the formation of health insurance exchanges and the government providing health insurance to citizens who can't afford it, will be the biggest contributors to this growth.

This is expected to add 25 million US citizens to the overall health insurance market, and WellPoint is well positioned to capitalize on the potential growth.

WellPoint has strong buyback activity and is also considered a compelling buy by analysts. Wellpoint has reduced shares outstanding by 9.2% in the past 12 months.

Insurance holding company CNO Financial Group (CNO) and its insurance subsidiaries—principally Bankers Life and Casualty Company, Washington National, and Colonial Penn Life Insurance Company—serve pre-retiree and retired Americans.

The company focuses on helping them protect against financial adversity and provide for a more secure retirement.

They do this by developing, marketing, and administering health insurance, annuity, individual life insurance, and other insurance products for senior and middle-income markets in the US.

CNO reported second-quarter net income increased about 17% versus a year earlier, aided by growth in revenue and a decline in benefits payouts.

Revenue rose to $1.08 billion from $1.07 billion. Analysts were expecting $1.07 billion. Management has reduced shares outstanding by 7.1% in the last 12 months.

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