Greater than eight years into its first title change, Well being insurer Anthem (NYSE:ANTM) introduced one other rebranding train early this month. This time, the nation’s second-biggest Medicaid insurer is ready to embrace a wider healthcare focus with its new name, Elevance Health. Nevertheless, the names of the corporate’s Blue Cross Blue Protect well being plans will stay unchanged. A shareholder vote on the brand new model is scheduled to happen on Might 18, Anthem (ANTM) stated.
“Elevance Well being’s firms will serve folks throughout the complete care journey, connecting them to the care, assist, and sources they should lead wholesome lives,” Chief Government Gail Boudreaux famous, signaling variations forward.
Diversification permits insurers so as to add enterprise with prospects of upper margins and sooner progress, hoping to succeed in a premium valuation much like that of UnitedHealth Group (NYSE:UNH), The Wall Road Journal reported citing Matthew Borsch, an analyst with BMO Capital Markets. “You positively need to go down that street if you happen to can,” he added.
From behavioral well being to pharmacy advantages administration, Anthem (ANTM) already boasts a broad strategic focus. Nevertheless, the corporate depends on its insurance coverage enterprise for almost 90% of its top line as of 2021 financials.
UnitedHealth (UNH), the biggest insurer within the Medicare Benefit market, has a extra diversified income stream. Backed by its Optum health-services arm, the corporate’s different companies account for as a lot as 23% of the topline.
The valuation discrepancy between the 2 rivals is indicative of Anthem’s (ANTM) targets. By way of its ahead value to earnings, the corporate trades at ~16.8x in comparison with ~23.4x of UnitedHealth (UNH), highlighting a ~28% low cost it wish to shut.
To foresee the prospects in closing that hole, the insurer must look previous a significant rebranding train introduced not too long ago. Tech large, Fb (FB) which modified its company identification to Meta Platforms final yr, continues to underperform the broader market since that announcement last October.
Nevertheless, the transformation of its rival, Google, into Alphabet (GOOG) was well-received by markets. Inside a yr from the announcement of the brand new identification, its share efficiency exceeded the broader S&P 500 by greater than 20 proportion factors.
With the brand new proposal coming after a large outperformance of Anthem (ANTM) shares, the branding train has not seemingly gone down nicely with the corporate’s buyers. One yr earlier than the announcement, Anthem (ANTM) had surged ~42% in comparison with the ~10% achieve within the S&P 500. Because the date of the brand new proposal, it has solely gained ~3%, whereas the S&P 500 and UnitedHealth (UNH) added ~6% and ~5%, respectively, as shown in this graph.