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Potential sale of Health Insurance Innovations 'makes sense' in current climate

As Health Insurance Innovations Inc. explores strategic alternatives to help boost its value, at least one industry expert believes a sale of either a portion of or the entire company would attract buyers and be timely.

"If I take a step back and look at the company, it's a good time," Aite Group analyst Michael Trilli said in an interview. "There's a lot of promise in the individual market right now, and we're seeing it. So, to me, I think that makes sense in terms of the market they play in."

Trilli said that "promise" in the individual market is rooted in three areas: the Affordable Care Act, continued growth in the individual markets and Medicare options and the individual coverage health reimbursement account, or ICHRA, rule issued June 13 by the Internal Revenue Service.

The technology provided by companies such as Health Insurance Innovations is attractive to prospective strategic acquirers as it would provide them with capabilities in a specific individual market that their legacy platforms may not be able to handle effectively, Trilli said. It would also allow them to cater to different consumer groups. The Aite analyst said the new rule is a game-changer for a broker like Health Insurance Innovations.

"People who work for companies that don't offer group plans come in any shape and size," he said. "When you think about a technology platform that can handle that variance in the buying population, I think that's a real asset."

Cantor Fitzgerald's Steven Halper pointed to Willis Towers Watson PLC's $1.3 billion purchase of direct-to-consumer healthcare organization Tranzact, the trade name of MG LLC, as a "comparable transaction" to that of a complete sale of Health Insurance Innovations.

"People are using that as sort of a predicate transaction," Halper said in an interview. "I think there's interest here for the business model."

The broker's stock has slumped in recent months despite the loosening of regulations on short-term insurance policies by President Donald Trump's administration. The price has gone from a close of $45.69 on Feb. 22 to a low of $18.86 on May 13. It has regained some ground since then and closed the July 31 session at $21.99.

Halper said the push for a new strategy has come from company shareholders who, like the Cantor analyst, see the stock as undervalued and are looking for a new direction.

"I think the board sort of recognizes that it thinks the stock is really undervalued, so it's just a function of finding a buyer," said Halper, who has a price target on the company's stock of $80. "We like the fact that the board is moving proactively to create shareholder value."