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Managed care stocks mixed as GOP plots move on ACA repeal

Stocks among major health insurers were mixed for the week ended Jan. 5 after they initially tumbled then recovered in a week where President-elect Donald Trump sought legislative support on Capitol Hill for his plan to repeal the Affordable Care Act.

As the 115th U.S. Congress convened for the first session of the 2017 legislative schedule, Trump kicked off the new year by attacking the Affordable Care Act for being too expensive, while citing the potential for escalating premiums in Arizona and Minnesota. Aetna Inc. and Humana Inc., which are in the midst of an antitrust trial related to their pending merger, each fell more than 2% on Jan. 3, hours after Trump's comments. Although Aetna rallied somewhat, ending the week up 0.05% at $124.51, Humana closed Jan. 5 at $200.73, falling 1.08% for the week.

Anthem Inc. ended the session Jan. 5 at $144.57, down 0.13% in the first week of 2017, while Cigna Corp. closed at $141.71, up 4.58%. A court ruling on Anthem's planned acquisition of Cigna is expected later in January.

UnitedHealth Group Inc. rose 0.71% to $162.18, and WellCare Health Plans Inc. climbed 1.19% to $138.73.

Insurance stocks generally tracked the broader index for the week ended Jan. 5. The SNL Insurance Index increased 0.41% to 861.14, and the S&P 500 rose 0.88% to 2,269.00.

Vice President-elect Mike Pence commented during the week on Trump's top priority upon entering the White House to replace the Affordable Care Act with a more affordable solution that reduces the cost of healthcare. At a meeting with House Republicans on Jan. 4, Pence said Trump will sign an executive order on his first day in office aimed at dismantling President Barack Obama's landmark bill.

If considerable modifications to the healthcare law are made during the Trump presidency, the changes may be phased in slowly, even beyond the 2018 elections, S&P Global analyst Joseph Marinucci wrote in the company's U.S. Health Insurer 2017 Outlook released Jan. 3. While a repeal of key provisions of the act could limit future growth in the Medicaid marketplace, leading managed care companies could stand to benefit if alternatives to the Affordable Care Act can provide sustainable access to coverage by means of a private-sector solution, Marinucci said in an interview.

"If you think about what's in place right now, it's built off a private-sector framework," Marinucci said. "It really comes down to what is the alternative and what extent the private sector will be engaged. I think there is a pretty good sense that the private sector will remain engaged."

Ameriprise Financial Inc. rose 3.48% for the week ended Jan. 5 to close at $113.74. Ameriprise remains well-positioned for long-term growth due primarily to higher growth potential among its retirement planning advice and asset management businesses, S&P Capital IQ analyst Erik Oja wrote in a Dec. 31, 2016, note. Oja anticipates total revenue growth for Ameriprise of 2.0% in 2017 amid expectations for a slight steepening of the yield curve.