Shares of Cigna Corporation (CI)(and other health insurance companies) have been depressed for quite a while now, pressured first by Cuomo's investigation, then by general recessionary pressures, followed by overwhelming one time losses from a run down business and finally by the uncertain threat of a health care reform that can wipe out all private health insurers. However, Cigna shares have now more than tripled since their March low of $8. The last leg of the run up in price has been fueled by premature expectations of general economic recovery, relief of expectations related to health care reform passing in its original form any time soon and optimism that CI results will beat expectations and be very favorable vs. last year.

I expect that once the results are announced later in the week, Cigna shares will retreat and consolidate for a while, before resuming their climb back up. In addition, I now see some other health insurers trading at even bigger discounts. Companies like Humana Inc. (HUM) also have an advantage over Cigna, as they already handle more Medicare business and are thus more likely to get a larger chunk of processing business for the new "universal" insurance, created by health care reform. Of course, this assumes that the health care reform in its final form will choose efficiency over control and shift claim processing to private insurers, rather than creating a new centralized public entity to handle the immense task of processing health care claims for 300 Million Americans.

With all the uncertainty about health care reform and the economy still up in the air, I should be able to replace my Cigna position with a position in another health insurer at a very attractive price, after all the majors report their results next week.

All this led me to sell CI shares today at $28.59. These were purchased at $45.95 on February 13, 2008 to replace the HUM position, which was previously liquidated on January 14, 2008 at $86.90 / share (within 9 cents of Humana's all time daily closing high, reached on the same day). My realized loss on the Cigna position sold today - almost 38%. Had I kept the original Humana position and sold it today, my loss on it from January 14, 2008 would have been over 62%. Also, I decided to continue holding my CI position, initiated on May 3, 2006 at $94.20 / share ($31.40 split adjusted).

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