Tags: Earns Cigna

Cigna's Profit Jumps 40 Percent as Enrollment Rises

Thursday, 03 Feb 2011 07:36 AM

 

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Managed care company Cigna Corp.'s fourth-quarter net income climbed 40 percent, as it reversed an enrollment slide and recorded better-than-expected growth in several business segments.

Cigna, the fourth-largest health insurer based on enrollment, said Thursday its medical membership climbed 4 percent to 11.4 million people compared to the final quarter of 2009, when it fell more than 5 percent. That contributed to a 20 percent increase in premiums and fees in health care, the Philadelphia insurer's largest segment.

CEO David M. Cordani said new sales and strong retention of customers have helped propel enrollment.

"It was an outstanding year for us from a growth standpoint," he said.

Overall, Cigna earned $461 million, or $1.69 per share, in the three months that ended Dec. 31. That's up from $330 million, or $1.19 per share, in the last three months of 2009. Revenue grew 17 percent to $5.43 billion.

Excluding some one-time items, adjusted earnings amounted to $1.15 a share. Analysts surveyed by FactSet forecast, on average, a profit of $1 per share on $5.38 billion in revenue.

Cigna operates healthcare, group disability and life segments in the United States. It also sells individual insurance in several countries and operates an expatriate business that provides coverage for people living outside their home countries. Earnings from that international business — a big growth priority for the company — climbed 46 percent to $57 million.

The insurer also saw a gain of $101 million in the quarter related to the completion of an IRS audit. That was partially offset by some one-time charges.

Goldman Sachs analyst Matthew Borsch said in a research note that Cigna earnings in health care and international segments, among others, surpassed expectations.

Citi analyst Carl McDonald noted in a separate note that Cigna's performance was also helped as tax rates came in much lower than normal.

Cigna also said lower-than-expected medical use helped performance. It saw a benefit from that in the third quarter too, and competitors UnitedHealth Group Inc. and WellPoint Inc. both cited a drop in use as they finished 2010 with better-than-expected earnings.

Cordani said medical costs rose about 6 percent in 2010, while the insurer started the year expecting an 8 percent increase. That mostly benefits Cigna's customers because the majority of the company's medical enrollment involves employer-sponsored coverage it administers while the employer pays claims.

Industry observers say use slowed due to a mild flu season in 2010 following the swine flu outbreak of 2009, and because consumers tend to cut back on care during a struggling or recovering economy. Trends are expected to revert to normal levels in 2011.

For 2010, Cigna earned about $1.35 billion, or $4.89 per share, on $21.25 billion in revenue. Adjusted earnings, excluding one-time items, were $4.64 per share.

In 2011, the insurer expects adjusted earnings to range from $4.30 to $4.70 per share. That assumes break-even results for its Variable Annuity Death Benefits business and does not account for share repurchases.

Analysts, who do count repurchases in their forecasts, expect earnings of $4.71 per share.

Wall Street expected strong fourth-quarter performances from health insurers for the most part. Cigna shares, which have climbed about 30 percent since the start of September, rose 5 cents to $42.31 in midday trading.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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