Cigna raises forecast as results crush views
Cigna Corp
Cigna's report closes out a strong reporting season for major U.S. health insurers, most of which topped quarterly forecasts and raised their outlooks, as the companies have benefited from lower-than-expected medical costs.
However, Wall Street is concerned the performance will not be sustainable beyond this year, when regulations from the new reform law kick in and require the insurers to spend a minimum amount on medical costs for many of their plans.
Analysts, however, view Cigna's businesses -- including those that cater to larger employers -- as less vulnerable to the shake-up.
Cigna's net income fell to $294 million, or $1.06 per share, from $435 million, or $1.58 per share, a year earlier. Results in the latest quarter were dragged down by a reinsurance business the company no longer actively markets.
Excluding results from that business and other items, earnings of $1.38 per share topped the average estimate of analysts by 37 cents, according to Thomson Reuters I/B/E/S.
Some of the earnings beat appeared to stem from a Medicare product that is becoming obsolete next year, Leerink Swann analyst Jason Gurda said in a research note, but that does not take away from the company's across-the-board solid second-quarter performance.
Revenue rose 19 percent to $5.35 billion, ahead of analysts' targets by about $100 million.
Profit in the healthcare segment soared nearly 40 percent to $247 million, helped by client retention and new sales as membership edged up about 2 percent to 11.37 million. The company also cited competitively attractive medical costs for its customers.
Most health insurers have reported a boost to their quarterly results from generally lower use of medical services, although they have largely been at a loss to pinpoint the reason for that decline.
Profit at Cigna's other two main segments was little changed at $64 million for international and $89 million for disability and life.
The company encouragingly outperformed on Healthcare and International, with Disability and Life modestly underperforming our expectations, Sanford Bernstein analyst Ana Gupte said in a research note.
For 2010, Cigna projected earnings of $4.10 to $4.40 per share, excluding items. It had previously forecast $3.75 to $4.15.
The company estimated membership growth of about 3 percent this year.
(Reporting by Lewis Krauskopf; Editing by Lisa Von Ahn and Maureen Bavdek)
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