* Adjusted second-quarter earnings $1.49/share vs estimate
$1.42
* Second-quarter revenue $7.46 billion vs estimate $7.24
billion
* Raises 2012 profit view for the second time this year
* Shares rise 2.4 percent
By Ransdell Pierson
Aug 2 (Reuters) – Cigna Corp reported
higher-than-expected quarterly earnings and sales on Thursday,
and the insurer raised its 2012 profit forecast for the second
time this year as its takeover of Medicare specialist
HealthSpring helped boost premiums and fees.
“Earnings (were) ahead of consensus expectations on solid
healthcare results, including stable utilization trends in
Medicare Advantage, continued strong international revenue
growth and better-than-expected group disability and life
earnings,” Leerink Swann analyst Jason Gurda said in a research
note.
The stable use of medical services by individuals insured
under Cigna’s Medicare Advantage plans contrasts with higher
usage of services, and thus higher expenses, seen with some
rival insurers, including Humana Inc.
Gurda said the medical loss ratio for Cigna’s Medicare
Advantage programs had fallen to 80.4 percent in the second
quarter from 88.1 percent a year earlier. The ratio is the
amount of revenue from health insurance premiums that is spent
on medical services.
Cigna, whose shares rose 2.4 percent, reported
second-quarter net income of $380 million, or $1.31 per share,
compared with $391 million, or $1.43 per share, a year earlier.
Excluding special items, Cigna earned $1.49 per share,
topping analysts’ estimates of $1.42, according to Thomson
Reuters I/B/E/S.
“Cigna solidly beat earnings and the release contained no
indication of cost trend deviations from expectations or other
surprises evident in other managed care organization reports in
the second quarter,” Jefferies & Co analyst David Windley said
in a research note.
Revenue rose 35 percent to $7.46 billion, above Wall Street
expectations of $7.24 billion. Revenue growth was largely
spurred by the HealthSpring acquisition, which led to a 52
percent rise in premiums and fees in the healthcare segment.
Cigna bought HealthSpring for $3.8 billion earlier this
year.
The deal gave Cigna a foothold in the business of selling
privately administered Medicare plans for older people, allowing
it to attract the wave of baby boomers becoming eligible for the
federal health program.
Chief Executive David Cordani said cost controls in its
Medicare Advantage business were largely due to the longstanding
and predictable ability of HealthSpring to control expenses.
“HealthSpring has a history of being very disciplined,” he told
analysts in a conference call. He said HealthSpring over the
past decade has gone after steady but not overly aggressive
growth in Medicare membership.
“They’ve gotten the benefit design in balance with the
(insurance) premium,” Cordani said.
Cigna raised its 2012 earnings forecast to a range of $5.25
to $5.60 per share, excluding items. In May, the company had
increased its outlook to between $5.20 and $5.55 per share,
citing strong profit from healthcare, its largest segment.
Earnings rose 19 percent to $332 million in the company’s
healthcare division and were up 1 percent at $89 million in the
disability and life segment.
Earnings rose 14 percent in the international segment, which
sells supplemental insurance to individuals overseas, including
to employees working abroad.
Cigna shares rose to $41.20 in morning trading on the New
York Stock Exchange.
