By Caroline Humer
Aug 1 Cigna Corp, which provides U.S. and
overseas health insurance as well as disability and life
insurance, reported a second-quarter profit that beat
expectations on Thursday as medical costs fell and revenue rose.
A weaker U.S. economy has forced people to cut back on
medical services in the past few years, reducing insurers'
payments on claims. Companies like UnitedHealth Group Inc
, WellPoint Inc, and Aetna Inc have
beaten expectations for the quarter because of this trend.
Cigna's net income rose to $505 million, or $1.76 per share,
from $380 million, or $1.31 per share, a year earlier.
Excluding investment gains and a loss on its pharmacy
benefit management contract, profit was $1.78 per share. On that
basis, analysts expected $1.60, according to Thomson Reuters
"The results looked solid. The company's three primary
divisions all exceeded my expectations, and the company's
outlook for the balance of 2013 has a conservative bias," said
Chris Rigg, an analyst at Susquehanna Financial Group.
He said the outlook did not account for as many shares as
Cigna might repurchase, or that the use of medical services like
doctors visits and hospital admissions could remain at the low
levels of the past several years.
Cigna stock was down 1.3 percent at $76.81 in late-morning
trading. Rigg said the shares were likely off because of gains
in recent months.
Cigna and its competitors will face changes to their
business in 2014, when state-based health insurance exchanges
begin selling insurance to individuals - expected mostly to be
subsidized based on income.
Cigna has been planning to sell insurance on the exchanges
in five states, and said Thursday those plans were on track.
The exchanges are part of U.S. President Barack Obama's
healthcare reform law.
REVENUE TOPS ESTIMATES
Revenue rose to $7.98 billion from $7.42 billion, while
analysts looked for $7.4 billion.
The company took in $5.69 billion in premiums and fees in
its largest division, global health care; $613 million in the
global supplemental benefits business, which includes foreign
health policies and supplemental Medicare coverage; and $846
million in its disability and life insurance division.
Chief Executive David Cordani said the company will drop
plans and leave markets affecting about 2 percent to 3 percent
of its 440,000 members because of government cuts to Medicare
Advantage funding in 2014.
Other insurers are making similar plans.
"As we look to 2014, as we talked about before, (have) no
doubt the environment is a disruptive environment. That will
impact both product offerings and price points of the product
offerings," Cordani said during a conference call.
The company sees 2013 earnings of $6.25 to $6.65 per share,
compared to a previous forecast of $6 to $6.45 per share. The
analysts' average estimate is $6.49.