* Shares rise as earnings beat estimates
* Acquired HealthSpring earlier this year
* $50 mln in charges for severance
By Caroline Humer
Nov 1 Health insurer Cigna Corp raised
its earnings outlook for the year as its recent purchase of
specialized Medicare provider HealthSpring again helped the
bottom line more than expected, enabling it to beat analyst
forecasts for quarterly profits.
The nation's fifth-largest insurer more than doubled its
quarterly profit as premiums and fees at its healthcare segment
jumped 51 percent, driven by contributions from HealthSpring,
which Cigna acquired for $3.8 billion earlier this year as well
as growth in its commercial business.
Cigna shares rose 3.2 percent to new 52-week trading highs.
Health insurers are facing a healthcare overhaul as the
government tries to cut spending by reining in reimbursements
for services, and have been on an aggressive acquisition spree
to gain scale and market share.
Recent big deals include UnitedHealth Group Inc's
$4.9 billion purchase of a majority stake in Brazilian health
insurer Amil Participacoes SA and Aetna Inc's
takeover of Coventry Health Care Inc for $5.6 billion.
"I thought the results looked strong across multiple
categories," Sarah James, an analyst at Wedbush Securities said,
noting growth in international operations and strong cost
controls there and across Cigna's government and employer-based
business as well as its pharmacy business.
The company's 2013 enrollment outlook for its employer-based
health insurance business seemed more positive than that of
UnitedHealth and Aetna. High unemployment rates are expected to
create a tougher climate next year. It added 1.25 million
members in the first nine months of 2012 for a total of 12.7
"I think part of that is that they are going after a
different kind of account," she said, explaining they target
their customers more closely to try to retain more customers.
HEADWINDS IN 2013
Still, Chief Executive Office David Cordani said during a
conference call with analysts and investors that he expects
"continuing economic headwinds" in 2013 and that to manage
costs, the company is taking a $50 million charge for severance
In a follow-up interview, he said that one uncertainty for
next year is the so-called fiscal cliff - about $600 billion in
government spending cuts that are due to take place unless
Congress takes action.
"From a Cigna standpoint, I don't worry about the fiscal
cliff as being a singular event that affects Cigna. I worry
about it as an event that effects the overall economy and
provides an overall headwind on employers and individuals,"
The company's strong results follow the market-topping
profits posted by rivals UnitedHealth and Aetna last month.
Cigna's HealthSpring government business for older adults
has been better able to weather pricing pressure because it is
set up differently. It places nurses and other healthcare
managers inside doctors' offices - typically big practices with
hundreds of physicians - and focuses on preventative care. That
helps manage costs, the company said.
Third-quarter net income rose to $466 million, or $1.61 per
share, in the third quarter, from $183 million, or 67 cents per
share, a year earlier.
Excluding items, the company earned $1.69 per share, handily
beating analysts' average estimate of $1.36, according to
Thomson Reuters I/B/E/S.
Those third-quarter 2012 items include the charge related to
severance as well as a charge related to the acquisition of
The insurer now expects full-year adjusted earnings of $5.70
to $5.90 per share, up from its prior forecast of $5.25 to $5.60
per share in August.
For 2013, it expects to grow earnings and revenue, Cordani
said during the call, but did not provide details.
Cigna's total third-quarter revenue rose 31 percent to $7.4
billion. Revenue at its international segment rose 22 percent,
and disability and life segment revenue increased 9 percent.
Shares of Cigna, which has a market capitalization of $14.71
billion, rose to $52.62 in midday trading Thursday after having
closed at $51 on Wednesday on the New York Stock Exchange.