February 6, 2020 / 11:26 AM / 13 days ago

Cigna sees 2020 revenue target above estimates on Medicare Advantage growth

(Reuters) - Cigna Corp (CI.N) on Thursday forecast 2020 revenue well above Wall Street estimates on Thursday, as it expects a significant increase in the number of people signing up for its government-backed Medicare Advantage health plans.

FILE PHOTO: A screen displays the logo fro Cigna Corp. on the floor at the New York Stock Exchange (NYSE) in New York, U.S., July 16, 2019. REUTERS/Brendan McDermid

Shares of the Bloomfield, Connecticut-based health insurer were up 2.6% at $211.86.

The company said it is on track to achieve 13% to 16% customer growth in its Medicare Advantage business this year, above its prior forecast of 10% to 15% growth.

“Our suspicion is that the Street may not have also fully factored in yet the very solid enrollment growth the company is going to achieve in Medicare Advantage this year,” Stephens analyst Scott Fidel said.

The insurer, which is now also one of the biggest pharmacy benefit managers after its $52 billion acquisition of Express Scripts in 2018, said it expects revenue of between $154 billion and $156 billion in 2020. That exceeds the average analyst estimate of $148.73 billion, according to Refinitiv data.

Cigna’s revenue outlook for the year also reflects its recent deal with smaller pharmacy benefits manager Prime Therapeutics, Fidel said.

In December, the company signed a three-year partnership deal with Prime, which is owned by a group of Blue Cross and Blue Shield plans. The arrangement will increase the number of prescriptions Cigna handles beginning with the second quarter.

While Cigna’s medical care ratio - the percentage premiums it collects that goes to pay medical claims - worsened in the fourth quarter, it met analyst expectations of 82.3%.

This is in contrast to medical costs for three other major U.S. health insurers that missed estimates in the fourth quarter, pressured by higher claims from the flu season and the suspension of the industry-wide health insurance fee.

Cigna attributed the year-over-year increase in medical costs to suspension of the fee and higher costs in its unit that offers health plans for individuals.

Cigna forecast 2020 adjusted earnings of between $18 and $18.60 per share. Analysts were estimating $18.59.

Excluding items, the company earned $4.31 per share, beating the average analysts’ estimate by 11 cents, according to IBES data from Refinitiv.

Cigna’s adjusted revenue rose to $36.54 billion in the quarter, ahead of expectations of $35.07 billion.

Reporting by Tamara Mathias and Manojna Maddipatla in Bengaluru, Caroline Humer in New York; Editing by Arun Koyyur and Bill Berkrot

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