Cigna Earnings Slip On Charges, But Guidance Raised

08/02/2012| 08:56am US/Eastern

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--Cigna caps reports for big managed-care firms with better-than-expected earnings

--Company raises full-year guidance

--HealthSpring deal contributes to surging revenue

(Updates with details on results, background on managed-care sector, analyst comment.)

 
   By Jon Kamp 
 

Cigna Corp.'s (>> CIGNA Corporation) second-quarter earnings slipped 2.8%, pressured by losses in a business Cigna is departing, but the health insurer still turned in a better-than-expected quarter as a recent acquisition and membership growth pumped up revenue.

Cigna--which raised its full-year adjusted earnings guidance by five cents a share--capped a turbulent reporting season for the biggest managed-care firms on a solid note. While UnitedHealth Group Inc. (>> UnitedHealth Group Inc.) and Aetna Inc. (>> Aetna Inc.) also beat Wall Street expectations and raised guidance, WellPoint Inc. (>> WellPoint, Inc.) and Humana Inc. (>> Humana Inc.) had more complicated quarters and guidance cuts.

"Cigna's results look good enough to please, particularly given the mixed bag of results reported by industry peers thus far for 2Q12," Susquehanna analyst Chris Rigg said.

Shares of the Bloomfield, Conn., company were recently inactive in premarket trading. Shares have declined more than 12% over the past 12 months.

Cigna reported a second-quarter profit of $380 million, or $1.31 a share, down from $391 million, or $1.43, a year earlier. The company reported a bigger loss in the recent period connected to a guaranteed minimum income benefits business it has long been winding down. Excluding this impact, per-share earnings rose to $1.49 from $1.47. Revenue jumped 35% to $7.46 billion.

Analysts polled by Thomson Reuters had forecast earnings of $1.42 a share on revenue of $7.24 billion.

The company, which has traditionally focused more on commercial health coverage, bought Medicare-focused insurer HealthSpring Inc. in January for $3.8 billion, pushing it further into a market for senior-focused plans. Cigna also agreed in May to buy American Financial Group Inc.'s (>> American Financial Group) Medicare supplement and critical-illness businesses for about $295 million in cash.

Managed-care firms have been bulking up their coverage of seniors as baby boomers age and Medicare Advantage plans--the insurers' version of the government program--become more popular.

Cigna's health-care segment posted a 52% increase in premiums and fees, boosted by the HealthSpring deal, organic business growth and rate increases. The margins in this business declined because of HealthSpring and a smaller contribution from excess reserves that Cigna previously set aside to cover expected member costs.

Total medical membership rose 9.7% to 13.8 million from 12.6 million a year ago.

The company is now expecting full-year adjusted earnings between $5.25 and $5.60 a share. Analysts, on average, were expecting earnings of $5.51 a share, according to Thomson Reuters.

--Melodie Warner contributed to this report.

Write to Jon Kamp at jon.kamp@dowjones.com

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