INDIANAPOLIS (AP) — Cigna Corp. said Thursday its second-quarter net income jumped 39 percent compared to last year's quarter, when a hit from a discontinued business weighed on the managed care company's performance.
The health insurer, which said last month it was moving its headquarters from Philadelphia to Bloomfield, Conn., also hiked its earnings forecast for 2011.
In doing so, Cigna became the fifth major health insurer to beat analyst expectations for the second quarter and raise its earnings forecast for 2011. Humana Inc., Aetna Inc. and UnitedHealth Group Inc. also have recently reported earnings growth, while WellPoint Inc. saw its net income fall 3 percent due mainly to problems with its Medicare Advantage enrollment in California.
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In the second quarter, Cigna earned $408 million, or $1.50 per share. That's up from the $294 million, or $1.06 per share, in last year's quarter. Revenue climbed 3 percent to $5.51 billion.
Adjusted net income totaled $1.53 per share.
Analyst surveyed by FactSet expected, on average, earnings of $1.29 per share on $5.36 billion in revenue.
Insurers have been helped in recent quarters by health care utilization that has increased at a slower pace than they expected when they set prices for their coverage. This normally offers a limited benefit for Cigna because much of its medical enrollment involves employer-sponsored coverage it administers while the employer pays claims.
But Goldman Sachs analyst Matthew Borsch said Cigna's earnings appeared to be high quality, and the insurer still saw a benefit from the utilization trend because the gap between pricing and use was wide.
Cigna took a loss of 7 cents per share in the quarter from its guaranteed minimum income benefits business, compared to a loss of 37 cents per share in last year's quarter. Cigna discontinued that business and its variable annuity death benefits business in 2000. It operates both in run-off mode, meaning it seeks no new business. But they can still hurt the company's performance when liabilities toward them increase.
Premiums and fees from health care, the insurer's largest segment, climbed less than 1 percent to about $3.3 billion compared to last year's quarter, but they grew 8 percent excluding some Medicare Advantage plans the company stopped selling.
Cigna's international business saw its premiums and fees climb 36 percent to $737 million. The insurer has said it wants to grow this segment, which sells individual insurance in several countries and operates an expatriate business that covers people living outside their home countries. Results in this year's quarter were fueled in part by the purchase of the Belgian company Vanbreda International last year.
The insurer's health care membership climbed about 1 percent to 11.5 million people.
Cigna now expects 2011 adjusted earnings per share of $4.95 to $5.25 per share, up from its previous forecast of $4.65 to $5 per share.
Analysts expect, on average, adjusted earnings of $5.07 per share.
Bernstein analyst Ana Gupte said in a research note Cigna's guidance increase appears conservative, and she thinks the company will have more chances to beat expectations and raise its forecast later in the year.
Cigna is the fourth-largest commercial health insurer based on enrollment, trailing WellPoint, UnitedHealth and Aetna.
Shares of the company slipped 67 cents to $45.88 in early trading.
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