CIGNA Posts Strong 2Q - Analyst Blog
04 August 2011 - 11:00PM
Zacks
CIGNA Corp.’s (CI) second quarter core earnings
of $1.53 per share were fairly ahead of the Zacks Consensus
Estimate of $1.29. Earnings also compare favorably with $1.38
reported in the comparable period last year. Better-than-expected
results were aided by strong earnings from across the board.
Earnings per share (EPS) also benefitted from lower share count
compared with the year-ago quarter.
CIGNA, the fourth-largest commercial health
insurer, has reported total revenue of $5.5 billion, beating the
Zacks Consensus Estimate of $5.0 billion. Revenue also upped 7%
year over year, driven by higher premium and fees income.
Consolidated premiums and fees increased 6.0% year over year to
$4.8 billion, mainly based on increase in International as well as
Life and Disability segments’ premiums. Net investment income, at
$284 million, remained flat over the prior year.
Segment Results
Premiums and fees from the Health Care segment
inched up 0.6% year over year to $3.3 billion. There was a net
medical membership growth of 93,000, which included a higher mix of
commercial guaranteed cost members. Operating earnings upped 13% to
$280 million and reflected growth in targeted medical and specialty
lines of business as well as favorable prior-year development
reserve.
Premiums and fees from the Disability and Life
segment hiked 10% year over year to $717 million, reflecting an
increase in premiums from the disability business. Operating
earnings were $88 million, down 1.1% due to a charge related to
litigation matter.
Premiums and fees from the International
segment increased 36% year over year to $737 million, mainly
attributable to new sales growth in the Life segment, supplemental
health insurance and membership growth in the expatriate employee
benefits business. CIGNA’s International business growth augurs
well, and we view it as a catalyst for future growth.
CIGNA ended the quarter with $720 million in cash, down from
$810 million at 2010 end.
2011 Outlook
Given the solid results and the favorable operating environment,
management upped its earnings guidance provided in 1Q11. Adjusted
income from operations is expected to lie in the range of $1.355 to
$1.435 billion, up from the earlier forecast of $1.3 to $1.4
billion. The EPS guidance has consequently been raised to the range
of $4.95–$5.25 from $4.65–$5.00 forecasted earlier.
The company now expects Health Care medical membership growth,
excluding membership losses from exits of non-strategic markets
including Medicare IPFFS, to be approximately 2% as against the
earlier projection of 1–3% growth.
Overall, the result reflects CIGNA’s strong second quarter. The
company’s bottom line benefitted boosted from price increases and
exits from non-strategic markets such as the Medicare Advantage
individual private-fee-for-service business. The company also
showed operating momentum and gained commercial risk memberships
for five quarters in a row. It is also is relatively safe owing to
minimum exposure to MLR regulations, unreasonable rate reviews and
health insurance exchanges. We expect the company to come up with
earnings surprises going forward.
CIGNA marks the close of quarterly reporting by health insurers.
Most big insurers such as UnitedHealth Group Inc.
(UNH), Aetna Inc. (AET), WellPoint
Inc. (WLP), Humana Inc. (HUM) reported
strong second quarter on the back of lower utilization.
AETNA INC-NEW (AET): Free Stock Analysis Report
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