Cigna Misses, Cuts Guidance
July 29 2016 - 7:50AM
Dow Jones News
Cigna Corp. slashed its guidance for the year and posted
second-quarter earnings sharply below expectations, dragged by
weakness in the group disability and life segment.
For 2016, the company now anticipates earnings of $7.75 to $8.10
a share, down from its previous forecast for $8.95 to $9.35 a
share.
Chief Executive David Cordani said a current headwind in group
disability and life pressured overall results.
"We are taking a series of corrective actions to stabilize and
improve group disability and life results," he said
The Bloomfield, Conn., insurer said it had 15.14 million total
medical customers at the end of the June quarter, compared with
14.77 million a year earlier and 15.12 million in the previous
quarter.
In Cigna's global health-care business, premiums and fees
revenue grew 3.1% to $6.94 billion, driven by customer growth,
specialty contributions, and rate actions in the commercial
employer group business, partially offset by expected reductions in
Medicare Part D and individual customers.
The group disability and life segment swung to a $12 million
loss after earning $106 million in the quarter a year ago and $15
million in the previous quarter, reflecting "modifications to our
disability claims management process implemented in the first
quarter and poor life claim experience."
In all for the quarter, Cigna posted earnings of $510 million,
or $1.97 a share, down from $588 million, or $2.26 a share, a year
ago. Income in the 2015 quarter included an after-tax charge of $26
million, or 10 cents a share, for transaction costs related to
Cigna's proposed merger with Anthem Inc.
Excluding certain items, earnings from operations fell to an
adjusted $1.98 a share from $2.55 a share. Revenue grew 4.9% to
$9.96 billion.
Analysts polled by Thomson Reuters had projected earnings of
$2.39 a share on $9.97 billion in revenue.
Cigna said its medical-loss ratio, or the share of premiums paid
out for members' health expenses, was 86.4% for its
government-based business, which the company attributed to strong
performance in the Medicare Advantage business and less prior year
reserve development. The medical-loss ratio for commercial members
was 78.8%, reflecting continued strong performance of the
commercial employer business, partially offset by higher medical
costs in the individual business.
Shares of Cigna, inactive premarket, have slipped 1.8% over the
past three months.
Anthem's agreement last July to buy Cigna capped months of
merger frenzy among top U.S. health insurers that is set to reshape
the industry. The deal combines the second- and fifth-largest
health insurers by revenue and would create a company with a huge
footprint in commercial insurance, the type of coverage provided to
employers and consumers.
The biggest companies in the field are seeking more cost
efficiency and scale as the health-care landscape changes because
of the Affordable Care Act and other factors.
But last week, the Justice Department filed a pair of lawsuits
in a Washington, D.C., federal court challenging Anthem's proposed
acquisition of Cigna and Aetna Inc.'s planned combination with
Humana Inc., alleging the mergers would harm consumers, employers
and health-care providers with an unacceptable reduction in
competition.
Anthem and Cigna put out separate statements setting markedly
different tones, amid lingering tension between the companies.
Anthem said it is "fully committed to challenging the DOJ's
decision in court but will remain receptive to any efforts to reach
a settlement."
Cigna noted that Anthem had led the regulatory process and said
it is "currently evaluating its options consistent with its
obligations under the agreement."
Cigna didn't comment on the merger while releasing its earnings
Friday.
Earlier this week, Aetna said it is now projecting losses on its
Affordable Care Act plans this year, a turnaround for a major
insurer that had maintained a relatively optimistic tone about that
business.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
July 29, 2016 07:35 ET (11:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Cigna (NYSE:CI)
Historical Stock Chart
From Aug 2024 to Sep 2024
Cigna (NYSE:CI)
Historical Stock Chart
From Sep 2023 to Sep 2024