CIGNA Lags Est on Share Dilution - Analyst Blog
February 02 2012 - 10:50AM
Zacks
U.S health insurer, CIGNA Corp.’s (CI) fourth
quarter core earnings of $1.11 per share lagged the Zacks Consensus
Estimate of $1.18. Earnings were also down from $1.15 reported in
the comparable period last year. The weaker than expected results
came on the back of dilutive effect led by equity financing of
Health Spring acquisition.
CIGNA’s third quarter consolidated revenues of $5.4 billion,
higher than the Zcaks Consensus Estimate of $5.24 billion. Revenues
also grew 0.6% year over year to $5.4 billion, reflecting higher
premium and fees earned and higher net investment income
Consolidated premiums and fees increased 2.1% year over year to
$4.8 billion, primarily led by higher premium in the International
business.
Net investment income came in at $286 million, up 3.6% year over
year.
Total medical membership increased 207,000 year over year to
12.7 million members. The increase in membership was primarily due
to enrollment gains in the International business.
Full year 2011 operating earnings came in at $5.21, eight cents
below the Zacks Consensus Estimate of $5.29 per share. Total
Revenues of $22.0 billion came in ahead of the Zacks Consensus
Estimate $21.1 billion.
Segment Results
Premiums and fees from the Health Care segment
decreased 1.6% year over year to $3.3 billion. Operating earnings
upped 4.4% to $216 million and reflected growth in targeted medical
and specialty lines of business as well as favorable prior-year
development reserve.
Overall, Health Care results reflect continued growth in the
company’s targeted customer segments. Results also reflect the
impact of the exits from non-strategic markets, primarily Medicare
Individual Private Fee For Service.
Premiums and fees from the Disability and Life
segment declined 2.3% year over year to $677 million primarily due
to a 7% decrease in life premiums and fees, partly offset by an
increase in premiums from the disability business. Operating
earnings were $55 million, down 24%, due to absence of
non-recurring after-tax gain, higher disability claims experience,
partially offset by continued favorable life claims experience.
Premiums and fees from the International
segment increased 26% year over year to $790 million,
mainly driven by improved customer retention and new sales within
the Health, Life and Accident businesses. CIGNA’s International
business growth augurs well, and we view it as a catalyst for
future growth.
Adjusted income from operations was comparable to the prior year
quarter, reflecting continued strong fundamental results, offset by
the impact of increased strategic investments in product and
geographic expansion initiatives, costs to streamline operations,
and the unfavorable impact of changes in foreign tax law.
2011 Outlook
Cigna expects full year 2012 consolidated adjusted income from
operations to be in the range of $1.46 billion to $1.57 billion, or
$5.00 to $5.40 per share. The outlook reflects expected continued
solid execution of the company’s strategy resulting in strong
organic growth, expected increase of medical services utilization
during 2012, and earnings accrual from the HealthSpring
acquisition. It expects membership to grow by 900,000 including
medical members acquired from HealthSpring.
Our take
Cigna has made a strong finish to the year 2011, reflecting
organic growth in each of its business units. Cigna boosts of
adiversified portfolio of businesses, including continued
attractive organic growth in its U.S. Health Care and International
businesses. It is also expanding in the growing Seniors market
through the acquisition of HealthSpring.
We expect these initiatives to deliver growth in 2012. A strong
balance sheet and adequate liquidity will further lead to continued
share buybacks, thereby contributing to the bottom line.
Peer Comparison
Yesterday peer Aetna Inc. (AET) reported
earnings of 97 cents per share falling inline with the Zacks
Consensus Estimate. Last week, WellPoint Inc.
(WLP) reported earnings of 99 cents per share, lagging the Zacks
Consensus Estimate of $1.11 per share and UnitedHealth Group Inc.’s
(UNH) reported earnings of $1.17 per share, substantially higher
than the Zacks Consensus estimate of $1.02 per share.
AETNA INC-NEW (AET): Free Stock Analysis Report
CIGNA CORP (CI): Free Stock Analysis Report
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
WELLPOINT INC (WLP): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Aetna (NYSE:AET)
Historical Stock Chart
From Apr 2024 to May 2024
Aetna (NYSE:AET)
Historical Stock Chart
From May 2023 to May 2024