CIGNA Lags Est on Share Dilution - Analyst Blog


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
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AET , CI , UNH , WLP

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