UPDATE: Cigna 3Q Net Rises 92%, Aided By Prior-Year Losses
(Adds details throughout, including analyst reaction.)
DOW JONES NEWSWIRES
Cigna Corp.'s (CI) third-quarter earnings soared 92%, with the comparison
benefiting from prior-year losses at its reinsurance business that are being
wound down as well as from lower administrative expenses at its health-care
segment.
The earnings exceeded analysts' expectations despite declining medical
enrollments. Cigna shares, up 77% this year, rose 5..1% premarket to $31.30.
Cigna, like its peers, is experiencing upward pressure on medical costs and
downward pressure on commercial enrollment. The health insurer has been cutting
costs and this summer was considering making more reductions to narrow the gap
in per-member expenses with some managed-care rivals.
"Our third quarter 2009 earnings were solid and reflect our continued focus on
ongoing operating effectiveness initiatives to drive strong service delivery and
further reduce expenses, particularly in our health-care business," Cigna
Chairman and Chief Executive Edward Hanway said.
Cigna also affirmed its 2009 forecasts.
Credit Suisse analyst Gregory Nersessian called the third-quarter results
mixed.
"Health care and the other segments reported stronger-than-expected results,"
Nersessian said, noting that the lower operating expenses offset higher-than-
expected medical costs. However, "the disability and life segment results were
light this quarter as that segment continues to exhibit up-and-down results this
year."
Also, Nersessian said, Cigna's international segment posted lower income than
expected as it "included an unspecified level of unfavorable claims experience."
For the quarter ended Sept. 30, the company reported a profit of $329 million,
or $1.19 a share, up from $171 million, or 62 cents a share, a year earlier.
Excluding items such as the reinsurance losses, earnings rose to $1.13 from 89
cents and surpassed the average analyst estimate on Thomson Reuters of $1.03.
The latest quarter's net income included income of $16 million from the
variable annuity products in Cigna's run-off reinsurance segment, which the
company is winding down. A year ago, the company's results included losses of $
133 million from the segment.
Revenue decreased 5.9% to $4.5 billion, slightly below the Thomson Reuters
estimate of $4.59 billion, as premiums and fee revenue fell 3.5%.
Medical membership fell 6.7% to 11.1 million as of Sept. 30 from a year
earlier and dropped 85,000 during the quarter.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481; Tess.Stynes@dowjones.com
(George Stahl contributed to this report.)
(END) Dow Jones Newswires
11-05-090904ET
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