Cigna Corp.'s first-quarter net income jumped 52 percent as medical claims fell, the international business grew again, and it raised its 2011 profit forecast like other big health insurers that also beat expectations for the quarter.
The Philadelphia company said Thursday earnings in health care, its largest segment, climbed 47 percent, and premiums and fees from its international business rose 32 percent, fueled in part by the purchase of the Belgian company Vanbreda International last year.
Cigna earned $429 million, or $1.57 per share, in the three months that ended March 31. That's up from the $283 million, or $1.02 per share, last year. Revenue climbed 4 percent to $5.41 billion from $5.21 billion.
Adjusted income from operations, which excludes some one-time items, totaled $1.37 per share.
Analyst surveyed by FactSet expected earnings of $1.09 per share on $5.49 billion in revenue.
Cigna, the fourth-largest health insurer based on enrollment, operates health care, group disability and life segments in the U.S. It also sells individual insurance in several countries and operates an expatriate business that covers people living outside their home countries.
The insurer's largest expense, health care medical claims, fell 6 percent in the quarter to about $2.08 billion. Insurers have benefited in recent quarters from slower-than-expected growth in medical use, which leads to fewer claims than they anticipate, and Cigna said that trend continued in the first quarter.
Cigna's medical-loss ratio, which essentially measures the percentage of premiums spent on care, dropped to 77.3 percent from nearly 83 percent even after accounting for a new health care overhaul rule that requires consumer rebates if insurers fall short of minimum percentages for these ratios.
Before the quarter, investors had worried about the impact this rule would have on the sector, but Cigna and several other insurers have eased concerns so far with strong performances. UnitedHealth Group Inc., WellPoint Inc., Aetna Inc. and Humana Inc. have already reported earnings that beat Wall Street expectations and raised their 2011 forecasts.
Earnings from Cigna's biggest segment, health care, climbed to $246 million from $167 million even though health care medical membership increased only slightly to 11.4 million.
Earnings in its international business climbed 7 percent to $77 million after rising 46 percent in the final quarter of 2010. Cigna announced the acquisition of privately held Vanbreda last August. Vanbreda provides worldwide medical insurance and employee benefits to customers including humanitarian operations and corporate clients.
CEO David Cordani told analysts during a conference call the company sees the international business as a "very robust opportunity" for future growth.
Wedbush analyst Sarah James said in a research note that segment offers higher growth rates and margins compared to Cigna's U.S. business, and she expects it to make up about 30 percent of Cigna's earnings by 2015.
Cigna also benefited in the quarter from investments, a $24 million gain due to the completion of an Internal Revenue Service examination and the performance of its discontinued guaranteed minimum income benefits business. The company operates that business in run-off mode, meaning it seeks no new business, but it can hurt Cigna when the market turns bad because the insurer's liabilities toward it increase.
Cigna now expects full-year adjusted earnings of $4.65 to $5 per share, up from a previous forecast of $4.30 to $4.70 per share but in a range some analysts still view as conservative.
Analysts expect, on average, earnings of $4.73 per share.
Cigna shares climbed 2.7 percent, or $1.25, to $47.17 in morning trading while broader trading indexes were down slightly.
- WellPoint Inc
- Humana Inc.
- Vanbreda International
- employee benefits
- net income
- Aetna Inc.