--Membership, revenue gains lift Cigna earnings
--Company boosts 2013 guidance
--Shares touch all-time high
(Adds CEO comments on recent year and outlook, stock details,
membership details)
By Jon Kamp
Cigna Corp.'s (CI) fourth-quarter earnings rose 49% as
membership gains, fueled by an acquisition last year, helped boost
the health insurer's revenue.
The Bloomfield, Conn., company also cited "favorable medical
costs" despite an uptick in flu-related costs. Cigna posted higher
earnings on an adjusted basis--which excludes some unspecified
litigation costs--than Wall Street expected.
Additionally, the company boosted its forecast for adjusted
per-share earnings in the new year by five cents.
"We had a strong year in 2012 that exceeded our expectations,"
Chief Executive David Cordani said during a conference call. "we
are confident in achieving our outlook for 2013"
Cigna shares rose 1.5% to $60.57 in recent trading despite a
sliding broader market. The company touched an all-time high of
$61.23 earlier, according to FactSet Research, and its shares are
up about 40% over the last 12 months.
This will be something of a transition year for health insurers
as they gear up for major changes under the health-care overhaul
law, which is adding a mix of new costs and market opportunities.
Starting next year, state-based exchanges and a broadened Medicaid
program are expected to expand health coverage to million more
Americans. The exchanges will be a marketplace where people can
shop for plans, sometimes with government subsidies.
Cigna is seen as having modest exposure to these market changes,
because it doesn't focus much on markets for individual health
insurance or small-business coverage that face new competition and
margin pressure from exchanges. The company does aim to seek new
customers through exchanges, but Mr. Cordani has noted Cigna
doesn't have to defend business along the way.
"From our point of view, change creates opportunity," he said in
an interview. He also confirmed "we continue to expect to grow both
underlying earnings and EPS" in 2014.
The company, which traditionally focused more on commercial
health insurance for bigger firms, has pushed further into the
market for senior-focused plans by buying Medicare insurer
HealthSpring Inc. and American Financial Group Inc.'s (AFG)
Medicare supplement and critical-illness businesses last year.
Cigna also took a major step toward simplifying its business
earlier this week, when it announced a deal with Warren Buffet's
Berkshire Hathaway Inc. (BRKA, BRKB) that will transfer up to $4
billion in obligations pegged to once-troublesome annuity
operations Cigna started winding down more than a decade ago. The
news boosted Cigna's shares.
The company reported a fourth-quarter profit of $406 million, or
$1.41 a share, up from $273 million, or 98 cents a share, a year
earlier. Excluding items such as litigation, realignment and
acquisition costs, adjusted per-share earnings rose to $1.57 from
$1.05. Revenue jumped 38% to $7.62 billion.
Analysts polled by Thomson Reuters had forecast earnings of
$1.48 a share on revenue of $6.79 billion.
Total medical membership rose 11% to more than 14 million,
helped by having HealthSpring on board for the full quarter. Cigna
closed the deal on Jan. 31, 2012. Chief Financial Officer Ralph
Nicoletti also noted that 1 million of Cigna's new members were
added through organic growth.
Cigna boosted its full-year adjusted earnings target to a range
of $5.85 and $6.30 a share, which gets the company closer to Wall
Street's recent $6.34 per-share target.
The outlook doesn't reflect an expected $500 million after-tax
charge in the first quarter pegged to exiting the annuity
reinsurance operations. Cigna started winding down this business in
2000, but it can still cloud financial reports, and the company has
had to maintain a war chest of money to support policyholders.
--Melodie Warner contributed to this article.
Write to Jon Kamp at jon.kamp@dowjones.com
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