Cigna Earnings Exceed Forecasts
Cigna Corp. on Friday reported a decline in third-quarter earnings, but the results beat analysts’ lowered expectations. The company’s stock rose 12%.
Analysts said they were relieved by signs Cigna might get a grip on higher medical expenses. Cigna shares rose $8.29 to $79.90 on the New York Stock Exchange and pulled up shares of other HMOs.
The Philadelphia-based company, which also provides group life, accident and disability insurance and retirement services, reported earnings of $248 million, or $1.66 a share, excluding an after-tax gain, down 12% from $281 million, or $1.76 a share, a year earlier.
Excluding charges from insurance claims stemming from the Sept. 11 attacks on the World Trade Center and the Pentagon, Cigna’s earnings were down 2.8% to $273 million, or $1.83 a share.
On that basis, analysts on average were expecting earnings of $1.58 a share, according to Thomson Financial/First Call.
“We believe the stock has been substantially oversold near term and is likely to trade meaningfully higher over the next few days,” Lori Price, analyst at J.P. Morgan Chase, wrote. “We are encouraged by the expense controls exercised in the quarter.”
Revenue at Cigna, which ranks behind industry leaders Aetna Inc. and UnitedHealth Group Inc. in membership size, fell 4% to $4.8billion.
Cigna’s stock had fallen about 46% from a high of $132.30 at the end of last year, as escalating medical costs cut into health plan profit and the weak stock market hurt the company’s retirement and investment services business.
The managed-care index rose about 4% on Friday as the stocks of other managed-care companies jumped. Shares of No. 1 health insurer Aetna rose $1.32, or 4.7%, to $29.15 on the NYSE. Shares of Santa Ana-based PacifiCare Health Systems Inc. rose $1.38, or 7.5%, to $19.64 on Nasdaq.
Cigna said earnings declined in its two main business segments but showed improvement from the second quarter.
Profit in the health maintenance organization segment declined 1.7% to $114 million. But Cigna said the unit’s results improved from $111 million in the second quarter, reflecting stabilization in medical cost trends due to lower hospitalization rates, the company said.
Cigna officials said the company expects to post 2002 earnings of $7.50 to $7.80 and continues to expect 2001 earnings of $7 to $7.20.
Analysts, who had lowered their estimates in recent months, were expecting $6.89 for 2001 and $7.86 for 2002, on average.
Medical membership in the third quarter rose slightly to 14.21 million from 14.12 million a year ago.
