Thursday, October 31, 2013

Cigna says will increase ’14 profit despite pressures [ He4lthherb4l ]


By Caroline Humer

(Reuters) – Insurer Cigna Corp said on Thursday it expects to increase its 2014 earnings from 2013, reflecting its smaller exposure to uncertainty around private Medicare and the rollout of individual insurance on new exchanges around the country.

Cigna, which reported third-quarter profit that beat analysts’ expectations on Thursday, has both a U.S. and overseas health insurance business and also sells disability and life insurance.

Cigna said that diversification will help it next year, which it expects to be challenging because of broad changes in the healthcare industry.

Larger competitors UnitedHealth Group Inc, WellPoint Inc and Aetna Inc have recently painted 2014 as uncertain because of private Medicare cuts and changes related to President Barack Obama’s healthcare reform law.

Shares of Cigna, which had fallen with other competitors after the pessimistic reports, were up 3 percent on Thursday. Shares of Aetna, UnitedHealth and WellPoint were also higher.

State-run “Obamacare” exchanges selling insurance to individuals launched on October 1 and have been struggling with technology problems. The federal exchange, which serves 36 states, has also been plagued by glitches, with would-be customers often unable to log on or encountering mysterious error messages; this week, the data center containing the information needed by all 50 states to enroll members has suffered outages.

Cigna CEO David Cordani told investors on a conference call that the company’s exposure to the exchanges is small because it is participating in only five states.

“We have cautioned not to look at this opportunity, for at least our company, as a watershed moment … It may present a long-term opportunity,” he said.

Cigna said it expects full-year earnings of $ 6.70 to $ 6.90 per share. Analysts were expecting $ 6.65, according to Thomson Reuters I/B/E/S.

That is an increase of 25 to 45 cents per share from its previous outlook. The company forecast 2014 growth that will probably be less than the growth in 2013.

The company said net income rose to $ 553 million, or $ 1.95 per share, from $ 466 million or $ 1.61 per share a year earlier.

Excluding investment gains, the company reported a profit of $ 1.89 per share. On that basis, analysts on average had expected $ 1.63, according to Thomson Reuters I/B/E/S.

Revenue rose to $ 8.1 billion from $ 7.3 billion.

The company said the results reflected continued medical cost management and a lower operating expense ratio that were partly offset by some pressure on its private Medicare plans for older people.

Medical costs were held back as cash-strapped Americans continued to cut back when possible on doctor and hospital visits.

Cigna has a private Medicare business, but it is comparatively small.

Cigna said that as of September 30, it had 13.8 million commercial customers and 488,000 customers in Medicare and Medicaid plans. The company also has a Medicare pharmacy benefit business and manages commercial pharmacy benefits.

The vast majority of commercial customers are in self-funded health plans in which Cigna administers health benefits as a third party and the company or organization is responsible for the actual cost of covering its members.

Cigna shares were up 3 percent at $ 76.85 at midday on Thursday on the New York Stock Exchange, after rising as much as 5 percent earlier in the session.

(Reporting by Caroline Humer in New York; editing by Lisa Von Ahn and Matthew Lewis)

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