By Anna Wilde Mathews and Michael Calia
Cigna Corp. said its first-quarter profit rose due to higher
revenue and better management of costs in the company's Medicare
and commercial businesses.
The results topped analysts' expectations. The company also
boosted its per-share earnings expectations for the year to a range
of $7.05 to $7.35. In February, the company had projected earnings
of $6.80 to $7.20 a share, below analysts' views at the time.
In the most recent quarter, gains were driven partly by the
company's group disability and life-insurance business, which
posted a wider adjusted margin than it did in the year-ago period,
at 6.7% from 5.2%. Premiums and fees for the unit rose 6.7% to $916
million.
Cigna also pointed to "effective medical management" in its
employer and Medicare Advantage businesses. The company said it was
continuing to expand its efforts to work closely with medical
providers in financial arrangements that aim to rein in expenses
and improve care.
The insurer also said it expected to have around 290,000
enrollees in individual insurance at the end of 2014, with
approximately 69,600 of those coming through government
marketplaces. Cigna said it was seeing signs of
higher-than-expected medical costs in its individual business,
including health law-compliant plans sold through government
marketplaces and outside.
Early enrollees in the 2014 plans were older than expected, and
medical utilization in the first month was "much higher" than
typical, said David M. Cordani, Cigna's chief executive. However, a
later wave of sign-ups brought younger people, he said. Still,
Cigna expects to lose money on the 2014 individual business, which
represents 3% of its revenue. Mr. Cordani said Cigna has "a bias to
enter some additional markets" beyond the five states where it
currently participates in health-law marketplaces.
Mr. Cordani also said the costs of specialty pharmacy products,
a category that includes pricey new hepatitis C treatments, were
generally matching Cigna's projections. The new Gilead Sciences
Inc. drug Sovaldi costs around $84,000 for a standard regimen to
treat the liver-damaging illness, and its effect on insurers'
bottom lines is being closely watched.
For the quarter, Cigna reported earnings of $528 million, or
$1.92 a share, up from $57 million, or 20 cents a share, a year
earlier. The year-ago period included items such as a $1.75-a-share
impact from a charge related to a reinsurance transaction.
Excluding net realized investment gains, earnings from continuing
operations came in at $1.83 a share, up from $1.72 a share.
Total revenue, which includes net investment income and
mail-order pharmacy revenue, improved 3.8% to $8.5 billion.
Premiums and fees revenue rose 4.1% to $7.62 billion.
Analysts polled by Thomson Reuters had projected per-share
earnings of $1.54 and premiums and fees revenue of $7.72
billion.
The global health-care segment, which is the company's largest,
posted 2.9% growth in premiums and fees at $5.99 billion. Adjusted
margin in the unit fell to 6.6% from 6.7%.
Total medical customers rose to 14.2 million from 14.1 million
in the prior-year period, and from just under 14.1 million in the
previous quarter.
Write to Anna Wilde Mathews at anna.mathews@wsj.com and Michael
Calia at michael.calia@wsj.com
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