CI Cigna Group

By Anne Steele 

Cigna Corp.'s profit fell 8.8% in the final quarter of the year as unfavorable medical costs in the company's individual and government businesses offset strength in the commercial employer and specialty businesses.

The health-care provider also took a hit from charges related to its proposed merger with Anthem Inc. and gave guidance for the year below expectations.

For full-year 2016, Cigna forecast earnings of $8.85 to $9.25 a share, compared with analyst estimates for $9.30 a share, according to Thomson Reuters.

In the most recent quarter, the Bloomfield, Conn., insurer said it had 15 million total medical customers at the end of the quarter, compared with 14.46 million a year earlier and 14.85 million in the previous quarter.

In Cigna's global health-care business, premiums and fees revenue grew 7.5% to $6.72 billion, reflecting growth in self-funded programs, specialty products and government businesses.

Over all, Cigna reported earnings of $426 million, or $1.64 a share, down from $467 million, or $1.77 a share, a year earlier. Income in the 2015 quarter included a charge of $28 million, or 11 cents a share, for transaction costs related to Cigna's proposed merger with Anthem.

Excluding certain items, earnings from operations rose to an adjusted $1.87 a share from $1.80 a share.

Revenue rose 6.7% to $9.53 billion.

In November, the company issued guidance for earnings of $1.61 to $1.81 a share. Analysts polled by Thomson Reuters forecast revenue of $9.52 billion.

Cigna said its medical-loss ratio, or the share of premiums paid out for members' health expenses, was 83.1% for its government-based business, which the company said included some "unfavorable medical cost variability in a specific market." The medical-loss ratio for commercial members was 80.4%, reflecting expected higher seasonal medical costs.

In July, Anthem agreed to buy Cigna for $48 billion, capping months of merger frenzy among top U.S. health insurers. The deal combines the second- and fifth-largest health insurers by revenue and would create a company with a huge footprint in commercial insurance, the type of coverage provided to employers and consumers.

The biggest companies are seeking more cost efficiency and scale as the health-care landscape changes because of the Affordable Care Act and other factors.

Shares of the company, which have risen 2% over the past three months, were inactive premarket.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

February 04, 2016 07:37 ET (12:37 GMT)

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