Bloomberg News

Cigna’s Cordani Says He Isn’t Planning To Enter New Countries

February 07, 2012

Feb. 2 (Bloomberg) -- Cigna Corp., the U.S. health insurer that sells in 30 countries and jurisdictions, isn’t looking to add more markets, Chief Executive Officer David Cordani said.

“From a prioritization of new countries to enter, we did Turkey and India, so we are where we want to be,” Cordani said in a telephone interview today after Cigna provided a 2012 forecast that trailed analyst estimates and sent shares down. “There are not additional countries on the horizon to enter.”

Cigna’s international revenue increased 31 percent in 2011 as the company took advantage of a growing middle class in countries including South Korea and China. This year, Cigna expects to increase earnings outside of the U.S. by 20 percent to 30 percent, Cordani said. The geographic diversity will help Bloomfield, Connecticut-based Cigna be better protected from changes in the U.S. health system, he has said.

The “growth trajectory is outstanding” in countries where Cigna already has a presence, Cordani said. In November, Cigna signed an agreement with India’s TTK Group to sell insurance products in that country. The company also acquired FirstAssist Insurance Services Ltd., a U.K. travel and protection insurer, to grow outside the U.S.

Cigna fell 5.6 percent to $43.13 at 1:07 p.m. New York time, after dropping 9.9 percent in the biggest intraday decline since August. The insurer forecast full-year profit today of $5 to $5.40 a share, less than the $5.68 average of 19 analyst estimates compiled by Bloomberg.

New Accounting

New accounting rules reduced Cigna’s 2011 earnings for the international business by $70 million. The change may put pressure on the company’s profit margins, said Chris Rigg, an analyst with Susquehanna Financial Group in New York who has a ‘neutral’ rating on Cigna.

“The top line is growing rapidly but the earnings are not growing as fast,” Rigg said.

In the U.S., Cigna is focusing on folding in Healthspring Inc.’s operations after its acquisition closed this week. Cigna paid $3.8 billion in cash for the company to expand into Medicare, which generated more than $1.3 billion for Healthspring in the third quarter. Medicare is the U.S. health plan for the elderly and disabled, and Medicare managed-care plans are among the fastest-growing products for health insurers as Americans age.

Cigna’s Forecast

Cigna’s outlook includes the impact of new accounting rules for deferred acquisition costs, increased medical use, and a contribution of 3 cents to 10 cents from Healthspring. Cigna joined WellPoint Inc. and UnitedHealth Group Inc., the two largest U.S. health insurance companies, in saying more people are expected to seek medical care in 2012, raising costs for insurers.

The Healthspring benefit is “a little less than what we had expected,” said Rigg, who has a ‘neutral’ rating on Cigna. “We thought it could be roughly double that amount.”

Fourth-quarter earnings excluding one-time items were $1.11, the company said. The quarterly results missed analyst estimates by 8 cents. Net income fell 37 percent to $290 million, or $1.04 a share, from $461 million, or $1.69, a year earlier, the company said.

“The fourth quarter is definitely disappointing,” Rigg said.

--Editors: Bruce Rule, Andrew Pollack

To contact the reporter on this story: Sarah Frier in New York at

To contact the editor responsible for this story: Reg Gale at

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