Cigna Corp. (CI:US), the third-biggest U.S. health insurer by market value, raised its 2012 forecast and said profit more than doubled after acquisitions boosted revenue from government-backed Medicare plans. The earnings pushed the shares to their best single-day gain in almost a year.
Cigna raised its full-year profit projection to $5.70 to $5.90 a share, above the average analyst prediction of $5.55, according to a statement today, and Chief Executive Officer David Cordani said that sales and earnings will rise next year as well. The carrier also announced a restructuring that includes 1,300 job cuts, about 4 percent of the Bloomfield, Connecticut-based company’s workforce.
Cigna bought insurer Healthspring Inc. for $3.8 billion a year ago and in May purchased Great American Supplemental Benefits Group, deals that expanded its business in Medicare plans for the elderly. Aetna Inc. (AET:US) and WellPoint Inc. (WLP:US) followed with similar acquisitions this year, as insurers prepare for slimmer profit margins in private-sector plans under President Barack Obama’s health-care overhaul.
“It is a very strong quarter that has exceeded expectations in all segments,” Ana Gupte, an analyst with Sanford C. Bernstein & Co. in New York, wrote today in an e- mail. “Health-care earnings are particularly strong with growth and solid metrics in the Medicare and commercial segments.”
Cigna gained 4.5 percent to $53.27 at the close in New York, the biggest single-day increase since Nov. 30, 2011, and the continuation of a two-day rally that has pushed the company’s market value ahead of Hartford, Connecticut-based Aetna. Aetna and Minnetonka, Minnesota-based UnitedHealth Group Inc. (UNH:US), the biggest insurer, beat profit estimates last month, citing increased Medicare revenue and medical costs that grew less than expected.
The No. 2 plan, Indianapolis-based WellPoint, is scheduled to report earnings on Nov. 7.
Cigna’s third-quarter net income (CI:US) jumped to $466 million, or $1.61 a share, compared with $183 million, or 67 cents, a year earlier, when the company took a charge for a discontinued business unit. Earnings excluding one-time items of $62 million were $1.69 a share, beating by 33 cents the average of 17 analyst estimates compiled by Bloomberg.
Sales rose to $7.36 billion from $5.61 billion a year earlier, and Cigna’s medical customers grew by 1.25 million in the first nine months of 2012. The insurer raised its full-year forecast from an August projection (CI:US) for adjusted profit of $5.25 to $5.60 a share.
Cigna also announced a “realignment and efficiency” plan that it said would save the company $60 million annually. The changes include cutting jobs across the company, including 300 in a European health and accident insurance business that “has not performed as well as we would have hoped,” said Matthew Asensio, a spokesman, in a telephone interview.
Cordani told analysts on a conference call the savings will be used to expand into new markets and upgrade technology, among other steps.
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