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Cigna Beats Projections as Health Insurance Rolls Swell

Cigna said quarterly net income fell 18% from a year earlier, when it recorded large investment gains, but results beat estimates as membership in its health insurance plans jumped.

Net income fell to $289 million, or $2.93 a share, from $352 million, or $2.87 a share, a year earlier, when the company had more shares outstanding.

Cigna reported adjusted income of $2.67 a share from operations. Analysts on average expected $2.51, according to Reuters Estimates.

The report is the last among large U.S. health insurers for the first quarter. The companies have generally reported higher or better-than-expected profits, but some of them worried investors because of a higher rate of medical costs eating into premium dollars.

Along those lines, Cigna had mixed results for key medical-cost ratios, CIBC analyst Carl McDonald said. "It looks like a fairly decent quarter to me," McDonald said.

With the focus on the relationship between medical costs and premiums, he said, the market reaction to Cigna's results will depend on what ratio takes investors' attention.

One such gauge, involving health plans for which Cigna takes on full risk, came in better than McDonald projected, while another, which also includes plans that base premiums on the company's previous claim experience, came in worse than he expected.

Revenue rose 6.5% to $4.4 billion. Health-care premiums and fees rose about 14% to $2.7 billion, reflecting membership growth and rate increases.

Membership in Cigna's health plans rose by about 812,000 members, or 9%, to 9.83 million at the end of March from a year earlier and by 441,000 members from the end of 2006. The company forecast membership growth of 5% to 6.5% for 2007.

Cigna's guaranteed cost loss ratio -- which measures medical costs as a percentage of premium dollars -- improved to 84.4% from 86.5% a year earlier.

Cigna had only 98.8 million shares outstanding on average during the quarter, compared with 122.5 million a year earlier.

The company forecast adjusted earnings a share of $10.25 to $10.95 for 2007. Analysts were expecting $10.65.

For the second quarter, the company said it expected profit of $2.45 to $2.70 a share. The analysts' average estimate is $2.62.

The forecasts exclude the impact of any future share repurchases, Cigna said.

Adjusting for a 3-for-1 stock split scheduled for June, the forecast equates to $3.40 to $3.65 for 2007 and 82 cents to 90 cents for the second quarter.