CIGNA Corp.’s (CI) first quarter 2011 core earnings of $1.37 per share outpaced the Zacks Consensus Estimate of $1.09 and also exceeded earnings of $1.01 per share recorded in the prior-year quarter. Better-than-expected results stemmed from strong earnings from across the board. Higher earnings per share (EPS) in the reported quarter also ensued from a lower number of shares over the prior year.
CIGNA, the fourth-largest commercial health insurer, reported total revenue of $5.4 billion, beating the Zacks Consensus Estimate of $5.2 billion. Revenues also upped 3.8% from $5.2 billion in the prior-year quarter, driven by higher premium and fees income, coupled with higher net investment income and net realized investment gains, as against net realized investment losses last year.
Consolidated premiums and fees spiked 4.4% to $4.7 billion, led by an increase in premiums from International as well as Life and Disability segments. Net investment income climbed 4.9% to $279 million primarily due to higher invested assets and was partially offset by lower yields.
SegmentResults
Premiums and fees in the Health Care segment remained almost unchanged at $3.3 billion relative to the prior-year quarter. There was a net medical membership growth of 69,000, which included a higher mix of commercial and Medicare related risk businesses. Operating earnings were up 47% to $246 million.
Premiums and fees in the Disability and Life segment increased modestly by 4.1% year over year to $688 million, reflecting an increase in premiums from disability business. Operating earnings from the segment were $77 million, up 10%.
Premiums and fees in the International segment surged 32% year over year to $698 million, mainly attributable to new sales growth in the Life segment, supplemental health insurance and membership growth in the expatriate employee benefits business. CIGNA’s International business growth augurs well, and we view it as a catalyst for future growth.
CIGNA ended the quarter with $790 million in cash, down from $810 million at the end of 2010. Book value per share scaled up 24% year over year to $25.95.
2011 Outlook
Given solid results and favorable operating environment, management revised its earnings guidance provided in the fourth quarter of 2010. It expects adjusted income from operations in the range of $1.3 to $1.4 billion, up from the earlier forecast of $1.2 to $1.3 billion. Consequently, EPS guidance has also been increased to $4.65–$5.00 range from $4.30–$4.70 range provided earlier.
Philadelphia-based CIGNA competes with UnitedHealth Corp. (UNH), Wellpoint Inc. (WLP), Aetna Inc. (AET).
Going forward, we expect CIGNA to keep up momentum as it is relatively safe with respect to exposure to minimum medical loss ratio regulations, unreasonable rate reviews and health insurance exchanges. The recently completed Vanbreda acquisitions should accelerate 2012 international earnings growth. The company has also shown operating momentum and gained commercial risk membership for five consecutive quarters.
CIGNA carries a Zacks Rank # 3, which translates into a Hold rating over the short term. Also, over the longer term (6+ months), we rate the shares Neutral.
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