Healthcare benefits provider CIGNA Corp. (CI) on Thursday reported a 92% surge in third-quarter profit, as favorable performance in the equity markets helped the company report a profit in the Run-off Reinsurance business, which reported a hefty loss last year. Revenues as well as medical membership declined from the previous year. Looking ahead, the company maintained its forecast for consolidated adjusted income from operations in 2009.
The company said third-quarter shareholders' net income increased to $329 million or $1.19 per share from $171 million or $0.62 per share for the same period last year. In the second quarter of 2009, shareholders' net income was $435 million or $1.58 per share.
The latest quarterly results included a $16 million after-tax, or $0.06 per share, income related to the variable annuity products within the company's Run-off Reinsurance segment, whereas in the previous year, the company recorded loss of $133 million after-tax, or $0.47 per share, related to these products.
CIGNA's adjusted income from operations for the third quarter was $311 million, or $1.13 per share. Analysts polled by Thomson Reuters expected the company to report earnings of $1.03 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues for the quarter dropped to $4.517 billion from $4.852 billion in the prior year quarter. Analysts had a consensus revenue estimate of $4.59 billion for the quarter. Second-quarter revenues were $4.49 billion.
Revenue from Premiums and fees declined to $3.985 billion from $4.128 billion. Net investment income slipped to $263 million from $272 million. Mail order pharmacy revenues grew to $316 million from $300 million.
Premiums and Fees from the Healthcare segment dipped to $2.812 billion from $2.991 billion, while earnings from the segment advanced to $200 million from $187 million. This segment includes medical and specialty health care products. Aggregate medical membership declined to 11.10 million from 11.19 million.
The Disability and Life segment, which includes CIGNA's group disability, life, and accident insurance operations, reported premiums and fees of $654 million, up from last year's $627 million. The segment reported earnings of $64 million, down from last year's $70 million.
At International, consisting CIGNA's life, accident and supplemental health insurance and expatriate benefits businesses in certain markets, Premiums and Fees grew to $482 million from $471 million. Earnings at the segment dropped to $38 million from $44 million.
The company reported Run-off reinsurance earnings of $30 million, compared to a loss of $105 million last year. Net realized investment gains totaled $14 million in the quarter, compared to losses of $23 million in the prior year.
In the previous year, the company incurred losses of $72 million after-tax, or $0.25 per share, from the Variable Annuity Death Benefits, or VADBe business. However, due to continued stability in the equity markets, no reserve strengthening was required for the VADBe business in the third quarter of the current fiscal.
For the first three quarters of the fiscal, the company's shareholders' net income increased to $972 million or $3.54 per share from $501 million or $1.78 per share for the same period last year. Revenues declined to $13.778 billion from $14.284 billion in the prior year.
Among others in the industry, Aetna Inc. (AET) said last month that third-quarter net income rose to $326.2 million from $277.3 million in the previous year. On a per share basis, earnings grew to $0.73 from $0.58 in the same quarter of last year. Quarterly revenue, excluding net realized capital gains, increased to $8.70 billion from $7.98 billion.
WellPoint Inc. (WLP), another peer, reported a decline in third-quarter profit that totaled $730.2 million or $1.53 per share, compared to $820.7 million or $1.60 per share in the prior-year quarter, as medical enrollment continues to decline, hurt by recession and rise in unemployment. Total revenues increased 3.1% to $15.4 billion from $14.9 billion in the previous year.
Looking ahead, CIGNA still expects full year 2009 consolidated adjusted income from operations to be in the range of $1.04 billion to $1.10 billion, or $3.80 to $4 per share. Analysts expect the company to report earnings of $3.85 per share for fiscal 2009 with the estimates ranging between $3.70 and $3.95. The guidance assumes that VADBe results will be about break-even for the remaining three months of 2009.
CIGNA currently estimates full year 2009 adjusted income from operations for the Health Care segment to be in the range of $700 million to $750 million, compared to the previous guidance range of $700 million to $760 million. The insurer continues to expect full-year 2009 medical membership to decline by about 5% to 5.5%.
President Barack Obama is pushing for a health care reform bill, which he believes could help ease the pace of healthcare cost increases. However, Credit Suisse believes CIGNA does not stand to benefit from it, due to the company's modest exposure to the individual, small group and Medicaid market segments.
CI closed Wednesday's regular trade at $29.78, up from the previous close of $28.31, on 7.70 million shares.
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