Healthcare benefits provider Cigna Corp. (CI) Thursday reported a profit for the fourth quarter, compared to a net loss last year, as stability in the equity markets led to its Run-off Reinsurance business turning to a profit versus a hefty loss in the prior year.
The company also reaffirmed its forecast for consolidated adjusted income from operations in 2010.
For the fourth quarter, the Philadelphia, Pennsylvania-based company reported shareholders' net income of $330 million, or $1.19 per share for the fourth quarter of 2009, compared to a shareholders' net loss of $209 million, or $0.77 per share, for the same period last year.
Results of the latest quarter included income of $60 million after-tax, or $0.22 per share related to the GMIB business, primarily related to favorable interest rate movements. In the previous year, results included losses of $408 million after-tax, or $1.51 per share, related to the GMIB and Variable Annuity Death Benefits, or VADBe, businesses.
Cigna's adjusted income from operations for the fourth quarter of 2009 surged to $285 million, or $1.03 per share from $132 million, or $0.48 per share, for the same period last year. Fourth quarter 2008 results included losses of $192 million after-tax, or $0.71 per share, from the VADBe business.
Recession had hit Cigna hard, as commercial insurance declined with employers implementing job cuts and other cost control measures. Also, some of its businesses suffered due to unfavorable equity market and interest rate movements. However, the situation started to improve in the third quarter.
Cigna noted today that due to continued stability in the equity markets, no reserve strengthening was required for the VADBe business in the fourth quarter of 2009.
On average, 16 analysts polled by Thomson Reuters expected the company to earn $0.96 per share for the quarter. Analysts' estimates typically exclude special items.
The company operates in five business segments: HealthCare; Disability and Life; International; Run-off Reinsurance, and Other Operations. Healthcare earnings for the quarter were flat with last year at $182 million, while earnings from Disability and Life edged up to $64 million from $62 million last year. International earnings rose to $39 million from last year's $38 million. Run-off Reinsurance earned $69 million in the just concluded period, compared to a loss of $394 million last year. Other Operations earned $23 million, flat with last year.
Total revenues dropped to $4.636 billion from $4.817 billion in the prior year. Analysts had estimated revenues for the quarter to be $4.60 billion.
Revenue from Premiums and fees slipped to $3.992 billion from $4.056 billion in the prior year. Net investment income grew to $262 million from last year's $261 million. Mail order pharmacy revenues grew to $338 million from $322 million in the prior year.
For the 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. Total revenues for the quarter dropped to $4.517 billion from $4.852 billion in the same quarter prior year.
In Healthcare, aggregate medical membership for the fourth quarter was 11,040 thousand, compared to 11,679 thousand last year. Segment margin slipped to 6% from 6.3% in the previous year.
In Disability and Life, segment margin grew to 9% from 8.5%, and in International, segment margin dropped to 7.2% from 9.3%.
For full year 2009, adjusted income from operations increased to $1.1 billion, or $3.98 per share from $946 million, or $3.39 per share in 2008. In the prior year, adjusted income from operations included losses of $267 million after-tax, or $0.96 per share, from the VADBe business. Full-year revenues rose to $18.414 billion from $19.101 billion in 2008. Analysts expected full year earnings of $3.91 per share on revenues of $18.40 billion.
According to David Cordani, who last month became Chief Executive Officer of Cigna, "In 2009, each of our ongoing operations delivered solid earnings in a challenging economic and competitive environment. We continue to deliver strong service and clinical results while driving ongoing efficiency gains."
Among peers, UnitedHealth Group Inc. (UNH) last month posted higher profit for the fourth quarter, reflecting strong performance from its health services businesses, and public and senior health benefits programs. The company's fourth-quarter net income grew to $944 million or $0.81 per share from $726 million or $0.60 per share in the year-ago quarter. Total revenues for the recent quarter advanced to $21.8 billion from the previous year's $20.5 billion.
WellPoint Inc. (WLP), another peer, last month reported a surge in fourth-quarter profit, helped by a gain from the sale of its NextRx pharmacy benefit management subsidiaries to Express Scripts, Inc. (ESRX). The company's net income for the fourth quarter jumped to $2.742 billion or $5.95 per share from $331.4 million or $0.65 per share reported for the same quarter last year. Total operating revenue slipped to $15.057 billion from last year's $15.426 billion, mainly due to lower fully insured enrollment in 2009.
Aetna Inc. (AET) is slated to announce fourth-quarter results Friday. Wall Street looks for earnings of $0.42 per share on revenues of $8.65 billion. Aetna recently said that it expects to incur an after-tax charge of about $60 million to $65 million in the fourth quarter, on previously announced job cuts and real estate consolidation.
Looking ahead, Cigna continues to estimate full year 2010 consolidated adjusted income from operations to be in the range of $1.05 billion to $1.15 billion, or $3.75 per share to $4.15 per share. This outlook includes an assumption that VADBe results will be nearly break-even for full-year 2010. Analysts expect 2010 earnings in the range of $3.90 per share to $4.17 per share with a consensus of $4.04 per share.
Further, the company now expects full year 2010 medical membership outlook in a range of -1% to +2%, reflecting the growth of about 80,000-90,000 members in its Individual Private Fee for Services business.
CI closed Wednesday's regular trade at $34.76, down $0.48 or 1.36%, on 4.01 million shares. For the past year, the stock traded in the range of $12.68-$39.26.
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