Disability Insurance Company Cigna Earns $294 Million in Second Quarter

Disability Insurance Company Cigna Corp. said Thursday its second-quarter net income fell 32 percent due to a big hit from a discontinued business.

However, the Philadelphia insurer lifted its full-year earnings outlook and said enrollment edged up 2 percent.

Cigna earned $294 million, or $1.06 per share, in the three months that ended June 30. That’s down from the $435 million, or $1.58 per share, in net income last year, when the insurer also saw a gain of 11 cents per share after freezing its pension plan.

Excluding one-time items, Cigna earned $1.38 per share.

Revenue rose 19 percent to $5.35 billion.

Analyst polled by Thomson Reuters forecast a profit of $1.01 per share on $5.26 billion in revenue, on average. Comparing these averages to Cigna’s adjusted net income can be difficult because the insurer includes results from a discontinued business. Many analyst projections do not.

Cigna operates health care, group disability and life segments in the United States. It also sells individual insurance in several countries and operates an expatriate business that provides coverage for people living outside their home countries.

The insurer’s medical enrollment rose 2 percent to 11.3 million compared to last year’s quarter, and it increased slightly compared to the first quarter. Cigna is the fourth-largest commercial health insurer based on enrollment.

Cigna’s biggest competitors – companies that include UnitedHealth Group Inc. and Aetna Inc. - all reported healthy profit increases and adjusted earnings that beat Wall Street expectations for the second quarter.

Cigna also delivered an “across-the-board solid” second-quarter performance, according to a Thursday morning research note from Leerink Swann analyst Jason Gurda.

Insurers have been helped so far in the second quarter by lower utilization of their coverage and big gains because claims leftover from previous quarters came in lower than expected. That was due in part to a mild flu season and swine flu outbreak that largely fizzled.

Cigna recorded a gain totaling $40 million due to those lower-than-expected claims.

The insurer has a broader product portfolio than some of its competitors, so its performance can be affected by factors they don’t face.

It said interest rate movements led to a loss of 37 cents per share in the quarter from its guaranteed minimum income benefits business. That compares to a 40-cent gain from that business in the same quarter last year.

Cigna discontinued that business and its variable annuity death benefits in 2000. It operates them in run-off mode, meaning it seeks no new business. But those segments can hurt the company’s performance when the market turns bad because Cigna’s liabilities toward them increase.

Cigna said the variable annuity death benefits were break-even in the quarter.

Looking ahead, the company expects a full-year profit of between $4.10 and $4.40 per share, better than its prior range of $3.75 to $4.15 per share. Analysts expect $4.10 per share.

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