Tags: Health Insurer | Cigna | Profit | earnings

Health Insurer Cigna Says 2nd-qtr Medical Costs Stay Low

Thursday, 30 Jul 2015 10:22 AM

Health insurer Cigna Corp, which agreed last week to be bought by Anthem Inc for $47 billion, said on Thursday that medical services use was low in the second quarter, helping to keep costs in check and beat Wall Street profit estimates.

Cigna's report of a continued low utilization trend backs up a growing industry view of this closely watched component of insurer profitability. Anthem made similar comments on Wednesday, when it reported better-than-expected quarterly earnings.

Health insurers have benefited from low medical services use during the past five years as the weak economy has kept down doctor visits and hospitalizations.

Overall, the national healthcare reform law, also known as Obamacare, has contributed to increased medical spending as million of people gained health insurance coverage in the past two years. But insurers say medical costs per person are stable and that membership growth has helped increase revenues.

Insurers have also turned to mergers to build scale to help keep costs down and negotiate better deals with doctors and hospitals.

Aetna Inc agreed to buy smaller rival Humana Inc in early July, just weeks before Anthem and Cigna reached a deal.

Cigna said its ratio of medical claims paid as a percentage of premiums taken in, or MCR, was 77.5 percent for its commercial business and 84.4 percent for its government business. It expects medical costs to rise 5 percent to 6 percent in 2015.

Net profit rose to $588 million, or $2.26 per share, for the second quarter, from $573 million, or $2.12 per share, a year earlier.

Excluding items, Cigna earned $2.55 per share, beating the average analyst estimate of $2.31, according to Thomson Reuters I/B/E/S. On Friday when it announced the Anthem deal, Cigna said second-quarter earnings would be at least $2.50 per share.

Cigna manages insurance plans for large companies and sells health plans to individuals on government exchanges created under the U.S. Affordable Care Act. It also manages government Medicare and Medicaid plans.

Premiums and fees in Cigna's commercial and government businesses rose 10 percent in the second quarter, boosted by the addition of 524,000 customers.

Revenue rose about 9 percent to $9.49 billion, just below the average analyst estimate of $9.53 billion.

Cigna shares rose 1.2 percent at $147.19 in light premarket trading.

© 2017 Thomson/Reuters. All rights reserved.

 
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Health insurer Cigna Corp, which agreed last week to be bought by Anthem Inc for $47 billion, said on Thursday that medical services use was low in the second quarter, helping to keep costs in check and beat Wall Street profit estimates.
Health Insurer, Cigna, Profit, earnings
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2015-22-30
Thursday, 30 Jul 2015 10:22 AM
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