Insurer Cigna’s 2nd-quarter profit falls 32 percent on impact from discontinued business

Cigna 2Q profit falls 32 pct; outlook increases

INDIANAPOLIS — A big hit from a discontinued business helped drop net income 32 percent for managed care company Cigna Corp.

However, the Philadelphia insurer lifted its full-year earnings outlook Thursday after seeing sizeable gains in business it still sells, and its stock rose briskly.

Cigna is the last of the large health insurers to report second-quarter earnings Thursday. Competitors like UnitedHealth Group Inc. and Aetna Inc. reported healthy profit increases that beat Wall Street expectations.

Analysts applauded Cigna’s performance too, but 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.

Cigna discontinued that segment and its variable annuity death benefits in 2000 and seeks no new business for them. But they still can hurt Cigna’s performance when the market turns bad and its liabilities toward them increase.

Overall, 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.

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

Revenue rose 19 percent to $5.35 billion.

Analyst polled by Thomson Reuters forecast, on average, earnings of $1.01 per share on $5.26 billion in revenue. Comparing that 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 U.S. It also sells individual insurance in several countries and runs an expatriate business that provides coverage for people living outside their home countries.

Its medical enrollment rose 2 percent year over year to 11.3 million.

Adjusted income for Cigna’s biggest segment, health care, soared 40 percent to $247 million in the quarter. Income from its international business rose only slightly to $64 million, but CEO David M. Cordani continued to tout it as an important source of future growth.

“We see the global economy fast becoming borderless and … we have a terrific and established foothold in this rapidly growing marketplace,” he told analysts during a conference call.

Insurers were helped in the 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 gains totaling $40 million due to those lower-than-expected claims.

Company officials also said they saw lower medical costs in the first half of the year due to a greater percentage of high-deductible insurance plans. These typically generate higher claim totals later in the year after customers pay deductibles and more coverage kicks in.

Looking ahead, Cigna expects full-year earnings of between $4.10 and $4.40 per share, better than its previous range of $3.75 to $4.15. Analysts expect $4.10 per share.

The company’s stock rose 4 percent, or $1.30, to $33.45 in late morning trading Thursday.

AP Business Writer Damian Troise in New York contributed to this story.