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Cigna's Q4 profits up 49 percent, aided by HealthSpring acquisition


By: 
Chris Anderson

Cigna Corp. today reported its 2012 fourth quarter profits jumped 49 percent compared to 2011, fueled, in part, by its late January 2012 acquisition of Medicare Advantage and Medicare Part D insurer HealthSpring.

Adjusted income for the fourth quarter of 2012 was $452 million, or $1.57 per share, compared to $293 million, or $1.05 per share, for the fourth quarter of 2011. Full year earnings were $1.73 billion, or $5.99 per share, compared with $1.36 billion, or $4.96 per share in 2011, representing full year earning growth of more than 21 percent.

The company fourth quarter earnings exceeded the estimate of analysts polled by both Bloomberg and Thomson Reuters, both of which anticipated earnings of less than $1.50 per share.

“2012 was another strong year for Cigna. We exceeded our growth and earnings expectations driven primarily by the strength of our global healthcare businesses,” said David Cordani, Cigna CEO in an earnings conference call.

For the year, medical membership grew by approximately 1.4 million members to 14 million. More than a million new members were a result of organic growth of its existing business, while more than 300,000 Medicare Advantage members were added via the company’s $3.8 billion acquisition of HealthSpring.

“Our HealthSpring acquisition is a clear example of how we are effectively managing capital to invest in our business to create sustainable customer and shareholder value,” Cordani added.

As a result of the strong performance, Cigna raised it earnings guidance for 2013 by 5 cents to between $5.80 to $6.25 a share.

As other large insurers have noted in their 2012 earnings calls, medical cost trend remained low in 2012 coming in at 5.5 percent. Cigna anticipates a slight acceleration of medical costs in 2013 in the 6 percent to 7 percent range, company officials noted.

That expected growth in medical costs may provide the company with some wiggle room to hit its earning target for 2013, according to an investor note from Los Angeles-based Wedbush Securities analyst Sarah James, who noted that surveys have shown “continued low utilization” for the coming year.

Investors reacted positively to the company performance, bumping the stock up more than 1.5 percent to $60.60 per share in morning trading, even as the Dow and NASDAQ indices were trading down nearly 1 percent.

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