Cigna Corp.’s (CI) fourth-quarter 2013 net operating earnings of $1.39 per share lagged the Zacks Consensus Estimate of $1.48 per share. Earnings were also down 11.5% year over year.
The earnings miss was on account of higher benefits and expenses which outpaced revenue growth.
Including one-time items, net income came in at $1.29 per share, down 9% year over year.
Cigna’s consolidated revenues came in at $8.2 billion, up 7.0% year over year and considerably higher than the Zacks Consensus Estimate of $7.9 billion. The improvement in revenues resulted from a 9% increase in premiums and fees in Global Health Care, 27% in Global Supplemental Benefits and 10% in Group Disability and Life.
Total benefits and expenses at Cigna increased 9.0% year over year to $7.6 billion.
Full-Year Highlights
For full-year 2013, operating income came in at $6.79 per share lagging the Zacks Consensus Estimate of $6.87 per share. The figure was, however, up 13.4% year over year.
Full-year revenues of $32.4 billion compared favorably with the Zacks Consensus Estimate of $31.4 billion and also increased 11.2% year over year.
Quarterly Review by Segment
Premiums and fees from Cigna's Global Health Care segment increased 6.0% year over year to $5.7 billion, owing to customer growth, specialty contributions and renewal rate increases.
Operating earnings decreased 20.0% to $318 million led by high medical costs in Medicare Advantage business and claim variability in the company’s Guaranteed Cost business.
Premiums and fees from the Global Supplemental Benefits segment climbed 12% year over year to $662 million, driven by acquisition of Great American Supplemental Benefits, the Cigna-Finansbank joint venture in Turkey and attractive customer retention and business growth, primarily in South Korea.
Operating income increased 5.3% year over year to $40.0 million led by strong customer retention and business growth, partly offset by increased strategic investment costs.
Premiums and fees from the Global Disability and Life segment climbed 8.6% year over year to $873 million, due to growth in both disability and life businesses. Operating earnings increased 17.9% to $66 million, due to improved life claims experience and lower operating expenses, partially offset by unfavorable disability claims experience
Share Repurchase Update
In 2013, Cigna spent $1.0 billion on share buyback.
Financial Update
Cigna ended the quarter with cash and short-term investments of approximately $760 million compared with $700 million at Dec 31, 2012.
Shareholders’ equity increased to $10.6 billion as of Dec 31, 2013 compared with $9.8 billion as of Dec 31, 2012.
2014 Guidance
For 2014, Cigna expects earnings in the range of $6.80 to $7.20 per share. Consolidated earnings from operations is expected to be in the range of $1.90 billion to $2.0 billion.
Segment-wise operating income from Global Health Care is projected between $1.575 and $1.635 billion, Global Supplemental Benefits between $195 million and $215 million and Group Disability and Life in the range of $305 to $325 million.
Global medical customer growth is estimated at 1% to 2%.
Cigna has a Zacks Rank #2 (Buy).
Other Stocks
Other health insurers who have already reported their quarterly earnings results include UnitedHealth Group Inc. (UNH) and WellPoint Inc. (WLP). Both the companies beat the respective Zacks Consensus Estimate by a penny. Aetna Inc. (AET) which reported earnings yesterday, on the other hand, missed the estimate by a penny.
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