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Cigna (CI) Q3 Earnings Beat on Higher Enrollment, Guides Up

Cigna Corp. CI reported third-quarter 2017 earnings per share of $2.83, beating the Zacks Consensus Estimate of $2.36. Earnings also grew 46% year over year.

Better-than-expected earnings were primarily driven by broad-based growth across its business segments.

Other Details

Cigna posted revenues of $10.27 billion, which surpassed the Zacks Consensus Estimate of $10.13 billion. Revenues grew 4.7% year over year.

Total benefits and expenses of $9.6 billion increased 5% year over year.
Operating expense ratio of 21.1% improved 100 basis points year over year.

Premium were up 5.6% year over year to $8 billion, while fees increased 4.7% to $1.14 billion.

The company medical enrollment grew to 15.82 million from 15.18 million in the year-ago quarter, driven by growth in its Commercial market segments.

Cigna Corporation Price, Consensus and EPS Surprise

Strong Segment Performance

Global Health Care: Premiums and fees from the segment increased 6% year over year to $7.2 billion. The improvement was driven by customer growth and specialty contributions in the Commercial employer group. However, the upside was partially offset by reductions in Government customers.

Adjusted operating earnings were $575 million, up 38.2% year over year on strong medical and specialty results, and continued effective medical cost.

Global Supplemental Benefits: Premiums and fees from this segment climbed 12.5% year over year to $937 million on the back of continued business growth.

Adjusted operating income increased 34.6% year over year to $109 million, reflecting business growth, favorable claims experience, particularly in South Korea, and effective operating expense management.

Global Disability and Life: Premiums and fees decreased 0.9% year over year to $1.02 billion.

The segment reported adjusted operating income of $73 million, up 37.8% year over year, reflecting a favorable claims experience in life business.

Financial Position

Cash and cash equivalents were $3.66 billion at Sep 30, 2017, up from $3.19 billion at year-end 2016.

Cigna’s long-term debt of $5.21 billion as of Sep 30, 2017 increased from $4.76 billion as of Dec 31, 2016.

Year to date, the company has repurchased 13.2 million shares of common stock for approximately $2.3 billion.

2017 Guidance Increase

Cigna pulled up its 2017 earnings guidance after strong results. It expects adjusted income from operations of $2.60 billion to $2.65 billion (previous estimate was $2.50 billion to $2.58 billion), or $10.20 to $10.40 per share ($9.75-$10.05 previously).

The company expects a revenue growth rate of approximately 4% and global medical customer growth of nearly 0.65 million.

Our Take

Cigna’s results reflect broad-based growth across its business segments. The company is poised for long-term growth on the back of its robust Global Supplemental business, growing government business and increasing membership. A strong capital position and resumption of share buyback are the other positives. The company has also been successful in maintaining its medical cost ratio at low levels.

Zacks Rank and Performance of Other Insurers

Currently, Cigna carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Among the other firms in the health care sector that have reported their second-quarter earnings so far, the bottom line at Aetna Inc. AET, Humana Inc. HUM and UnitedHealth Group Inc. UNH beat their respective Zacks Consensus Estimate.

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