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Cigna 2nd-Quarter Profit Declines On ChargePHILADELPHIA (AP) Health insurer Cigna Corp. on Wednesday reported a 27 percent drop in second-quarter profit after boosting reserves to handle an increase in unfavorable claims related to its reinsurance business.
Investors pummeled the stock in morning trading, pushing it down $2.86, or 5.5 percent, to $48.78. The Philadelphia-based insurer, which also sells disability and life insurance, said net income fell to $198 million, or 68 cents a share, from $273 million, or 78 cents, a year earlier. But Cigna said the quarter included a $56 million after-tax charge, or 19 cents a share, related to unfavorable reinsurance claims from other insurers on their annuity products. Excluding the charge, the company said earnings came to $279 million, or 96 cents a share, compared with $270 million, or 77 cents, a year ago. Revenue rose 7 percent to $4.4 billion. Analysts surveyed by Thomson Financial projected revenue of $4.4 billion and earnings of 88 cents a share for the quarter. Health care claims payable rose by 11 percent to $790 million at the end of June from $710 million on Dec. 31. The company also raised its full-year outlook, with adjusted income now expected at $1.03 billion to $1.1 billion, or $3.55 a share to $3.75 a share. Previously, the company projected earnings of $1 billion to $1.07 billion, or $3.40 a share to $3.65 a share. Its outlook for membership growth is unchanged at 5 percent to 6.5 percent for the year. "Consolidated results for the quarter exceeded our expectations," said H. Edward Hanway, Cignas chairman and chief executive, during a conference call with analysts. "Our prospects are attractive to organically grow our business on a sustained basis." In the quarter, health care profit rose as a result of increased membership and higher rates. Health care earnings rose by 6 percent to $168 million, while premiums and fees were up 11 percent to $2.7 billion. Medical membership rose 8.7 percent to 9,800 year-over-year, but it was down slightly from the first quarter. Paul Newsome, an analyst at A.G. Edwards (NYSE:AGE) , said in a research note that Cignas lean operations, unique products and commitment to consumer-driven care should strengthen business. "The biggest challenge the firm faces in our estimation is using these assets to continue its current membership growth momentum and reducing its consolidated administrative costs," he said. Disability and life insurance earnings rose 6 percent to $68 million, while premiums and fees went up by 10 percent to $580 million. Cignas international business, which includes insuring Americans living abroad, posted a 22 percent increase in profit to $44 million. Premiums and fees rose 17 percent to $436 million. During the quarter, Cigna repurchased about 6.5 million shares for $350 million. Tag CloudExternal InformationAdditional InformationTop job at Countrywide in doubt as buyout plan is blocked...Government Sets New Fuel Economy Standard... McClatchy’s Profit Falters on Ad Sales... A Partridge, a Pear Tree, a Price Tag That Grows... Where Am I?News Main Page - Business - Cigna 2nd-Quarter Profit Declines On Charge |
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