Buoyed by commercial business, Cigna reports strong first quarter

Wall Street
Cigna's total revenues reached $10.4 billion in the quarter, an increase of 5% over Q1 2016, the insurer reported Friday.

Cigna enjoyed a strong financial performance in the first quarter, despite the sanctions on its Medicare business and the legal battle over its proposed merger with Anthem.

The insurer reported (PDF) Friday that its adjusted income from operations in the first quarter increased 20% to $719 million, or $2.77 per share. Those results were 13% ahead of Wall Street’s estimate of $2.45 per share, according to a research note from Jefferies.

Total revenues reached $10.4 billion in the quarter, an increase of 5% over Q1 2016. Cigna attributed that to “strong business growth” in its commercial healthcare and global supplemental benefits segments, which was partially offset by expected losses in its seniors business.

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In January 2016, the federal government banned Cigna from selling new Medicare products, citing “substantial failures” in its ability to comply with Part C and Part D regulations. Cigna didn’t participate in the annual enrollment period for 2017 while it fixed the issues cited by regulators, but CEO David Cordani said on an earnings call Friday that the insurer expects to participate in next Medicare open enrollment cycle this fall.

As for Cigna’s plans for the individual market, “we continue to take a measured approach, participating where we can best deliver value and accumulate learnings as that very dynamic market continues to evolve,” Cordani said during the call.

Cordani’s comments echoed what he said during the insurer’s fourth-quarter earnings call, when he indicated that Cigna was still evaluating the extent of its participation in the marketplaces next year. Other large insurers, including Aetna and Humana, have already dropped out of many Affordable Care Act exchange markets in 2018.

Cordani also acknowledged that Anthem asked the Supreme Court to review a lower court’s decision to deny its appeal of a ruling against the two insurers’ proposed deal. He noted that there is an upcoming hearing on Cigna’s petition to exit the merger agreement, adding, “we will update you when there is additional news to share.”

If Cigna is allowed to exit the contract with Anthem, it could be in a position to acquire Humana, analysts have said. Indeed, “depending upon the mix of share repurchase, dividend and M&A, we continue to expect capital deployment capacity of $7-14 billion in 2017,” Cordani said during Friday’s call.

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