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Cigna (CI) Earnings Beat in Q2, Guidance Raised, Shares Gain

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Cigna Corp. (CI - Free Report) reported second-quarter 2017 operating net earnings of $2.91 per share, comfortably beating the Zacks Consensus Estimate of $2.48 and increasing 47% year over year.

The earnings beat reflected strong contribution from each of the company’s business segments.

Strong earnings performance led the shares to gain 0.4% in pre-market trading.

Other Details

Cigna posted revenues of $10.3 billion, which surpassed the Zacks Consensus Estimate of $9.98 billion.  Revenues grew 4% year over year.
Total benefits and expenses of $9.2 billion remained almost unchanged year over year.

Operating expense ratio of 19.9% improved 100 basis points year over year.
The company’s medical enrollment grew to 15.7 million from 15.1 million in the year-ago quarter, driven by organic growth in all of its commercial market segments.

Quarterly Review by Segment

Global Health Care: Premiums and fees from the segment increased 3% year over year to $7.18 billion. The improvement was driven by customer growth and specialty contributions in the company’sCommercial employer group. However, the upside was partially offset by reductions in Government customers.

Adjusted operating earnings were $591 million, up 21.6% year over year on strong medical and specialty results, and continued effective medical cost.

Global Supplemental Benefits: Premiums and fees from this segment climbed 14% year over year to $914 million on the back of continued business growth.

Adjusted operating income increased 26.5% year over year to $105 million, reflecting business growth and strong operating expense management.

Global Disability and Life: Premiums and fees also increased 1% year over year to $1.02 billion, primarily driven by consistent business growth across disability and life products.

The segment reported adjusted operating income of $83 million against a loss of $12 million in the year-ago quarter, reflecting continued stable life results and further improvement in disability performance.

Financial Position

Cash and marketable investments were $2.2 billion at Jun 30, 2017 and $2.8 billion at year-end 2016.

Cigna’s long-term debt of $4.6 billion as of Jun 30, 2017 declined from $4.8 billion as of Dec 31, 2016.

Year to date, the company has repurchased 7.7 million shares of common stock for approximately $1.25 billion.

Cigna Corporation Price, Consensus and EPS Surprise

Cigna Corporation Price, Consensus and EPS Surprise | Cigna Corporation Quote

2017 Guidance

Cigna pulled up its 2017 earnings guidance after strong results. It expects adjusted income from operations between $2.50 billion to $2.58 billion (previous estimate was $2.41 billion to $2.53 billion), or $9.75 to $10.05 per share ($9.25–$9.75).

It, however, maintained the guidance for revenue growth rate at 3% to 4%, and the global medical customer growth range of 0.5 million to 0.6 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. , Humana Inc. (HUM - Free Report) and UnitedHealth Group Inc. (UNH - Free Report) beat their respective Zacks Consensus Estimate.

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