Cigna Q4 Earnings Beat on Higher Revenues, Guides for 2016
Cigna Corp. CI reported fourth-quarter 2015 operating net earnings of $1.87 per share, comfortably beating the Zacks Consensus Estimate of $1.78. Earnings were up 3.9% year over year. The improvement was backed by revenue growth in the reported period.
Cigna reported revenues of $9.5 billion, in line with the Zacks Consensus Estimate and up 6.7% year over year. The improvement was backed by higher contribution from its segments, namely Global Health Care, Global Supplemental Benefits and Group Disability and Life.
Cigna's global medical customers were 15 million, up from 14.5 million members in the year-ago quarter.
Premiums of $7.5 billion increased 8% year over year. All the segments of the company registered premium growth.
Quarterly Review by Segment
Premiums and fees from the Global Health Care segment increased 7.5% year over year to $6.7 billion. Operating earnings were $394 million, down 0.8% year over year. Cigna’s medical customer base grew 4% in fourth quarter of 2015 to a total of 15 million on the back of organic growth in Middle Market, International, Select, and Medicare lines of business as well as the impact of the acquisition of Qualcare Alliance Networks.
Premiums and fees from Cigna's Global Supplemental Benefits climbed 6.9% year over year to $776 million on customer growth and strong retention, but were partially offset by adverse foreign currency movements. Operating income increased 50% year over year to $54 million backed by a favorable claims experience in Korea and business growth.
The Global Disability and Life segment’s premiums and fees also increased 8.5% year over year to $998 million. Operating earnings decreased 2.4% year over year to $83 million.
Financial Update
Cash and marketable securities were $1.4 billion at Dec 31, 2015, up from $400 million at Dec 31, 2014.
Shareholders’ equity increased 12.9% year over year to $12 billion as of Dec 31, 2015.
Cigna spent $685 million on repurchasing 5.5 million shares in 2015. Given the pending combination with Anthem, it is unlikely that the company will make further share repurchases in 2016.
Cigna issued its 2016 earnings guidance. It expects income from operations in the high single-digit range and earnings per share of $8.85 to $9.25. The company projects mid single-digit growth in revenues and global medical customers to grow in low single digits.
Our Take
Cigna’s reported-quarter results demonstrate its continued operational strength. The company has delivered positive surprises in 13 out of the past 14 quarters. Going forward, we expect the company to continue posting favorable results on solid revenue growth in government business as well as show disciplined expense management and effective medical cost management. Its strong balance sheet should also support its results.
Zacks Rank and Performance of Other Insurers
Cigna carries a Zacks Rank # 3 (Hold). Other players in the industry like UnitedHealth Group Inc. UNH and Aetna Inc. AET posted positive earnings surprises by beating their respective Zacks Consensus Estimate in the fourth quarter. Yet another player, Anthem Inc. ANTM missed on earnings.
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