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Cigna (CI) Q2 Earnings Beat on Revenue Growth But Shares Fall

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Cigna Corporation’s CI second-quarter 2021 earnings of $5.24 per share beat the Zacks Consensus Estimate by 5.6%. The same was, however, down 9.8% year over year.

Revenues of $43.1 billion rose 9.9% year over year on higher contribution from its segments, namely Evernorth, U.S Medical and International. The top line beat the Zacks Consensus Estimate by 4.4%.

Despite revenue growth, year-over-year earnings declined as the prior-year quarter benefited from lower medical care expenses, thus rendering the comparison uneven. Medical cost ratio (MCR), which measures medical cost as a percent of premium, was 82.2%, up from 68% in the prior-year quarter as more people started utilizing medical services with COVID-19 receding. Higher utilization of medical services increases medical cost for the company and weighs on profitability.

Shares of the company fell 13% at the time of this writing as the company anticipated to take a hit of $2.50 per share from COVID-19, which was 10 times the initial impact of $1.25 as expected earlier. Investors grew skeptical that the Delta variant might weigh on earnings in the second half of the year.

Cigna Corporation Price, Consensus and EPS Surprise

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

Cigna Corporation price-consensus-eps-surprise-chart | Cigna Corporation Quote

The company’s expense ratio, which is measured as the ratio of expense as a percentage of revenues, improved 150 basis points year over year to 6.9%, reflecting a decline in costs.

So far this year, Cigna has added 3.1 million pharmacy customers. Total medical customer increased 279000, driven by net growth in U.S. Commercial, U.S. Government and International Markets. However, on a sequential basis Medical customers declined by 131,000 members.

Strong Segmental Performances

In its Evernorth business, which houses the Express Scripts and primarily includes pharmacy services, revenues rose 14% to $32.6 billion. Higher revenues were owing to growth in retail network and specialty pharmacy services. This upside is also backed by the lower base effect of the last year quarter, when retail script volumes were lower due to the COVID-19 pandemic.

In its U.S. Medical business, which mainly sells health insurance, revenues grew 13% year over year to $10.46 billion. This was owing to customer growth in Medicare Advantage and the Individual business, higher premiums and a favorable net investment income.

Cigna is one of the few US health insurers — another one being UnitedHealth Group Inc. UNH — which is present internationally. Revenues from international operations grew 9% to $1.6 billion whereas operating profit decreased due to higher utilization of medical services.

Leverage Within Comfort Level

Cigna’s debt-to-capitalization was 40.5% on Jun 30, 2021, almost in line with its approximate long-term target of 40%.

Upbeat Guidance

The company expects adjusted revenues of $1.7 billion (up from the prior estimate of a minimum $1.66 billion) and earnings per share of $20.20 (unchanged). The company expects total medical customer growth of at least 3,50,000 (flat). The company expects 2021 MCR to be between 83.0% and 84.0%, compared with its prior forecast of 81.0% to 82.0%.

Cheerful Health Insurers

This reporting cycle was good for insurers across the board, evidenced by an earnings beat for UnitedHealth Group Inc., Anthem Inc. ANTM and Humana Inc. HUM.

Both Anthem and UnitedHealth raised their earnings guidance for 2021 while Humana reiterated the same. This clearly implies that operating conditions of these players are conducive to growth going forward.

Cigna carries a Zacks Rank #3 (Hold), currently. You can see the complete list of today’s Zacks #1 Rank (strong Buy) stocks here.



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UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report

Humana Inc. (HUM) : Free Stock Analysis Report

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