Cigna's HealthSpring Acquisition Helps Profit Rise

Health insurer Cigna Corp. reported a higher-than-expected fourth-quarter profit on Thursday, helped by the acquisition of Medicare provider HealthSpring, and raised its outlook for 2013.

Feb 7 Health insurer Cigna Corp. reported a higher-than-expected fourth-quarter profit on Thursday, helped by the acquisition of Medicare provider HealthSpring, and raised its outlook for 2013.

Cigna raised its 2013 profit outlook by 5 cents per share, saying it now expects to earn $5.85 per share to $6.30 per share, compared with a November forecast of $5.80 to $6.25.

Cigna said fourth-quarter net income rose to $406 million, or $1.41 per share, from $273 million, or 98 cents per share, a year earlier. Profit was helped by favorable medical costs, revenue growth and operating cost controls.

Excluding items, the company reported a profit of $1.57 per share. Analysts on average had expected $1.48, according to Thomson Reuters I/B/E/S.

The items included gains in businesses that Cigna has exited but remain on its books, and the costs of litigation.

Premiums and fees rose 48 percent to $6.8 billion, primarily due to its 2012 purchase of HealthSpring, a specialized Medicare provider, as well as organic growth and rate increases. Total revenue was $7.62 billion, up from $5.43 billion a year earlier.

Customers are continuing to shift to business in which Cigna provides administrative services and employers assume the insurance risk, which has helped fees grow, Cigna said.

Cigna provides health insurance to companies both in the U.S. and overseas, much of which involves the benefits administration business, and offers Medicare and Medicaid plans. It also sells insurance such as life, disability and accident.

Health insurers are facing a dramatic industry shift in 2013 and 2014 as the Affordable Care Act brings reform to their industry. In October, insurers will start offering healthcare policies to individuals and small businesses through online exchanges.

Laws governing when employers must offer insurance to employees will kick in, and insurers say that they may lose some of their employer business to these exchanges over time. Many are strengthening their Medicare and Medicaid businesses through acquisitions like that of HealthSpring as a result.

Earlier this week, Cigna said it had struck a reinsurance deal with Berkshire Hathaway Inc that will take some of the volatility from its net earnings by removing gains and losses related to two closed annuity reinsurance businesses. It will take a $500 million after-tax charge in the first quarter.