Cigna profit misses Wall Street target as earnings slip in segment

PHILADELPHIA, Thu May 3, 2012 – Insurer Cigna Corp. posted a lower-than-expected first-quarter profit on Thursday, as earnings slipped in its segment offering disability and life coverage policies.

Cigna is the latest health insurer to miss Wall Street’s earnings target in the period, following Aetna Inc., Coventry Health Care and Humana Inc.

Cigna did raise its full-year earnings forecast.

Net income fell to $371 million, or $1.28 per share, from $413 million, or $1.51 per share, a year earlier.

Excluding special items, Cigna’s earnings of $1.28 per share fell 2 cents below the analysts’ average estimate, according to Thomson Reuters I/B/E/S.

Revenue jumped 25 percent to $6.79 billion, helped by the acquisition of Medicare specialist HealthSpring.

Profit in the main healthcare segment rose 6.5 percent to $262 million, helped by rising membership in its plans.

But earnings in its disability and life segment fell 16 percent to $65 million. The company cited strategic investments in its disability management programs as a factor pushing down profit.

Cigna forecast 2012 earnings of $5.20 to $5.55 per share. It previously projected $5.00 to $5.40. Analysts have been looking for $5.41.

Cigna to buy Medicare co-insurer HealthSpring for $3.8 billion

BLOOMFIELD, Conn. ― Health insurer Cigna Corp. will buy HealthSpring Inc. for about $3.8 billion to jump-start its business selling Medicare plans for the elderly.

The move represents a significant diversification for Cigna, which has largely focused its U.S. health plans on businesses. The company said it would issue new equity to cover about 20 percent of the purchase price, with the rest funded by additional debt and cash.

Cigna plans to buy HealthSpring for $55 a share, a 37 percent premium over the closing price on Friday, the companies said in a statement on Monday.

“We view it as both a growth opportunity as well as a great marketplace to further differentiate,” Cigna Chief Executive Officer David Cordani told reporters on a conference call.

Asked whether the deal would face regulatory hurdles, Cordani said it was a “segment expansion” into an area where Cigna is not a large player and therefore should be manageable. The companies plan to close the transaction in the first half of 2012.

“It’s not a scale-based consolidation,” Cordani said. “We’re obviously aware of the environment around scale-based consolidation.”

Cigna expects the deal to add to its earnings per share in the first full year of operations. Separately, the insurer raised its forecast for 2011 adjusted earnings to a range of $5.05 to $5.30 per share, from a previous view of $4.95 to $5.25.

HealthSpring shares jumped 33 percent to $53.46 in premarket trading, while Cigna rose 2.9 percent to $46.