Cigna Corp.'s first-quarter earnings fell 10% amid a bigger impact from charges and other items, but the health insurer's revenue jumped with help from an acquisition and a growing member base.
Earnings were slightly below the level analysts expected in the quarter, although Cigna said it topped its own forecast. The Bloomfield, Conn., company raised its full-year earnings guidance while also raising expectations for membership growth this year.
Results in the recent quarter got some help from the recognition of claims reserve that didn't have to be used in prior periods, analysts noted. This could raise some concern among investors, because earnings could have otherwise missed expectations more sharply, although that concern may be muted by the guidance boost, Wells Fargo analyst Peter Costa said.
Cigna shares—up 11% this year through Wednesday—fell 1.2% in early trading Thursday on the New York Stock Exchange.
The company in January closed on a $3.8 billion acquisition of Medicare-focused insurer HealthSpring Inc., pushing Cigna, which has traditionally focused more on commercial health insurance, further into a market for senior-focused plans. Managed-care firms have been bulking up in this area as baby boomers age and Medicare Advantage plans—the insurers' version of the government program—become more popular.
Cigna said its medical membership including customers in its international business rose 11% to 13.9 million from 12.5 million a year ago. The company now expects to add about 1.2 million members this year, up from its prior forecast for a 900,000 boost.
"Our first-quarter 2012 results exceeded our expectations for earnings and customer growth, reflecting continued effective execution of our strategy with solid contributions from each of our ongoing businesses," Cigna Chief Executive David Cordani said in a release.
The company reported a first-quarter profit of $371 million, or $1.28 a share, down from $413 million, or $1.51 a share, a year earlier. Excluding items such as acquisition and litigation costs, per-share adjusted earnings fell to $1.24 from $1.31. Revenue jumped 25% to $6.79 billion.
Analysts polled by Thomson Reuters had forecast earnings of $1.30 a share on revenue of $6.71 billion.
Looking ahead, Cigna now expects full-year earnings of $5.20 to $5.55 a share, up from its February forecast of $5 to $5.40 a share. The new guidance brackets Wall Street's $5.41 per-share target.
The company noted its forecast reflects, in part, an "expected increase in medical services utilization during 2012." Like other insurers, Cigna has been projecting an increase in patients using health-care services after a long slump caused by the recession.