By Mrinalika Roy and Bhanvi Satija
(Reuters) -Cigna Corp on Thursday raised its annual earnings forecast after topping quarterly profit estimates as a slow recovery in non-urgent procedures lowers medical expenses, sending the insurer’s shares up about 5%.
Cigna’s robust performance rounded off a strong quarter for health insurers that have seen their fortunes fluctuate through the pandemic, seesawing between higher COVID-related costs and lower expenses owed to deferred elective procedures.
Lower-than-expected medical utilization within the quarter helped bring down Cigna’s medical care ratio (MCR), or the amount spent on medical claims versus the income from premiums, to 80.7% from 84.4% a year earlier.
“Non-COVID costs in the quarter were better than expectations across most service categories, driven by lower levels in inpatient, emergency room care and surgeries and direct COVID costs were also less than projected,” Chief Financial Officer Brian Evanko said.
Cigna’s quarterly MCR beat was the largest among insurers, Evercore ISI analyst Michael Newshel said in a note.
The Bloomfield, Connecticut-based insurer forecast 2022 MCR between 81.5% and 82.5%, compared with its prior forecast of 82% to 83.5%.
Cigna’s health plan customers remained nearly stagnant at 17.8 million compared with the preceding quarter, partly due to weakness in U.S. government-backed Medicare Advantage plans.
Chief Executive Officer David Cordani said the business was running at below target margins, with improvement likely in 2023.
Cigna now expects full-year adjusted earnings of at least $22.90 per share, compared with its previous forecast of $22.60 per share.
“Though guidance raise appears conservative, Cigna continues to rebound in 2022. We expect additional upside looking toward 2023,” Oppenheimer analyst Michael Wiederhorn said.
Excluding special items, Cigna’s income from operations was $6.22 per share, above analysts’ average estimate of $5.48, according to Refinitiv IBES data.
(Reporting by Bhanvi Satija and Mrinalika Roy in Bengaluru; Editing by Vinay Dwivedi)
