Cigna Corp., the third biggest health insurer by market value, raised its forecast for 2013 profit and said fourth-quarter earnings rose 49%, boosted by rising enrollment in its Medicare plans for seniors.
Net income rose to $406 million, or $1.41 a share, from $273 million, or 98 cents, a year earlier, the Bloomfield, Connecticut-based company said in a statement. Excluding one- time items, earnings of $1.57 topped the $1.49 estimate of 16 analysts tracked by Bloomberg.
Chief Executive Officer David Cordani spent $3.8 billion last year for Healthspring Inc., expanding Cigna’s presence in the growing market for government-backed Medicare plans. Like other insurers, Cigna also gained from lower-than-expected medical costs last year, defying predictions that more Americans would seek care as the economy improved.
“For the most part, the numbers have come in better than expected,” says David Windley, a Jefferies & Co. analyst in Nashville, Tennessee. “Utilization was lower than many people thought.”
Cigna said it expects profit of $5.85 to $6.30 a share this year, up from its November forecast of $5.80 to $6.25 a share. The company fell 1.2% in New York trading to $59.67 yesterday. Its shares have gained 38% in the 12 months through yesterday.
Revenue rose to $7.62 billion, from $5.43 billion a year earlier.
The insurer said Feb. 4 that it had reached a $2.2 billion deal to shift its death-benefits liabilities to Warren Buffett’s Berkshire Hathaway Inc. Cigna had been trying for more than a decade to exit the business, whose volatile costs had become a drag on its stock price, says Carl McDonald, a Citigroup analyst in New York, in a Feb. 4 note to clients.
Under the deal, Berkshire will assume as much as $4 billion in liabilities.
UnitedHealth Group Inc., based in Minnetonka, Minnesota, is the biggest health insurer by market value.
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