PHILADELPHIA - Health insurer Cigna Corp. on Wednesday said fourth-quarter profit rose 13 percent as double-digit gains in overseas business as well as group disability and life helped to offset a slight decline in health care earnings.
The company also raised its 2008 earnings in anticipation of strong growth in its international and group businesses. Shares of Cigna rose 97 cents, or 2 percent, to $48.78.
Cigna reported a net income of $263 million, or 93 cents per share, compared with $232 million, or 76 cents per share, a year ago. Excluding investments and special items, adjusted profit totaled 98 cents per share in the latest period.
Revenue climbed to $4.46 billion from $4.21 billion a year earlier, primarily due to higher premiums and fees from specialty insurance and Medicare Part D.
Profit matched the consensus estimate of analysts polled by Thomson Financial, who expected earnings of 98 cents per share on revenue of $4.44 billion.
For fiscal 2007, adjusted earnings came to $1.14 billion, or $3.96 per share — a penny shy of analysts' forecasts. Revenue rose 6.5 percent to $17.6 billion.
"The upside was driven entirely by the non-health care segments," Matt Perry, senior analyst at Wachovia Capital Markets, wrote in his research report.
He noted it's been a pattern at Cigna over the past several quarters.
Cigna's core health care business, which accounts for more than half of revenue, posted a 3.4 percent decline in adjusted earnings to $170 million. Premiums and fees rose 3 percent.
Medical membership rose by 8 percent in the quarter to 10.17 million from a year ago, but it was down from 10.22 million in the third quarter.
Earnings from the rest of Cigna's operations collectively pulled in net adjusted profits of $107 million, up by 19 percent from the prior year. They were led by group disability and life insurance, which had a 24 percent increase in profits while international posted a 32 percent gain.
Looking ahead, the company raised its fiscal 2008 adjusted income to between $1.165 billion and $1.225 billion, or $4.05 to $4.25 per share. Health care earnings are expected to come in between $740 million and $780 million.
"We expect good earnings and revenue growth in group and international business," Ed Hanway, Cigna's chief executive, said in a conference call with analysts.
Cigna also said 2008 medical membership is expected to grow by 2 percent to 5 percent, excluding membership growth related to the pending acquisition of Great-West Healthcare.
Wall Street is forecasting higher 2008 profit of $4.27 per share on revenue of $18.8 billion.
Perry said Cigna's higher forecast for 2008 is entirely due to growth in its non-health care businesses. He cut his 2008 earnings estimate, saying "without meaningful size in either Medicare or Medicaid, we don't believe Cigna can generate much upside in its health care business in 2008."
Earlier this week, rival Humana Inc. said fourth-quarter earnings rose 57 percent due to a growing Medicare Advantage business, lower tax rate and the sale of a venture capital investment.
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