Shares of Cigna (NYSE:CI) ticked lower on Thursday after the health insurer reported a 37% decline in fourth-quarter profit on acquisition-related charges and forecast weaker-than-expected earnings and more medical claims in 2012.
Cigna and its rivals in the health insurance industry have benefited over the last few years on lower medical claims, as the uncertain economy has kept patients out of doctor’s offices to save on costs. However, the company says it expects that number to rise this year as the economic improves.
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Cigna earned $290 million, or $1.04 a share, in the fourth quarter, down from a year-earlier $461 million, or $1.69, on costs related to the HealthSpring buy.
The news pushed Cigna's shares 6% lower Thursday morning.
The acquisition opened Cigna’s portfolio to the seniors and Medicare market, which is on track to expand as Baby Boomers near retirement. With HealthSpring, Cigna added some 365,000 Medicare Advantage customers and a large stand-alone Medicare prescription drug business with about 650,000 subscribers.
Excluding one-time items, the health insurer earned $1.11, below average analyst estimates of $1.19 in a Thomson Reuters poll. Revenue for the three months ended Dec. 31 was $5.46 billion, up slightly from $4.43 billion a year ago, missing the Street’s view of $5.51 billion.
The gains were led by higher premiums and fees in both its Health Care and international business segments, and a slight rise in membership across all units but pharmacy.
In a statement, CEO David Cordani said Cigna is confident “2012 will be a significant year” for the company.
But the Bloomfield, Conn.-based company predicted a fiscal 2012 profit in the range of $5 to $5.40 a share, which is below average estimates of $5.67.
The company said the outlook reflects an expected increase in medical services usage, which ultimately means higher claims and bills.