August 5, 2021
(Reuters) – Health insurer Cigna Corp doubled its estimate of the hit to full-year earnings from the pandemic as it reported a better-than-expected second-quarter profit and maintained its annual adjusted earnings forecast.
The company said on Thursday it now expects full-year earnings to take a hit of about $2.50 per share due to COVID-19, compared with its previous forecast of about $1.25 per share.
Cigna’s shares were down 2.8% at $224.95 in premarket trading.
The company, which also has a pharmacy benefits management business, said its medical costs in the reported quarter grew as demand for non-COVID healthcare services normalized.
Health insurers have largely benefited from a decline in patient use of discretionary healthcare services due to the ongoing pandemic, but demand for these services is recovering as more Americans get vaccinated.
Rivals Anthem Inc and Centene Corp also recently warned about a potential increase in COVID-19 costs in the second half of the year due to the impact of the Delta variant of the coronavirus.
Cigna’s medical care ratio, the amount spent on medical claims versus the income from premiums, worsened to 85.4% in the second quarter, from 70.5% a year earlier, compared with an estimate of 81.04%, according to five analysts polled by Refinitiv.
A lower medical expense ratio is better for health insurers as it signals a tight rein on medical costs.
The company now expects medical care ratio for the full year to be between 83.0% and 84.0%, compared with its prior forecast of 81.0% to 82.0%.
Cigna stuck to its full-year adjusted income from operations target of at least $20.20 per share.
On an adjusted basis, the company earned $5.24 per share in the quarter ended June 30, beating estimates of $4.96 per share.
(Reporting by Manojna Maddipatla in Bengaluru; Editing by Shounak Dasgupta)