Cigna 3Q profit falls 6.7 percent on costs

[October 29, 2010]  NEW YORK (AP) -- Managed care company Cigna Corp. said Friday its third-quarter profit fell 6.7 percent on higher medical costs and losses from the company's reinsurance segment.

The Philadelphia insurer says it earned $307 million, or $1.13 per share, in the three months that ended Sept. 30. That's down from the $329 million, or $1.19 per share, in the same period last year.

Revenue rose 16.5 percent to $5.27 billion.

Analysts polled by Thomson Reuters forecast a profit of $1.06 per share on $5.26 billion in revenue.

Premiums and fees in the health care segment rose 2.3 percent to $3.35 billion, primarily on membership growth and change in membership to a higher percentage of commercial and Medicare customers. Meanwhile, the company recorded a loss of $44 million from its death benefits and income benefits businesses, related mainly to low levels of interest rates.

Cigna's performance can be affected by its guaranteed minimum income benefits and variable annuity death benefits businesses.

The variable annuity death benefits invest in mutual funds. They were sold as long-term investments that provide a steady return to customers during retirement and then a death benefit. The guaranteed minimum income benefits provide reinsurance to variable annuities issued by other insurers.

Cigna discontinued both businesses in 2000 and operates them in run-off mode, meaning it seeks no new business. Those businesses hurt the company's performance when the market turns bad because Cigna's liabilities toward them increase.

Looking ahead, the company now expects full-year profit between $4.35 and $4.50 per share, up from prior guidance of $4.10 to $4.40 per share. Analysts expect profit of $4.42 per share.

Cigna operates health care, group disability and life segments in the United States. It also sells individual insurance in several countries and operates an expatriate business that provides coverage for people living outside their home countries.

[Associated Press]

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