Cigna reported strong second-quarter earnings Friday, which included a 4% increase in total revenues compared to a year ago to $10.3 billion.
In announcing its earnings, Cigna also raised its 2017 earnings forecast from between $9.35 and $9.85 to between $9.75 and $10.05 per share. Experts had predicted $9.77.
With Cigna's announcement, six major health insurers have beaten Wall Street expectations in the second quarter, despite the healthcare debate in Washington and uneasiness in the Affordable Care Act exchanges.
Cigna’s positive results are yet another second-quarter success for payers. In recent days, Aetna raised its outlook after a strong quarter, Humana beat its earnings predictions, Anthem posted strong results and UnitedHealth announced that its revenue grew 8% from last year.
For Cigna, the payer’s adjusted income from operations increased to $750 million compared to $515 million last year, which Cigna said “reflects significantly increased earnings contributions from each of our business segments.”
Premiums and fees increased 3% compared to a year ago, which was “driven by customer growth and specialty contributions in our commercial business.” Cigna reported that its financial results for its commercial insurance projects more than offset a drop in revenue from government products because of lower enrollments in those programs.
Cigna's positive second-quarter numbers may lead to M&A activity, especially regarding Medicare Advantage (MA). Cigna Chief Executive David Cordani said in June the payer has between $7 billion and $14 billion that it may use on mergers and acquisitions this year. That money may go to expanding its MA offerings. Corandi declined to say in June whether Cigna is looking to buy Humana, which is the second-largest MA payer, or whether it may acquire or merge with other companies.
Regardless, you can expect Cigna to grow its MA market in the coming months after the CMS lifted Cigna’s suspension to sell MA and Medicare Part D plans in June. The suspension came after CMS found issues with Cigna’s appeals and grievances processes, Part D, formulary and benefits administration. The CMS restricted Cigna for 18 months, which the company said cost them at least $500 million.
Also, earlier this year, a proposed $54 billion merger proposal with Anthem failed. Despite the failed merger, Humana reported $1.1 billion net income in the first quarter compared to $254 million last year. At the time, Humana officials pointed to the failed merger with Anthem as a major reason for the net income increase and Bruce D. Broussard, Humana’s president and chief executive officer, especially highlighted MA as a positive.
After the merger failed, Cigna filed a lawsuit against Anthem that seeks more than $13 billion in damages and a $1.85 billion contractual breakup fee. Anthem is protesting both payments.