- Cigna on Thursday reported second quarter earnings that included a total revenue increase of 10% to $11.5 billion compared to the same quarter in 2017, beating Wall Street expectations for the fourth consecutive quarter. Operating revenues increased 12% year-over-year, largely driven by success in the commercial market, and per share growth was 34% year-over-year.
- The payer's medical customer base totaled 16.2 million in Q2, representing an increase of 329,000 customers year-over-year. However, Cigna's customer growth has stagnated since Q1 of this year and has mostly been contained to commercial and behavioral care.
- The company has raised its 2018 outlook, which does not include its pending acquisition of Express Scripts, bumping total revenue growth up 8% and estimating global medical customer growth between 400,000 and 500,000 new members.
While its competitors are champing at the bit to capitalize on the lucrative Medicare Advantage market, Cigna has been something of an outlier in its commercial market successes. That's not all by choice — after being barred from participating in the MA market for more than a year by CMS for offering plans the agency had deemed unsafe for consumers, the Connecticut-based insurer made its return to MA last summer.
CEO David Cordani had expressed optimism for the company's MA growth potential last quarter, but told investors on Thursday morning's earnings call that while leadership is pleased to be back in the saddle with seniors, the company was largely unable to open new MA markets in Q2 and had a number of counties exit, which Cordani said was in line with expectations.
However, the company's total government medical care ratio did fall from 84.7% in Q1 to 83.7% in Q2, while total commercial MCR of 76.3% for Q2 was a bit above that of 73.7% for Q1. Still, Cigna is outpacing the market on commercial growth, with total commercial enrollment up 4%.
Cordani told investors the company continues to feel "very good" about the commercial marketplace and expects that momentum to continue into 2019.
"All the indicators we're seeing ... continue to reinforce [that] we see a very attractive growth outlook in the commercial space in 2019," Cordani said.
Cigna shareholders will put the Express Scripts transaction, valued at $67 billion including debt, to a vote Aug. 24. A bump in the road emerged Wednesday, however, when activist investor Carl Icahn, who owns less than 5% of the company's stock, reportedly said he would urge shareholders to vote down the merger he deemed too expensive.
The proposed integration is part of a recent string of vertical mergers to pop up in the healthcare space and one of many market disruptions anticipated in 2019. Among those disruptions are Amazon's multi-pronged foray into healthcare, efforts to lower drug prices and create rebate transparency among PBMs and the Trump administration's expansion of short-term health plans, all of which were of interest to Cigna investors Thursday morning.
"The marketplace continues to change," Cordani repeatedly said on the call. "It's a competitive landscape."