A strange thing happened on Friday morning: A managed-care company—
Cigna
—reported earnings, and its stock jumped up.
A positive market reaction to managed-care financial results hasn’t been the norm these past few weeks, as steep selloffs have greeted earnings reports from
Humana
and
UnitedHealth Group.
Cigna Group, however, isn’t like its large health insurance peers in one important way: It largely eschewed the burgeoning Medicare Advantage business, which offers commercially-managed, government-funded health plans to older Americans.
The risks of Medicare Advantage for insurers came into sharp focus in January. A sharp spike in hospital and doctor office visits among U.S. seniors raised costs for these plans, and set off worries about their profitability.
Cigna, meanwhile, said Wednesday it had sold off its relatively small Medicare Advantage business as part of a $3.7 billion deal.
On Friday, Cigna Group stock climbed after the company reported earnings for its fiscal fourth quarter that beat expectations. The company had revenue of $51.1 billion in the quarter, well ahead of the FactSet consensus estimate of $48.9 billion. Earnings were $6.79 per share, beating the consensus estimate of $6.54 per share.
Cigna’s medical loss ratio for the quarter—a calculation that tracks the proportion of premiums paid out to cover medical expenses—was 82.2%, better than the 84% ratio projected by analysts.
Lower medical loss ratios, or MLRs, leave more room for profits.
Humana,
which is heavily focused on Medicare Advantage, reported a 91.4% MLR for the quarter, worse than the 89% consensus estimate.
The Cigna results underline the company’s improved position this year in comparison to its Medicare Advantage-focused peers. Cigna shares were up 2.6% so far in 2023 as of the close of trading Friday, while Humana shares were down 17.9%, and UnitedHealth shares were down 3.7%.
Cigna also issued guidance that was roughly in-line with consensus estimates. Cigna said it now expects revenue of at least $235 billion in 2024, slightly above the FactSet estimate of $228.7 billion. It said it expects adjusted income from operations of at least $28.25 per share, in-line with the $28.29 consensus estimate.
Cigna shares were up 2.8% Friday, after climbing as much as 4% earlier in the morning.
In a note Friday, Jefferies analyst David Windley threw a dash of cold water on the results. Among other things, he said that the company’s MLR guidance for 2024 of between 81.7% and 82.7% was “a little higher than consensus.” The FactSet estimate for the company’s 2024 MLR is 81.8%.
“The details are a little less pleasing and likely mute the reaction,” Windley wrote.
Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com
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