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Low utilization, enrollment gains boost Cigna earnings


An influx of more than half a million new enrollees helped Cigna Corp. post high single-digit revenue growth in the second quarter of 2015, the company said Thursday.

The Bloomfield, Connecticut-based health insurer reported that its second-quarter net income grew by 2.6% to $588 million, which the company said was attributable mainly to effective medical cost management, low utilization trends and modest year-over-year improvement in the company’s operating expense ratio.

Cigna recorded $9.49 billion in total revenue in the three months ending June 30, an increase of 8.7% over results posted in the same period in 2014, due in large part to the addition of 524,000 medical members, the company said in a statement.

“Cigna’s strong second-quarter results once again reflect the consistent effective execution of our global strategy,” David Cordani, Cigna’s president and CEO, said Thursday in the company’s statement.

A spokesman for Cigna said the company elected not to host its customary conference call with investment analysts following the release of its quarterly financial results, citing the last week’s joint conference call outlining the details of its proposed $54 billion merger with rival insurer Anthem Inc.

“As we look to the future, and our recent announcement that we will combine with Anthem to build the industry’s premier health service company, we remain focused on delivering affordable, personalized solutions that create sustained long-term value for the benefit of our customers and clients around the world,” Mr. Cordani said in his statement.

Based on its results through the first six months of the year, Cigna executives raised their estimates for the company’s year-end total operating income, as well as the projected year-end operating income of its global health care segment, which accounted for nearly 80% of the company’s total revenue and 89.8% of its net earnings in the second quarter.

Cigna’s net income in the second quarter held to a low single-digit percent increase over prior-year results primarily due to a $65 million after-tax charge associated with the company’s early redemption of long-term debt. Absent that charge, the company would have posted a 14.0% gain in second-quarter profits compared to results from a year ago, driven in part by improved medical care ratios in both its commercial and government health care units, according to its earnings report.

“You’re always going to get some fluctuations in medical expenses from quarter to quarter and from year to year,” said Vishnu Lekraj, Chicago-based senior research analyst at Morningstar Inc. “It also depends on the makeup of your membership book, and that’s why we’ve seen these companies consolidating and trying to diversify their memberships in order to smooth out the ups and downs they’re going to face from certain cohorts.”

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