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(Reuters)—Insurer Cigna Corp. posted a lower-than-expected fourth-quarter profit, hurt by performance in its disability and life coverage business and international plans, and forecast 2012 earnings below Wall Street's target, sending shares down nearly 6%.
The company, one of the largest U.S. health insurers, also said on Thursday its outlook for the year includes an expected rise in use of health care services among its members.
Health insurers have benefited from low claim costs as Americans delay nonemergency procedures and doctor visits to save money in the weak economy, but most insurers say they expect such utilization to rebound this year.
Cigna follows rivals UnitedHealth Group Inc., WellPoint Inc. and Aetna Inc. in forecasting 2012 profit at least somewhat below Wall Street targets, though many analysts believe the company outlooks could prove conservative, especially if use of health care services stays low.
"Historically they're conservative around guidance," Oppenheimer & Co. analyst Michael Wiederhorn said. "They're assuming a pickup in utilization but they haven't seen it yet."
Even with Thursday's decline, Cigna shares are up about 3% for the year, after a strong run across the board for health insurance stocks in 2011.
"The group has been very strong and I think people are looking for reasons to sell," Mr. Wiederhorn said. "I do think you will see this stock recover very quickly over the next week or two."
Cigna's quarterly net income fell to $290 million, or $1.04 per share, from $461 million or $1.69 per share a year earlier.
Excluding items, earnings of $1.11 per share missed the analysts' average estimate by 8 cents, according to Thomson Reuters I/B/E/S.
Revenue edged up about 0.6% to $5.46 billion, roughly $40 million below estimates.
Earnings in Cigna's main health care segment rose 4% to $216 million.
But profit in its disability and life insurance business slumped 24% to $55 million, hurt by higher disability-related claims and a 7% decrease in life insurance premiums and fees.
Profit rose 3.5% to $59 million in its international division, in which it sells supplemental insurance to individuals in Asia and elsewhere and offers coverage to employees working abroad. Goldman Sachs analyst Matthew Borsch had looked for international earnings of $84 million.
Profit margin in the business slipped to 7.2% from 8.7% a year ago.
Cigna forecast 2012 profit of $5.00 to $5.40 per share, excluding items. That is an increase of as much as about 10% over its 2011 earnings of $4.95, but below Wall Street's target of $5.67.
Even excluding an accounting charge from the outlook, "the initial midpoint of $5.20 is still weak and below expectations," Sanford Bernstein analyst Ana Gupte said in a research note.
Jefferies & Co. analyst David Windley said in a research note there was "no one significant item affecting guidance. Instead, Cigna's stand-alone operations were all moderately below our projections."
On Tuesday, Cigna closed its $3.8 billion acquisition of Medicare specialist HealthSpring Inc., becoming a much bigger player in providing plans under the U.S. government program for the elderly.
It expects membership growth of about 900,000 this year, including 365,000 Medicare Advantage members acquired in the HealthSpring deal. Cigna ended 2011 with 11.48 million members.
Cigna said it aims to increase earnings per share by an average of between 10% and 13% a year over the longer term.
Shares were down 5.6% at $43.10 on the New York Stock Exchange in late morning.
BLOOMFIELD, Conn. (Reuters)—Health insurer Cigna Corp. will buy Nashville, Tenn.-based HealthSpring Inc. for about $3.8 billion to jump-start its business selling Medicare Advantage and other Medicare-related plans for the elderly.