Cigna beat Wall Street expectations with its second quarter revenue of $39.27 billion and on earnings, according to results posted Thursday morning. The payer had net income of $1.75 billion, up nearly 25% from the prior-year quarter.
Like other insurers, the company saw increased profit as people deferred care in April and May to forgo potential exposure to the novel coronavirus. Care utilization was at about 30% to 35% below baseline in April but was only down by about 5% in June with a similar outlook for July, executives said.
Cigna reaffirmed its full-year guidance for earnings and for revenue of $154 billion to $156 billion. The company expects increased COVID-19 treatment costs as well as lower enrollment and investment income due to the volatile economic environment amid the pandemic, CFO Eric Palmer told investors during Thursday’s earnings call.
Cigna’s medical loss ratio of 70.5%, down from 81.6% a year ago, jibes with what other major payers have reported — again due to patients deferring care during the pandemic. Palmer said he expected the MLR to be about 150 to 200 basis points above baseline in the back half of the year as patients seek out care put off in earlier months.
SVB Leerink analysts said in a note they expect a positive reaction to the results “given healthy fundamentals” across the payer’s three core businesses and “healthy levels of earnings across the board.”
Other analysts agreed, noting the relatively modest decline in commercial membership and results from the health services segment, which includes pharmacy benefit management arm Express Scripts. That segment posted 7% growth year over year.
“At this point, it seems that lower insurance enrollment due to unemployment has not affected the company’s commercial health care business as much as originally anticipated, and lower medical costs are benefiting the company more than expected,” Ashtyn Evans, an analyst with Edward Jones, wrote in a recent note.
CEO David Cordani said Cigna’s employer client mix is less weighted toward industries most affected by the economic upheaval, but added he expects “to see a slow recovery to the overall employment marketplace in the United States” over the next 18 months.
The company remains on track to close the sale of its group disability and life sector this year. New York Life bought the business in December for $6.3 billion. Palmer said the $5.3 billion in Cigna proceeds from the transaction will go toward share repurchases and debt repayment in 2021.
The international market segment grew 54% year over year on lower utilization due to the pandemic.
Other major payers, including Anthem and UnitedHealthcare, have reported roughly doubling profit in the second quarter as the result of deferred care. Molina posts results Friday and Humana next week.