By Leroy Leo and Khushi Mandowara
(Reuters) – Cigna Group on Friday raised its annual profit forecast after strong growth and lower medical costs at the company’s health insurance business helped it beat estimates in the first quarter.
One of the oldest health insurers in the U.S., Cigna saw its medical cost ratio – or spending on claims as a percentage of premiums – fall to 81.3% from 81.5% thanks to higher premiums and lower COVID-19 costs. Market expectations were pegged at 82.1%, according to four analysts polled by Refinitiv.
Several other health insurers including UnitedHealth and Humana also beat profit estimates and raised forecasts this quarter on strength in their government-backed plans and low medical costs.
Still, that has largely failed to allay investor concerns around 2024, when regulatory pressure on insurers and drug middlemen is seen ramping up in light of the U.S. elections. Lower expected reimbursement rates for some government-backed plans are adding to the pressure too.
Cigna cut the midpoint of its 2023 forecast for medical cost ratios by 10 basis points to a range of 81.5% to 82.3%.
Its total premiums during the quarter rose 6% to $11.03 billion, beating analysts’ average estimate of $10.42 billion, according to Refinitiv data.
Revenue from Cigna’s Evernorth unit, which houses its pharmacy benefit management business, rose nearly 8% to $36.18 billion, due to strong growth in specialty pharmacy services – a segment that provides drugs for complex conditions such as cancer and rheumatoid arthritis.
Excluding one-off items, the company reported profit of $5.41 per share, beating estimates of $5.22.
Cigna raised its profit forecast by 10 cents to at least $24.70 per share.
(Reporting by Khushi Mandowara and Leroy Leo in Bengaluru; Editing by Devika Syamnath)
