Cigna Group, a health insurance company, beat estimates in the first quarter and raised its annual profit forecast, thanks to lower medical costs in its health insurance business. The company’s shares rose 3% in premarket trading following the earnings report.
Cigna’s medical cost ratio, or spending on claims as a percentage of premiums, fell to 81.3% from 81.5% in the first quarter. This was due to higher premiums and lower COVID-19 costs. Market expectations were pegged at 82.1%, according to four analysts polled by Refinitiv.
Other health insurers, including UnitedHealth (NYSE:UNH) and Humana (NYSE:HUM), also beat profit estimates and raised forecasts this quarter, thanks to strength in their government-backed plans and low medical costs.
Cigna’s government business, which includes Medicare and Medicaid plans, saw a 19% increase in revenue in the first quarter. The company’s commercial business also performed well, with revenue up 9%.
Cigna’s strong earnings report is a positive sign for the health insurance industry, which has faced challenges during the COVID-19 pandemic. Many insurers saw increased costs due to the pandemic, as patients postponed non-emergency procedures and sought treatment for COVID-19. However, as vaccine distribution has increased and COVID-19 cases have declined, insurers are starting to see lower medical costs.
In addition to lower medical costs, Cigna is also benefiting from its acquisition of pharmacy benefit manager Express Scripts in 2018. The company’s pharmacy business saw a 15% increase in revenue in the first quarter, thanks to growth in specialty pharmacy services.
Cigna’s strong performance in the first quarter led the company to raise its annual profit forecast. The company now expects adjusted earnings per share to be between $20.20 and $20.60 for the year, up from its previous forecast of $18.60 to $19.10.
In conclusion, Cigna Group’s strong first-quarter earnings report is a positive sign for the health insurance industry. The company’s lower medical costs and strong performance in its government and commercial businesses are indicative of a broader trend in the industry. Cigna’s acquisition of Express Scripts is also providing a boost to the company’s pharmacy business. The company’s raised annual profit forecast is a testament to its strong performance in the first quarter and its confidence in its ability to generate profits going forward.
