Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Cigna sees bigger hit to 2021 earnings from pandemic

Published 08/05/2021, 06:09 AM
Updated 08/05/2021, 01:07 PM
© Reuters. FILE PHOTO: A screen displays the logo for Cigna Corp. on the floor at the New York Stock Exchange (NYSE) in New York, U.S., July 16, 2019. REUTERS/Brendan McDermid/File Photo

© Reuters. FILE PHOTO: A screen displays the logo for Cigna Corp. on the floor at the New York Stock Exchange (NYSE) in New York, U.S., July 16, 2019. REUTERS/Brendan McDermid/File Photo

By Manojna Maddipatla

(Reuters) -Shares of Cigna Corp (NYSE:CI) tumbled 13% after the health insurer warned of a bigger hit to its full-year earnings due to the impact of the pandemic and said it also expects non-COVID costs to trend near normal levels in the second half of the year.

The company said both COVID-19 and non-COVID costs were above expectations for the second quarter.

COVID-19 costs were higher in April than in May and June, and for the balance of the year these costs are expected to run at a lower level than they did in the first half of the year, Chief Financial Officer Brian Evanko said.

Health insurers have largely benefited from a decline in patient use of discretionary healthcare services due to the pandemic, but demand for these services is recovering as more Americans get vaccinated.

Meanwhile, rivals Anthem Inc and Centene (NYSE:CNC) Corp recently warned of a potential rise in coronavirus-related costs in the second half of 2021 due to the impact of the fast-spreading Delta variant.

Shares of UnitedHealth Group Inc (NYSE:UNH), Anthem and Centene were down between 2% and 5%.

Cigna's medical care ratio (MCR), the amount spent on medical claims versus income from premiums, worsened to 85.4% in the second quarter, from 70.5% a year earlier, compared with an estimate of 81.04%, according to analysts polled by Refinitiv.

The company now expects 2021 MCR to be between 83.0% and 84.0%, up from its prior forecast of 81.0% to 82.0%.

A lower medical expense ratio is better for health insurers.

© Reuters. FILE PHOTO: A screen displays the logo for Cigna Corp. on the floor at the New York Stock Exchange (NYSE) in New York, U.S., July 16, 2019. REUTERS/Brendan McDermid/File Photo

While the spike in Cigna's MCR is disappointing, the issue is mostly transitory and manageable, Cantor Fitzgerald analyst Steven Halper said in a client note.

Cigna expects full-year earnings to take a hit of about $2.50 per share, compared with its previous forecast of about $1.25 per share.

Latest comments

don't worry cigna, higher medical costs are transitory
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.