Cigna quarterly profit beats as the health insurer braces for a tussle with Carl Icahn

Earnings


Cigna reported a much better-than-expected quarterly profit on Thursday, helped by higher enrollment and premium rates, as the health insurer braces itself for a tussle with Carl Icahn on its $52 billion Express Scripts deal.

The Wall Street Journal on Wednesday reported that billionaire investor Icahn has a sizable stake in the insurer and plans to vote against its Express Scripts acquisition.

The insurer did not comment on the Icahn report in its earnings statement but is likely to face questions from analysts regarding the report during the conference call.

Cigna shareholders are scheduled to vote on the deal on Aug. 24. The two companies hope the deal will help them hold on to profits despite scrutiny for rising healthcare costs.

Analysts, however, do not expect Cigna shareholders to vote down the deal.

JP Morgan analyst Gary Taylor said few shareholders have questioned the strategic rationale of the deal as the competitive environment for health insurers is likely to change if the deal for CVS Health to buy Aetna is approved.

Taylor also noted that Cigna shareholders own nearly 84 percent of Express Scripts shares outstanding.

Investor skepticism over the profitability of companies like Express Scripts, which act as a middleman between drug companies and health plans and are under pressure to change how they handle drug discounts, has weighed on Cigna shares. Cigna is down about 10 percent this year.

Cigna shares were up 2 percent at $187 in light premarket trading on Thursday.

The company said net income came in at $806 million, or $3.29 per share, in the second quarter ended June 30, compared to $813 million, or $3.15 per share, a year earlier.

Excluding items, Cigna earned $3.89 per share, well above the average analysts’ estimate of $3.33, according to Thomson Reuters I/B/E/S.

Cigna’s operating revenue rose about 11 percent to $11.50 billion, ahead of analysts estimate of $11.16 billion.

The company also raised its full year adjusted profit per share forecast to $13.60 to $13.90, from previous estimate of $12.85 to $13.25 per share.

The solid and unexpected fundamental performance may offer some relief and breathing room for management to address the likely focus on the angst around the Express Scripts deal, Leerink analyst Ana Gupte said in a note.



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