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    ARTICLE PAGE

    Earnings Preview: Cigna to report 3Q earnings

    By AP
    Nov 3, 2009

      INDIANAPOLIS (AP) — Managed care provider Cigna Corp. reports results for the third quarter on Thursday. Here are some key developments and analyst opinions related to that period.

      OVERVIEW: Philadelphia-based Cigna's main national competitors have managed to top Wall Street expectations for the most part during the third quarter. But they've also been hurt by sliding enrollment in employer-based health insurance and growing flu-related costs.

      Enrollment losses are expected to last into next year, as employers continue to cut jobs and reduce the number of people covered under their health insurance plans.

      Cigna saw an enrollment loss in the second quarter, driving down premiums and fees from its health care segment, the largest portion of its business. Cigna operates health care, group disability and life and international business segments.

      The insurer has estimated that its enrollment will fall between 5 percent and 5.5 percent for the year. The company had about 11.7 million members at the start of 2009.

      Improving equity markets helped Cigna in the second quarter with its discontinued guaranteed minimum income benefits and variable annuity death benefits businesses. Charges from those businesses had hurt Cigna in recent quarters.

      Cigna said in August that it expects to maintain its 2009 adjusted profit forecast of $1.04 billion to $1.1 billion.

      BY THE NUMBERS: On average, analysts polled by Thomson Reuters expect third-quarter earnings of $1.03 per share on $4.6 billion in revenue.

      ANALYST TAKE: Fixed-income markets have been strong, which should help Cigna avoid variable annuity writedowns in the quarter, Oppenheimer analyst Carl McDonald said late last month in a research note. He also noted that the real estate market "appears to have bottomed, which puts the commercial mortgage portfolio of the company in better shape."

      But McDonald also said Cigna's administrative costs are sized for a much bigger company.

      "We'd encourage the company to come up with a plan to eliminate significant administrative costs over the next couple years, which can be a tricky thing to do without hurting service operations," he wrote.

      The uncertainty of health care reform remains a concern for many analysts and investors following the managed care sector. But Cigna has lower exposure to reform risks than other insurers due to its low proportion of earnings from Medicare Advantage and individual-small group insurance, Goldman Sachs analyst Matthew Borsch said last month in a research note.

      STOCK PERFORMANCE: Cigna shares climbed 17 percent in the quarter to $28.09 on Sept. 30. That tops a 14 percent climb by the Standard&Poor's 500 index over the same period.

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