Cigna Corp. reported stronger operating income as it grew membership in almost all lines of business, though net income was down on charges related to its run-off reinsurance business.
Net income was $57 million, or 20 cents per share, compared with $371 million, or $1.28 per share for the same period last year. Net income was reduced by special items including $507 million related to Cigna’s discontinued reinsurance business. The company also took a $51 million charge on a regulatory matter related to its disability benefits business.
Operating income was $497 million, or $1.72 per share, compared with $359 million, or $1.24 per share, during the same period a year ago. Analysts polled by Thomson Reuters were expecting $1.43 per share, on average.
Cigna reported revenue of $8.2 billion, up 21 percent from $6.75 billion during the same period a year ago.
Goldman Sachs analyst Matthew Borsch said in a note to investors that Cigna’s first-quarter results indicate a strong start to the year.
The health insurer increased its membership in commercial health plans to 13.85 million customers as of March 31, up from 13.43 million customers a year earlier.
Membership in the company’s behavioral care benefits increased to 22 million from 19.8 million a year earlier. Dental benefits membership increased to 12.1 million from 11.3 million and pharmacy benefits membership was up to 6.9 million from 6.5 million.
Cigna saw a slight decline in membership in its Medicare Part D, prescription drug plans, to 1.21 million from 1.27 million.
During the first quarter, Cigna entered an agreement with Berkshire Hathaway to exit its run-off reinsurance business on Feb. 4, and this includes Cigna’s variable annuity business that provided guaranteed minimum income benefits.
Cigna’s outlook for the year includes operating income between $1.735 billion and $1.865 billion.
“On the core business, our results for the first quarter were extremely positive, both top-line as well as bottom-line, and that enabled us to increase our full-year operating outlook,” said Cigna CEO David M. Cordani.
Cigna purchased about $250 million of the company’s stock in the first quarter of the year and the Bloomfield health insurer has about $1 billion to $1.1 billion in surplus cash.
“We have a lot more structural and financial flexibility now in 2013 and beyond as a result of that divestiture exit, and that’s very positive for the company,” Cordani said of exiting the run-off reinsurance and variable annuity business.
The company has not said how much of its surplus cash it might designate for acquisitions or stock repurchases.
Shares of Cigna were trading at $68.23, up $2.85 on Thursday morning.