Cigna joins competitors with 1Q enrollment slip

INDIANAPOLIS — Cigna Corp. joined its biggest health insurance competitors Thursday when it said rising unemployment helped suppress enrollment in the first quarter, normally a big time for insurers to add members or renew business.

Despite the enrollment losses, the Philadelphia-based insurer still managed to post a fourth-quarter profit that more than tripled and an increase in revenue. The profit improvement was driven by better performance in an insurance business that's no longer active.

Cigna's total medical enrollment fell 3 percent to 11.4 million from the end of 2008. Its fully insured business lost 101,000 members.

In the past two weeks, Indianapolis-based WellPoint Inc. and Minnetonka, Minn.-based UnitedHealth Group Inc. also have said they lost members since the start of the year, including drops in fully insured enrollment that were bigger than Cigna's decline.

Fully insured business is generally more profitable for managed care companies than self-funded plans, which the companies only administer. Many insurers have seen a steady enrollment decline over several quarters in this business, but Edward Jones analyst Steve Shubitz said he thinks that accelerated "as the economic decline has steepened."

Cigna and WellPoint, the largest health insurer based on enrollment, both cited layoffs as the main reason behind their first-quarter membership drops. WellPoint Chief Executive Angela Braly said they lost more fully insured business than they expected.

Shubitz said companies that employ less than 1,000 people play a big role in enrollment drops.

"It's largely due to smaller employers that are just canceling the benefits or people just not being able to afford it anymore because prices go up every single year," he said.

WellPoint officials have said they expect the decline they saw in the first quarter to level off by the end of the year and forecast enrollment growth for 2009. Cigna forecasts a full-year membership decline of between 3 percent and 4 percent.

Hartford, Conn.-based Aetna Inc. bucked the first-quarter enrollment trend. It added more than a million members, thanks to large national accounts with Bank of America Corp. and Home Depot Inc.

Cigna Corp. on Thursday posted a first-quarter profit of $208 million, or 76 cents per share, compared with $58 million, or 20 cents per share, in the first quarter of 2008.

Revenue rose 4 percent, to $4.77 billion from $4.57 billion, with premium revenue rising 5 percent, to $4.05 billion.

A key driver behind the profit improvement was Cigna's guaranteed minimum income benefits business, which turned from a $195 million loss to $23 million in income.

Cigna discontinued that business and its variable annuity death benefits in 2000. The insurer operates both in run-off mode, meaning it seeks no new business for them.

Cigna's adjusted operating income fell 29 percent to $188 million, or 69 cents per share, from $265 million, or 93 cents per share. That total leaves out one-time items and results from the guaranteed minimum income benefits.

Analysts polled by Thomson Reuters forecast earnings of 91 cents per share on $4.83 billion in revenue. But Cigna said some analysts do not adjust for the discontinued businesses.

Also on Thursday, Cigna reduced its adjusted operating income estimate for the year to $3.70 to $3.90 per share, down from the $3.95 to $4.25 per share it estimated in February.

The cut brings Cigna's estimates closer to Wall Street's: Analysts expect $3.88 per share, according to Thomson Reuters.

Chairman and Chief Executive H. Edward Hanway said the lowered guidance was due mainly to a first-quarter charge of $49 million, or 18 cents per share, the company took for the variable annuity death benefits business.

Cigna expects results from that business to roughly break even for the rest of the year. The insurer also reaffirmed its guidance for operating income of between $700 million and $760 million for health care, its largest business segment.

President and Chief Operating Officer David Cordani named "further opportunities for employment-related cost reductions" as an area that will help drive expense cuts.

Spokesman Chris Curran said it was too early to say whether that might mean job cuts.

Cigna announced in December it would cut 1,100 jobs, or about 4 percent of its work force, due to the slumping economy.

Cigna shares fell nearly 5 percent, or 99 cents, to $19.78 in Thursday afternoon trading.

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AP Business Writer Marley Seaman in New York contributed to this story.