(Bloomberg) -- Cigna Group shares fell after US markets opened as the company maintained its outlook despite second-quarter earnings that exceeded analysts’ expectations, driven by growth in its health services division.
Adjusted income from operations was $6.72 a share, ahead of the average of analyst estimates compiled by Bloomberg. The health-care giant affirmed its forecast for adjusted 2024 earnings of at least $28.40 a share.
Cigna executives said they saw elevated medical costs in the quarter but they were largely in line with what the company had planned for.
The shares fell as much as 6.9% after US markets opened, the biggest intraday drop since November.
“The lack of a guidance raise despite the beat will be likely viewed as a modest disappointment,” Leerink Partners analyst Whit Mayo wrote in a research note.
US health insurers have faced a rocky first half of the year with unexpected medical costs, scrutiny from regulators, and skepticism from investors. Cigna joined its rivals in holding guidance steady midway through 2024, signaling a conservative stance to cushion for risks ahead.
Cigna is less exposed to the Medicare and Medicaid insurance segments where there’s been the most turmoil. Its stock has gained 16% so far in 2024 through Wednesday’s close, on par with the S&P 500 Index and ahead of its largest rivals.
Revenue in the quarter exceeded analysts’ expectations, reflecting large client wins in the company’s Evernorth Health Services business, Cigna said in a statement Thursday.
The company’s medical-loss ratio, an important gauge of how much premium revenue is paid out for care, was above analysts’ forecasts. Cigna said the figure was driven up primarily because of Medicare Advantage risk adjustment changes from the prior year.
Cigna’s business encompasses a health benefits arm, Cigna Healthcare, and a services division called Evernorth that houses its pharmacy benefits manager and specialty pharmacy.
Evernorth is where the growth is. Pharmacy customers jumped 24% as Cigna took on a major contract to serve health insurer Centene Corp. at the start of the year. Quarterly revenue at Evernorth grew by 30% from the same period in 2023.
In contrast, sales in the health benefits business increased just 3% from last year, and medical membership declined slightly as the company raised premiums in certain markets.
Margins in its individual exchange health plan business are improving but still on track to end the year below its target range of 4% to 6%, executives said on a call with analysts.
(Updates with share moves, analyst comment and details from earnings call from the first paragraph.)
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