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Cigna Beats Targets

But the big insurer offers guidance below the consensus.
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posted a drop in fourth-quarter earnings but beat Wall Street estimates.

For the quarter ended Dec. 31, the Philadelphia-based insurer made $224 million, or $1.78 a share, down from the year-ago $558 million, or $4.16 a share. Adjusted operating income, excluding certain items and realized investment results, fell to $1.98 a share from $2.41 a share a year earlier but beat the $1.66 Thomson First Call estimate.

Adjusted income from operations for the fourth quarter of 2005 included better-than-expected results in Cigna's health and related benefits businesses.

"All of our businesses performed well in the fourth quarter and throughout 2005," said CEO H. Edward Hanway. "Our health care, group disability and life and international operations generated strong results reflecting our ability to deliver innovative health and related benefits programs to meet customers' needs. We also stabilized our health care membership and set the stage for membership growth in 2006. We are confident that we will succeed in the marketplace by using our strengths and capabilities in consumerism to enhance and improve the health and well-being of our members."

Consolidated revenue fell to $4.2 billion from $4.3 billion a year ago, while health care medical claims payable slipped to $800 million from $1.1 billion a year earlier. The decline primarily reflects the impact of favorable prior year claim development. The prior year development was driven by the emergence of favorable claim experience, primarily resulting from effective provider contracting and medical management. Improved claim processing efficiency and lower membership also contributed to the lower reserve balance at Dec. 31.

The company bought back 5 million shares for $566 million during the fourth quarter of 2005 and approximately 15.4 million shares for $1.6 billion for the full-year 2005. In January 2006, the company repurchased approximately 635,000 shares for $73 million. On Jan. 25, Cigna's board of directors increased the company's stock repurchase authority by $500 million. As of Feb. 8, the company has approximately $700 million of stock repurchase authority available.

Cash and investments at the parent company were $1 billion at Dec. 31 and $1.5 billion a year earlier, reflecting continued strong dividends from subsidiaries and the impact of stock repurchase activity.

The company guided to adjusted income from operations of $1.65 to $1.80 a share for the first quarter and $7.25 to $7.70 for the year. Analysts surveyed by Thomson First Call were looking for $1.86 for the quarter and $7.81 for the year.