Cigna Earnings Well Exceed Expectations

The insurance company attributed the rise in operating income for the quarter to steady improvements in multiple areas.
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Cigna

(CI) - Get Report

reported late today that its third-quarter earnings jumped 20%, well exceeeding Wall Street's expectations.

The Philadelphia-based insurance company said its income from continuing operations, excluding one-time items, totaled $286 million, or $1.47 a diluted share, compared with $237 million, or $1.12 a share, in the year-earlier quarter. A consensus of analysts polled by

First Call/Thomson Financial

expected Cigna to earn $1.30 a share in the latest quarter.

"The way they got there was across the board," said William McKeever, an analyst with

PaineWebber

. "When you added up all of the little numbers, it begins to really grow." McKeever gives Cigna a buy rating; his firm is not involved in any recent underwritings for Cigna.

Like McKeever, Cigna attributed the rise in operating income for the quarter to steady improvements in multiple areas, notably in the Cigna health care segment of the business, which grew 14% to $182 million from $159 million in the year-earlier quarter.

Cigna posted its financial results after the stock market closed. Its shares ended down 1 3/8 at 73 3/8.

McKeever said his only concern was that Cigna's medical costs increased again as they had in the previous quarter. But he expects the company to raise its prices by 10% in 2000 to accommodate the added expenditures.

"That should allow for another growth expansion next year," McKeever said.

Cigna's third-quarter operating earnings excluded an after-tax gain of $1.2 billion for the sale of property and casualty business to

Ace Ltd.

, a $400 million after-tax charge from Brazilian investments, and $10 million of after-tax restructuring charges.

Net income quadrupled to $1.1 billion, or $5.44 a diluted share, in the third quarter from $251 million, or $1.19 a share, in the comparable 1998 quarter.

Revenues rose to $4.7 billion in the latest quarter from $4.3 billion a year earlier.

During the quarter, Cigna spent $1.1 billion to repurchase 12.8 million shares of its common stock.