Cigna raises earnings forecast as lower costs drive profit beat

© Reuters. FILE PHOTO: A screen displays the logo for Cigna Corp. on the floor at the New York Stock Exchange (NYSE) in New York, U.S., July 16, 2019. REUTERS/Brendan McDermid/File Photo

(Reuters) - Cigna Corp (NYSE:CI) raised its annual earnings forecast after topping quarterly profit estimates on Thursday, as a slow recovery in non-urgent medical procedures helps insurers rein in medical expense, sending its shares up over 3% before the bell.

Health insurers have seen medical costs fluctuate through the pandemic, with lower spending on elective procedures softening the blow from higher claims related to COVID-19 testing and treatment.

UnitedHealth Group (NYSE:UNH) and Elevance Health, formerly known as Anthem Inc, raised annual profit forecasts in July, while CVS Health (NYSE:CVS) lifted its earnings forecast on Wednesday, buoyed by a strong performance in its health insurance and pharmacy services units.

Cigna's quarterly medical care ratio (MCR) beat was the largest among insurers, as its healthcare margins rose on improved pricing of government-backed insurance plan for the elderly and disabled, Evercore ISI analyst Michael Newshel said in a note.

The company's MCR, or the amount spent on medical claims versus the income from premiums, fell to 80.7% from 84.4% a year earlier.

The Bloomfield, Connecticut-based insurer forecast 2022 MCR between 81.5% and 82.5%, compared with its prior forecast of 82% to 83.5%.

The company is likely keeping the outlook for the second half of the year conservative due to uncertainty over COVID and medical procedures' utilization trends, Newshel said.

Cigna now expects full-year adjusted earnings of at least $22.90 per share, compared with its previous forecast of $22.60 per share.

Excluding special items, Cigna's income from operations was $6.22 per share, above analysts' average estimate of $5.48, according to Refinitiv IBES data.