Lower medical costs and more revenue from employer- and government-based health plans led to higher second-quarter profits for Cigna Corp., the Bloomfield, Conn.-based company reported Thursday.
The results exceeded Cigna's lofty predictions from last week. The health insurer released an earnings preview the same day it announced its plans to merge with Anthem. The Anthem-Cigna tie-up is valued at more than $54 billion, including Cigna's debt.
Cigna's net income increased 3% in the second quarter, totaling $588 million. Revenue increased 9% to $9.5 billion, giving Cigna almost $19 billion in insurance business in the first half of 2015.
Most of Cigna's customers are employers who offer health plans to their workers. Many of those employers are self-insured and they hire Cigna as their third-party administrator. Roughly 77.5% of premiums from commercial plans went to pay medical claims, which was lower than the 78.9% medical-loss ratio in the same period last year.
Cigna is a smaller but growing player in Medicare and Medicaid. Those two payers continued to represent about 40% of Cigna's premium revenue. The second-quarter medical-loss ratio for Cigna's government plans, which includes Part D plans, was 84.4%, compared with 85.5% in the second quarter of 2014.
Looking towards the company's future, Cigna CEO David Cordani will become president and chief operating officer of Anthem if the deal receives shareholder and regulatory approval. The companies did not clarify if Cordani would become Anthem's next CEO after Joseph Swedish reduces his role in two years.