Cigna (CI) beat both revenues and guidance by a wide margin.
- CI reported 4Q10 adjusted EPS of $1.11 Headline adjusted EPS of $1.15 included a roughly $0.04 EPS gain from the sale of a workers' comp & case management business. Depending on which figure you use, you have a .09-.14 beat.
- Health segment earnings of $207 million were roughly 4% above Street estimates of about $200 million.
- Medical claims payable net of reinsurance were down about $52 million sequentially to $1 billion, with the decline resulting from the $42 million in after-tax favorable reserve development. Importantly, medical claims payable are up about 40% from a year ago with premium growth of 21.2%. Operating cash flow of $1.7 billion for the year reflected a 1.3x multiple to net income and CI ended the year with $810 million in cash at the parent, up 71% from year-end '09 levels.
- Revenue grew 17 percent to $5.43 billion. Analysts surveyed by FactSet forecast, on average, $5.38 billion in revenue.
Guidance - 2011 EPS range of $4.30-4.70 was below street expectations of 4.73. This is just a case of management being extremely conservative. (See also earnings call transcript.) This company is pulling an "Apple" (AAPL) with guidance that does not likely reflect true earnings potential. My healthcare analyst friend with a top Wall Street firm (I cannot name names for confidentiality reasons) is maintaining his target of 4.83 for 2011 and recommending that clients ADD to positions here, not sell in a crazed frenzy because of conservative guidance. Cigna had a great quarter, I'd expect this to continue. I urge you not to be dissuaded as a result of this guidance.
Disclosure: I am long CI.