Yahoo Finance Strong Sales Drove Cigna’s Global Revenue Growth in 2015
Diversified Businesses Boost Cigna’s Profit Margins in 4Q15
Cigna’s medical customer base
In 2015, Cigna’s (CI) global healthcare enrolments, which involve the company’s commercial and government-sponsored enrolments, reached about 15.0 million members, year-over-year (or YoY) growth of 4%. To know more about Cigna’s business segments, please refer to Cigna: Medicare and Medicaid Beneficiaries Top Earners.
The above chart shows that Cigna’s global healthcare segment’s premiums and fees came in at $6.7 billion in 4Q15, a YoY rise of about 7.5%. The business earned premiums and fees worth approximately $26.8 billion in 2015, YoY growth of about 10%.
Total revenues earned by the segment, including mail-order pharmacy revenues, net investment income, and other revenues, reached about $7.6 billion in 4Q15, a 7.8% rise compared to total revenues earned in 4Q14.
Growth drivers
Cigna has benefited from organic membership growth in its middle market, international, select, and Medicare segments as well as inorganic customer growth due to its acquisition of Qualcare Alliance Networks, announced on January 26, 2015. To know more about Cigna’s customer segments, please refer to Cigna’s Customer Segments a Healthy Mix.
Global healthcare revenues rose in 2015, mainly due to strong sales of the company’s self-insured and specialty commercial plans as well as its government-sponsored plans. In 2015, government businesses Medicare and Medicaid also proved to be key revenue growth drivers for peer companies such as UnitedHealth Group (UNH), Aetna (AET), and Anthem (ANTM).
Future prospects
Cigna has projected that in 2016, it will manage to grow its Medicare Advantage (or MA) customer base both in existing markets and in new markets such as Kansas City. The company also expects to witness improvement in operating margins in its MA business in 2016.
In 2016, Cigna is also expected to continue offering a number of funding arrangements to its commercial customers so that they actively convert from fully-insured plans to Cigna’s self-insured plans, thus ensuring continued growth of Cigna’s administrative services only or self-insured business. To know more about Cigna’s commercial business, please refer Cigna’s Commercial Business Mostly Self-Insured.
UnitedHealth Group, Cigna, Aetna, and Anthem make up 0.62%, 0.20%, 0.20%, and 0.18%, respectively, of the portfolio holdings of the SPDR S&P 500 ETF (SPY). Hence, strong government-sponsored business can help SPY benefit from solid share price performance of major health insurance carriers.
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