Cigna Corp., the U.S. health insurer with the best-performing shares, said it will seek to expand in China and elsewhere abroad while facing the “seismic shocks” of a recession and health-care overhaul at home.
The Philadelphia-based company sees the international market as a “growth driver,” said David M. Cordani, the incoming chief executive officer, in a speech today. In the U.S., Cigna will concentrate on “middle-market” insurance plans for individuals and for businesses with fewer than 5,000 employers. The company said it expects earnings per share next year to be little changed.
Cigna said earlier this month that it anticipates enrollment in its health-care plans, now at 11 million people, will fall 5 percent or more this year as businesses cut benefits in the recession. The upheaval is pushing Cigna to shift focus from lower-growth U.S. markets and to try to expand its life- and disability-insurance lines, which accounted for a sixth of its $4.52 billion revenue in the third quarter, Cordani said.
“We stepped back in a dispassionate way to look at our business portfolio and it presented us with some fundamental choices about what we do,” he said in the speech, at a Cigna investor conference in New York City. “We made some tough choices. Our mantra is focus, focus, focus.”
Cigna already has 2,000 employees in China, where the company has a profitable business selling health and other insurance, Cordani said. The company has issued 630,000 policies in the country, he said.
Insurance Market
The potential market for health insurance outside the U.S. is $112 billion, which includes local citizens and Americans living abroad, said William Atwell, the president of Cigna’s international unit. The market, covering 30 countries, is expected to grow by 5 percent a year through 2015, he said.
Cigna’s per-share earnings will be little changed in 2010 after reaching $3.80 to $4 this year, said Annmarie Hagan, the insurer’s chief financial officer. The projection doesn’t include the effects of any share repurchases or the health-care legislation, she said.
Cordani, 43, was appointed in June to succeed H. Edward Hanway, 57, after he retires Dec. 31.
Cigna rose 19 cents to $30.03 at 4:15 p.m. in New York Stock Exchange composite trading. A 78 percent gain for the year makes Cigna the best performer in the six-member Standard & Poor’s 500 managed-care index.
Seismic Shocks
The recession and health-care legislation in Washington have been “seismic shocks” for Cigna, Hanway said in a speech. Lawmakers are considering bills that would create a government- run insurer to compete with private companies, impose new taxes on the industry and provide subsidies to expand coverage to more than 31 million uninsured Americans.
Cigna is “disappointed” the current proposals don’t focus more on reining in the country’s rising medical costs, Hanway said. For that reason, Congress is likely to return to the issue after the latest debate ends, he said.
The insurer has relatively little business now among small businesses and government-backed Medicare policies for the elderly, where profit margins are likely to suffer most under the health-care bills, Hanway said.
“We are well positioned to adapt as necessary and to compete effectively and profitably in any of the reform scenarios that are under consideration at the present,” Hanway said.
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