Cigna tumbles after the quarterly profit reached by medical costs

(Bloomberg) – The actions of the Cigna group were collapsed after the health insurer said that his fourth quarter had been affected by surprisingly high costs of the plans used by employers to cover catastrophic medical complaints.

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The shares have slipped up to 10% when the markets opened in New York, their greatest intraday loss since November 2022. The drop has erased the gain of 9.8% of Cigna this year at the end of Wednesday.

The report fueled investor fears about medical costs out of control after United also pointed out. Cigna’s insurance activity, which focuses on private health plans, was considered less exposed to expenses than Medicare and Medicaid health plans have seen in the latter quarters.

Cigna’s health services segment spent 87.9% of premium income on medical expenses in the fourth quarter, more than analysts were waiting. The insurer blamed these costs on the “loss of stopping” plans, the coverage that some employers buy to limit the loss of particularly expensive complaints.

“We had a greater frequency of high dollars seekers than we expected,” said Cigna’s financial director Brian Evanko during an appeal with investors, highlighting the costs of surgeries and medication against Cancer.

Cigna said high costs would weigh on the margins for the next two years. The company plans to spend 83.2% to 84.2% of 2025 medical costs on medical costs, compared to the average estimate of 81.8%. Investors prefer a lower number.

The adjusted income of operations was $ 6.64 per share during the three months closed on December 31, less than the average estimate. The profit in 2025 will be at least $ 29.50 per share, said Cigna. It is also below the average estimate of the analyst of $ 31.50 compiled by Bloomberg.

These results are “likely to attract the most attention today, given the recent solid performance of Cigna shares,” said Jared Holz de Mizuho in a note. Forecasts seem “more conservative than improbable but need to see how it shakes”.

The insurer also operates a pharmacy service manager, who negotiates the prices of medicines between manufacturers, insurers and pharmacies. Drugs were under fire of certain Washington legislators who say PBM increases drugs.

(Updates with opening actions, business comments starting in the second paragraph.)

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