(Reuters) - Cigna Group's better-than-expected second-quarter profit failed to allay investor fears about persistently high costs, sending the health insurer's shares down over 4% on Thursday.
Cigna is investing in its Evernorth unit, which houses its pharmacy benefits manager (PBM) division, ahead of implementing a contract from Centene Corp next year.
It also faces increased medical costs from a spurt in demand for elective surgeries which people had postponed during the pandemic.
Morningstar analyst Julie Utterback said Cigna's investments into Evernorth led to weaker profit growth compared with strong revenue trends at the unit.
Revenue at Evernorth grew 10% to $38.21 billion, while profit rose 3% to $1.52 billion.
In October, Centene replaced CVS Health Corp's Caremark with Cigna's PBM, Express Scripts, to manage its annual pharmacy spend of around $40 billion.
Cigna expects "accelerated income growth" in the second half for Evernorth, CFO Brian Evanko said, citing increased demand for biosimilars, including those for Abbvie's arthritis treatment, Humira.
Express Scripts has four biosimilars or copycat versions of Humira on its reimbursement list, including Amgen's Amjevita.
The company maintained its annual profit forecast of at least $24.70 per share.
Cigna, which continues to expect a medical care ratio of 81.5% to 82.3% this year, said costs were likely to be highest in the fourth quarter.
Medical cost ratio — or spending on claims as a percentage of premiums — rose to 81.2%, compared with estimates of 81.95%, according to an average of four analysts polled by Refinitiv.
Overall revenue for the quarter grew 7% to $48.62 billion while adjusted income from operations fell about 8% to $1.82 billion. Analysts' were expecting revenue of $47.31 billion.
Excluding one-off items, the company reported adjusted profit from operations of $6.13 per share, compared with estimates of $6.02 per share.
(Reporting by Bhanvi Satija in BengaluruEditing by Vinay Dwivedi)
Reuters Health Information © 2023
