Health insurer Cigna reported lower-than-expected quarterly profit on Thursday. The insurer said it expects medical costs to rise in 2021 due to COVID-19 treatment and normalizing demand for discretionary healthcare services.
Cigna shares dropped about 2% after the insurer predicted a negative impact of about $1.25 per share, mainly driven by COVID-19 costs in 2021, Reuters reported.
Chief Financial Officer Brian Evanko predicted that a COVID-related decline in customer volumes in a Cigna unit that sells employer-sponsored and government health plans will contribute to the impact on shares.
A drop in patient utilization of discretionary healthcare services last year generally benefited insurers, but the costs of programs for COVID-19 testing and treatment have largely offset those benefits, Reuters reported. Cigna said it expects that trend to continue during this quarter.
Read more: Cigna beats profit expectations
In Q4, the insurer’s medical care ratio – the amount it spent on medical claims versus income from premiums – worsened to 85.8% from 82.3%. The slump was driven by COVID-19 testing and treatment costs, Reuters reported. Cigna said it projects the ratio to be in the range of 81% to 82% this year.
Cigna said it projected full-year consolidated income from operations to be at least $6.95 billion ($20 per share). That’s below the insurer’s previous target of $20-$21 per share.
“This increases the importance of Cigna presenting a next phase strategy to add growth segments to its PBM (pharmacy benefits management) and employer centric business,” Bernstein analyst Lance Wilkes said in a client note.
Excluding items, Cigna reported a profit of $3.51 per share for Q4, below the Refinitiv IBES estimate of $3.68.