Assurant and Cigna: More health earnings takeaways

Assurant Inc. (NYSE:AIZ) sat out of the Patient Protection and Affordable Care Act (PPACA) health insurance exchange system this year, and Cigna Corp. (NYSE:CI) dipped a toe in.

Even though the companies tried to stay out of the way of the exchange program, executives at both had to spend much of the time during their companies’ third-quarter earnings calls talking about the effects of PPACA on major medical operations.

Assurant executives talked about how last-imine Obama administration changes in major medical market rules threw off projections about the riskiness of new off-exchange individual business.

Assurant will be trying to rebound in 2015 by selling individual qualified health plan (QHP) coverage through up to 16 public exchanges, and by increasing premiums on all of the PPACA-compliant individual business it sold off exchange.

Cigna executives were making optimistic predictions about their ability to narrow losses on individual policies over the next three years, and their hopes for getting new business from small employers with a strong interest in improving the health of their employees.

Earlier this month, WellPoint Inc. (NYSE:WLP) express confidence in and optimism about its public exchange program. Aetna Inc. (NYSE:AET) seemed to like the idea of seeing off-exchange individual and small group business migrating toward the public exchange system.

Here’s a look at three insights gleaned from the companies’ earnings reports and earnings calls. 

1. The temperature outside that public exchange system was c-o-l-d!

Cigna as a whole reported $534 million in net income for the third quarter on $8.8 billion in revenue, compared with $553 million in net income on $8.1 billion in revenue for the third quarter of 2013.

The company’s global health unit ended the quarter providing or administering medical coverage for 14 million people, about as many as it was covering a year earlier. The unit increased total premiums and fees to $6.1 billion, from $5.7 billion — but the adjusted profit margin fell to 6.3 percent, from 6.7 percent.

Assurant — a company at which health insurance accounts for just a small component of revenue — is reporting $140 million in net income on $2.7 billion in revenue, up from $129 million in net income on $2.3 billion.

The health unit there, which focuses mainly on selling individual and family medical coverage, posted $17 million in operating losses on $537 million in premiums, fees and other revenue, compared with a $6.6 million net operating profit on $406 million in revenue for the comparable quarter in 2013.

During the Cigna conference call, when a securities analyst suggested that Cigna’s small exchange program seemed to be on track to lose about $100 million after tax, David Cordani, the president, said he thought the analyst’s estimate was “probably a little bearish.” Cordani said the company sees itself as being in “version 1.0 of this marketplace.”

“We’re being highly focused on where and how we’re playing in the market,” Cordani said.

Robert Pollock, Assurant’s chief executive officer, seemed to be even less happy with the state of the individual market outside the exchange system. He called the results at his company’s health unit “disappointing.”