Cigna Corp. on Nov. 4 reported a higher-than-expected medical loss ratio (MLR) for the third quarter of 2021, which the company blamed on rising medical costs from COVID-19 care and from high utilization among customers who signed up for Affordable Care Act exchange plans during the pandemic special enrollment period. However, equities analysts were not overly concerned, noting that most investors saw the “MLR miss” coming and that Cigna did beat Wall Street consensus estimates for its quarterly earnings.

The insurer’s MLR for the quarter was 84.4%, which was higher/worse than the consensus estimate of 83.0% as well as up from the 82.6% MLR recorded in the third quarter of 2020. But its adjusted earnings per share (EPS) of $5.73 for the quarter beat the consensus estimate of $5.12, and its adjusted revenues of $44.3 billion also beat the Street’s expectations of $43 billion.

“Given commentary from peers around higher commercial trends, and considering prior guidance that did not appear to factor in higher trajectory of cost, we don’t believe the MLR miss was surprising,” Citi analyst Ralph Giacobbe advised investors in a Nov. 4 note. “Moreover, despite the lower quality, management was able to drive EPS upside, and all focus will shift to 2022 and commentary around pricing and visibility to still grow in the 10%-13% range next year.” The “lower quality” Giacobbe referred to stemmed from the fact that Cigna’s higher-than-expected EPS was “driven in part by higher investment income and lower tax rate and share count,” he explained.

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