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$CI's Global Health Care medical costs for 3Q15 rose by 9% from last year, primarily due to customer growth in its government business and, to lesser extent, medical cost inflation. Mail order pharmacy costs grew by 7%, primarily due to increased volume from higher customer base and home delivery utilization as well as higher unit costs.
Despite the volatility in healthcare insurance market, $CI posted higher profit in 3Q17, boosted by low medical costs. Shareholders' net income surged 23% to $560MM or $2.21 per share, while revenue grew 5% to $10.4Bil. Adjusted EPS from operations spiked up 46% to $2.83, which included $0.85 per share of special charges.
$CI is attempting to reduce opioid use among its customers by 25% by 2019. Drug lists are regularly evaluated to eliminate inappropriate use of opioids. Due to this, the brand OxyContin is no longer covered as a preferred option on $CI’s group commercial drug lists effective January 1, 2018. Doctors will be advised to seek alternative options.
$CI remains committed to 10-13% long-term EPS growth rate and strategic objectives to achieve $16 of EPS out in 2021. $CI would expect to grow revenue as well as earnings off of its 2017 base. $CI has a great track record of producing very strong cash flows and it expects that to continue in 2018 as well as to maintain very strong capital position.
$CI sees meaningful growth opportunities in its targeted international markets. The company said the global health marketplace is large, complex, and changing rapidly, which provides Cigna with potential for attractive growth and ongoing value creation.
$CI lifted its FY17 adjusted income from operations outlook to $2.50-2.58Bil from $2.41-2.53Bil and its adjusted EPS from operations to $9.75-10.05 from $9.25-9.75. The outlook excludes the impact of additional prior year reserve development and potential effects of any future capital deployment. Total revenue growth is still expected at 3-4%.
$CI's Global Supplemental Benefits results for 2Q17 continue to reflect the value created by affordable and personalized solutions delivered directly to individual consumers through a diversified set of distribution channels. Premiums and fees for 2Q17 grew 14% over the previous year quarter, reflecting continued business growth.
$CI's Global Health Care delivered strong results in 2Q17, reflecting consistent performance in well-positioned growth businesses. The medical customer base at the end of 2Q17 totaled 15.7MM, an increase of 457,000 customers year to date, driven by organic growth in all of its Commercial market segments.
$CI reported a jump in 2Q17 earnings driven by strong performance across its Global Health Care, Global Supplemental Benefits and Group Disability & Life segments. Net income grew to $813MM or $3.15 per share from $510MM or $1.97 per share last year. Revenue rose 4% to $10.32Bil. Adjusted EPS from operations increased to $2.91 from $1.98.
$CI said that the Medicaid business in Illinois, which company has planned to exit, is running at near breakeven. $CI is not characterizing this business as a major headwind or tailwind in terms of the impact. The individual commercial business is in line with expectations and margins were negative, but still better than last year, $CI said.
$CI stated that Medicaid is a small business for it and saw an increase in Medicaid MCR in Texas and Illinois towards the end of the last year and elevated a little bit in 1Q17. $CI does not plan to participate in the Illinois Medicaid market beyond the end of this year. The exit of that business is considered in the outlook, the company said.