AET Aetna Inc. (delisted)

Cigna Corp. slashed its guidance for the year and posted second-quarter earnings sharply below expectations, dragged by weakness in the group disability and life segment.

For 2016, the company now anticipates earnings of $7.75 to $8.10 a share, down from its previous forecast for $8.95 to $9.35 a share.

Chief Executive David Cordani said a current headwind in group disability and life pressured overall results.

"We are taking a series of corrective actions to stabilize and improve group disability and life results," he said

The Bloomfield, Conn., insurer said it had 15.14 million total medical customers at the end of the June quarter, compared with 14.77 million a year earlier and 15.12 million in the previous quarter.

In Cigna's global health-care business, premiums and fees revenue grew 3.1% to $6.94 billion, driven by customer growth, specialty contributions, and rate actions in the commercial employer group business, partially offset by expected reductions in Medicare Part D and individual customers.

The group disability and life segment swung to a $12 million loss after earning $106 million in the quarter a year ago and $15 million in the previous quarter, reflecting "modifications to our disability claims management process implemented in the first quarter and poor life claim experience."

In all for the quarter, Cigna posted earnings of $510 million, or $1.97 a share, down from $588 million, or $2.26 a share, a year ago. Income in the 2015 quarter included an after-tax charge of $26 million, or 10 cents a share, for transaction costs related to Cigna's proposed merger with Anthem Inc.

Excluding certain items, earnings from operations fell to an adjusted $1.98 a share from $2.55 a share. Revenue grew 4.9% to $9.96 billion.

Analysts polled by Thomson Reuters had projected earnings of $2.39 a share on $9.97 billion in revenue.

Cigna said its medical-loss ratio, or the share of premiums paid out for members' health expenses, was 86.4% for its government-based business, which the company attributed to strong performance in the Medicare Advantage business and less prior year reserve development. The medical-loss ratio for commercial members was 78.8%, reflecting continued strong performance of the commercial employer business, partially offset by higher medical costs in the individual business.

Shares of Cigna, inactive premarket, have slipped 1.8% over the past three months.

Anthem's agreement last July to buy Cigna capped months of merger frenzy among top U.S. health insurers that is set to reshape the industry. The deal combines the second- and fifth-largest health insurers by revenue and would create a company with a huge footprint in commercial insurance, the type of coverage provided to employers and consumers.

The biggest companies in the field are seeking more cost efficiency and scale as the health-care landscape changes because of the Affordable Care Act and other factors.

But last week, the Justice Department filed a pair of lawsuits in a Washington, D.C., federal court challenging Anthem's proposed acquisition of Cigna and Aetna Inc.'s planned combination with Humana Inc., alleging the mergers would harm consumers, employers and health-care providers with an unacceptable reduction in competition.

Anthem and Cigna put out separate statements setting markedly different tones, amid lingering tension between the companies. Anthem said it is "fully committed to challenging the DOJ's decision in court but will remain receptive to any efforts to reach a settlement."

Cigna noted that Anthem had led the regulatory process and said it is "currently evaluating its options consistent with its obligations under the agreement."

Cigna didn't comment on the merger while releasing its earnings Friday.

Earlier this week, Aetna said it is now projecting losses on its Affordable Care Act plans this year, a turnaround for a major insurer that had maintained a relatively optimistic tone about that business.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

July 29, 2016 07:35 ET (11:35 GMT)

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