(Source: Business Wire)
CIGNA Corporation (NYSE: CI) today reported shareholders' net income1
of $329 million, or $1.19 per share2, for the third quarter
of 2009 compared with shareholders' net income1 of $171
million, or $0.62 per share2, for the same period last year.
Shareholders' net income1 for the third quarter 2009 included
income related to the variable annuity products3 within our
Run-off Reinsurance segment of $16 million after-tax, or $0.06 per share2,
primarily related to favorable performance in the equity markets.
Shareholders' net income1 for the third quarter 2008 included
losses of $133 million after-tax, or $0.47 per share2,
related to the variable annuity products3 within our Run-off
Reinsurance segment.
CIGNA's adjusted income from operations5 for the third
quarter of 2009 was $311 million, or $1.13 per share2,
compared to adjusted income from operations5 of $246 million,
or $0.89 per share2, for the same period last year. Third
quarter 2008 results included losses of $72 million after-tax, or $0.25
per share2, from the Variable Annuity Death Benefits (VADBe)
business. As a result of continued stability in the equity markets, no
reserve strengthening was required for the VADBe business in the third
quarter of 2009.
"Our third quarter 2009 earnings were solid and reflect our continued
focus on ongoing operating effectiveness initiatives to drive strong
service delivery and further reduce expenses, particularly in our Health
Care business," said H. Edward Hanway, Chairman and Chief Executive
Officer of CIGNA Corporation. "We remain committed to creating value for
our customers, as we continue to pursue our mission to improve the
health, well-being, and sense of security of the people we serve."
CONSOLIDATED HIGHLIGHTS
The following is a reconciliation of adjusted income from operations5
to shareholders' net income1 (after-tax; dollars in millions,
except per share amounts):
Three months ended Nine months ended
Sept. 30, Sept. 30, June 30, Sept. 30,
2009 2008 2009 2009
Adjusted income from operations(5) $ 311 $ 246 $ 313 $ 812
Net realized investment gains (losses), net of taxes 9 (15) (9) (24)
GMIB results(3), net of taxes 16 (61) 110 149
Special items(4), net of taxes (7) - 21 34
Shareholders' income(1) from continuing operations $ 329 $ 170 $ 435 $ 971
Shareholders' income (losses)(1) from discontinued operations(6) - 1 - 1
Shareholders' net income(1) $ 329 $ 171 $ 435 $ 972
Adjusted income from operations(5), per share(2) $ 1.13 $ 0.89 $ 1.14 $ 2.96
Shareholders' income(1) from continuing operations, per share(2) $ 1.19 $ 0.62 $ 1.58 $ 3.54
Shareholders' net income(1), per share(2) $ 1.19 $ 0.62 $ 1.58 $ 3.54
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Consolidated revenues were $4.5 billion for the third quarter of 2009
and $4.9 billion for the third quarter of 2008.
Health care medical claims payable7 were approximately $735
million at September 30, 2009 and $713 million at December 31, 2008.
Cash and short term investments at the parent company were
approximately $210 million at September 30, 2009 and $90 million at
December 31, 2008.
HIGHLIGHTS OF SEGMENT RESULTS
"Adjusted segment earnings (loss)" are adjusted income (loss) from
operations5, as applicable, for each segment (see Exhibit
2).
Health Care
This segment includes medical and specialty health care products and
services provided on guaranteed cost, retrospectively experience-rated
and service-only funding bases. Specialty health care includes
behavioral, dental, disease management, stop-loss, and
pharmacy-related products and services.
Financial Results (dollars in millions, medical membership in thousands):
Third Qtr. Third Qtr. Second Qtr. Nine months ended
2009 2008 2009 Sept. 30, 2009
Adjusted Segment Earnings, After-Tax $ 204 $ 187 $ 177 $ 535
Premiums and Fees $ 2,812 $ 2,991 $ 2,855 $ 8,578
Segment Margin, After-Tax(8) 6.3% 5.5% 5.4% 5.4%
Aggregate Medical Membership 11,104 11,900 11,189
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Third quarter 2009 adjusted segment earnings reflect effective
operating expense management tempered by medical cost pressure on our
guaranteed cost book of business. Results reflect sustained
contributions from the specialty businesses.
Premiums and fees in the third quarter 2009 decreased approximately 6%
relative to third quarter 2008 primarily due to a decline in medical
membership, partially offset by rate increases.
Disability and Life
This segment includes CIGNA's group disability, life, and accident
insurance operations that are managed separately from the health care
business.
Financial Results (dollars in millions):
Third Qtr. Third Qtr. Second Qtr. Nine months ended
2009 2008 2009 Sept. 30, 2009
Adjusted Segment Earnings, After-Tax $ 65 $ 70 $ 90 $ 213
Premiums and Fees $ 654 $ 627 $ 661 $ 1,987
Segment Margin, After-Tax(8) 8.7% 9.7% 12.0% 9.4%
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Third quarter 2009 adjusted segment earnings continue to reflect
competitively strong margins driven by the sustained value we deliver
to our customers from our disability management programs. Second
quarter 2009 results include a net favorable impact of $20 million
after-tax related to a reserve study.
International
This segment includes CIGNA's life, accident and supplemental health
insurance and expatriate benefits businesses operating in select
international markets.
Financial Results (dollars in millions):
Third Qtr. Third Qtr. Second Qtr. Nine months ended
2009 2008 2009 Sept. 30, 2009
Adjusted Segment Earnings, After-Tax $ 40 $ 44 $ 63 $ 144
Premiums and Fees $ 482 $ 471 $ 462 $ 1,378
Segment Margin, After-Tax(8) 8.0% 8.8% 13.0% 10.0%
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Adjusted segment earnings in the quarter reflect the impact of global
economic pressures, which included unfavorable claims experience. Our
International business continues to deliver competitively strong
margins. Second quarter 2009 results include a favorable adjustment of
$14 million related to the implementation of a capital management
strategy which reduces our effective tax rate for future periods.
Other Segments
Adjusted segment earnings (losses) for CIGNA's remaining operations
are presented below (after-tax, dollars in millions):
Third Qtr. Third Qtr. Second Qtr. Nine months ended
2009 2008 2009 Sept. 30, 2009
Run-off Reinsurance $ 14 $ (44) $ 2 $ (33)
Other Operations $ 23 $ 20 $ 21 $ 62
Corporate $ (35) $ (31) $ (40) $ (109)
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Run-off Reinsurance results for the third quarter 2009 reflect
favorable claim development in the workers compensation and personal
accident businesses. As a result of continued stability in the equity
markets, no reserve strengthening was required for the VADBe business
this quarter.
OUTLOOK
CIGNA currently estimates full year 2009 consolidated adjusted income
from operations5,9 to be in the range of $1.04 billion to
$1.10 billion, or $3.80 to $4.00 per share2. This outlook
includes an assumption that VADBe results will be approximately
break-even for the remaining three months of 2009, reflective of
management's view that the long-term reserve assumptions are
appropriate and that capital markets remain stable over the balance of
the year.
CIGNA currently estimates full year 2009 adjusted income from
operations5,9 for the Health Care segment to be in the
range of $700 million to $750 million.
CIGNA's earnings and earnings per share2 outlooks exclude
the impact of any future stock repurchase10.
Full year 2009 medical membership is expected to decline by
approximately 5% to 5.5%.
Management will provide additional information about the 2009 earnings
outlook and discuss the 2010 earnings outlook on CIGNA's third quarter
2009 earnings call.
The foregoing statements represent management's current estimate of
CIGNA's 2009 consolidated and Health Care segment adjusted income from
operations5,9 as of the date of this release. Actual results
may differ materially depending on a number of factors, and investors
are urged to read the Cautionary Statement included in this release for
a description of those factors. Management does not assume any
obligation to update these estimates.
This quarterly earnings release and the Quarterly Statistical Supplement
inclusive of the Investment Supplement are available on CIGNA's website
in the Investor Relations, Most Recent Disclosures section (http://www.cigna.com/about_us/investor_relations/recent_disclosures.html).
A link to the conference call, on which management will review third
quarter 2009 results and discuss full year 2009 and 2010 outlook is
available in the Investor Relations, Event Calendar section of CIGNA's
website (http://www.cigna.com/about_us/investor_relations/events.html).
Notes:
1. Effective January 1, 2009, CIGNA adopted the Financial
Accounting Standards Board's (FASB's) updated consolidation guidance on
accounting for noncontrolling interests (ASC 810-10), which requires
income attributable to noncontrolling interests to be included in income
from continuing operations, income from discontinued operations, and net
income, but then be subtracted out to determine shareholders' income
from continuing operations, shareholders' income from discontinued
operations, and shareholders' net income.
2. Earnings per share (EPS) are on a diluted basis. Effective
January 1, 2009, CIGNA adopted the FASB's updated earnings per share
guidance (ASC 260-10) which requires unvested restricted stock awards
that contain rights to non-forfeitable dividends to be included in both
basic and diluted earnings per share calculations. Prior period
earnings per share data have been restated to reflect the adoption of
this guidance.
3. The application of the FASB's fair value disclosure and
measurement guidance (ASC 820-10), which impacts reinsurance contracts
covering GMIB, does not represent management's expectation of the
ultimate payout. Changes in underlying contract holder account
values, interest rates, stock market volatility, and other factors may
result in changes to the fair value assumptions, and/or amount that will
be required to ultimately settle the Company's obligations, which could
result in a material adverse or favorable impact on the Run-off
Reinsurance segment and CIGNA's results of operations.
4. Special items included in shareholders' net income and
segment earnings (loss), but excluded from adjusted income (loss) from
operations, adjusted segment earnings, and the calculation of segment
margins are:
Third Quarter 2009
After-tax charge of $7 million related to CIGNA's previously
announced cost reduction plan.
Second Quarter 2009
After-tax benefit of $30 million related to the decision to freeze
the CIGNA Pension Plan and CIGNA Supplemental Pension Plan, effective
July 1, 2009.
After-tax charge of $9 million related to CIGNA's previously
announced cost reduction plan.
Nine months ended September 30, 2009
After-tax benefit of $20 million related to completion of an IRS
examination and after-tax benefit of $30 million related to the
decision to freeze the CIGNA Pension Plan and CIGNA Supplemental
Pension Plan, effective July 1, 2009, partially offset by after-tax
charge of $16 million related to CIGNA's cost reduction plan.
5. CIGNA measures the financial results of its segments using
Segment Earnings (Loss), which is defined as shareholders' income (loss)
from continuing operations before net realized investment results. Adjusted
income (loss) from operations is defined as segment earnings excluding
special items (which are identified and quantified in Note 4) and
excludes results of CIGNA's GMIB business. Adjusted income (loss)
from operations is a measure of profitability used by CIGNA's management
because it presents the underlying results of operations of CIGNA's
businesses and permits analysis of trends in underlying revenue,
expenses and shareholders' net income. This measure is not
determined in accordance with generally accepted accounting principles
(GAAP) and should not be viewed as a substitute for the most directly
comparable GAAP measures, which are segment earnings (loss),
shareholders' income from continuing operations, and shareholders' net
income. See Exhibit 2 for a reconciliation of adjusted income
(loss) from operations to segment earnings (loss), shareholders' income
from continuing operations, and consolidated shareholders' net income.
6. The discontinued operations included in shareholders' net
income are:
Third Quarter 2008 and Nine months ended September 30, 2009
Primarily due to after-tax benefit of $1 million related to past
divestitures.
7. Health care medical claims payable are presented net of
reinsurance and other recoverables. The gross health care medical
claims payable balance was $932 million as of September 30, 2009 and
$924 million as of December 31, 2008.
8. Segment margins in this press release are calculated by
dividing adjusted segment earnings by segment revenues. Segment
margins including special items for Health Care were 6.2% for the three
months ended September 30, 2009, 5.9% for the three months ended June
30, 2009, and 5.6% for the nine months ended September 30, 2009. Segment
margins including special items for Disability and Life were 8.6% for
the three months ended September 30, 2009, 12.4% for the three months
ended June 30, 2009, and 9.8% for the nine months ended September 30,
2009. Segment margins including special items for International
were 7.6% for the three months ended September 30, 2009, 13.2% for the
three months ended June 30, 2009, and 10.0% for the nine months ended
September 30, 2009.
9. Information is not available for management (1) to
reasonably estimate future net realized investment gains (losses) or (2)
to reasonably estimate future GMIB business results due in part to
interest rate and stock market volatility and other internal and
external factors; therefore it is not possible to provide a
forward-looking reconciliation of adjusted income from operations to
shareholders' income from continuing operations. Special items
for the remainder of 2009 may include potential charges associated with
the previously announced cost reduction plan as well as litigation
related items. Information is not available for management to
identify, other than this item, or reasonably estimate additional 2009
special items.
10. Repurchases may from time to time be made pursuant to
written trading plans under Rule 10b5-1, which permit shares to be
repurchased when CIGNA might otherwise be precluded from doing so under
insider trading laws or because of self-employed trading blackout
periods.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company and its representatives may from time to time make written
and oral forward-looking statements, including statements contained in
press releases, in the Company's filings with the Securities and
Exchange Commission, in its reports to shareholders and in meetings with
analysts and investors. Forward-looking statements may contain
information about financial prospects, economic conditions, trends and
other uncertainties. These forward-looking statements are based on
management's beliefs and assumptions and on information available to
management at the time the statements are or were made. Forward-looking
statements include but are not limited to the information concerning
possible or assumed future business strategies, financing plans,
competitive position, potential growth opportunities, potential
operating performance improvements, trends and, in particular, the
Company's productivity initiatives, litigation and other legal matters,
operational improvement in the health care operations, and the outlook
for the Company's full year 2009 and 2010 results. Forward-looking
statements include all statements that are not historical facts and can
be identified by the use of forward-looking terminology such as the
words "believe", "expect", "plan", "intend", "anticipate", "estimate",
"predict", "potential", "may", "should" or similar expressions.
You should not place undue reliance on these forward-looking statements.
The Company cautions that actual results could differ materially from
those that management expects, depending on the outcome of certain
factors.
