NEWS RELEASE |
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Contact:
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Ted Detrick, Investor Relations – (215) 761-1414
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Matt Asensio, Media Relations – (860) 226-2599
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o
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Consolidated revenues increased to a total of $8.5 billion in the first quarter.
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o
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Adjusted income from operations1 was $501 million, or $1.83 per share, which represents per share growth of 6% over first quarter 2013.
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Shareholders’ net income for first quarter was $528 million, or $1.92 per share.
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Cigna grew its global medical business2 by 90,000 customers in the first quarter.
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Projected adjusted income from operations1,3 for 2014 is now estimated to be in the range of $1.93 billion to $2.0 billion, or $7.05 to $7.35 per share.4
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Three Months Ended
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March 31,
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December 31,
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2014
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2013
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2013
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Total Revenues
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$ | 8,496 | $ | 8,183 | $ | 8,151 | ||||||
Consolidated Earnings
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Adjusted income from operations1
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$ | 501 | $ | 497 | $ | 387 | ||||||
Net realized investment gains, net of taxes
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27 | 93 | 14 | |||||||||
GMIB results, net of taxes6
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- | 25 | - | |||||||||
Special items, net of taxes5
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- | (558 | ) | (40 | ) | |||||||
Shareholders' net income
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$ | 528 | $ | 57 | $ | 361 | ||||||
Adjusted income from operations1, per share
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$ | 1.83 | $ | 1.72 | $ | 1.39 | ||||||
Shareholders' net income, per share
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$ | 1.92 | $ | 0.20 | $ | 1.29 |
As of the Periods Ended
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March 31,
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December 31,
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2014
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2013
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2013
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Global Medical Customers (ex. Limited Benefits)2
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14,168 | 14,134 | 14,078 |
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Cash and short term investments at the parent company were approximately $475 million at March 31, 2014 and approximately $760 million at December 31, 2013.
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During the period from February 7, 2014 through April 30, 2014, the Company repurchased approximately 5.4 million shares of stock for approximately $425 million.
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Year to date, as of April 30, 2014, the Company repurchased approximately 8.0 million shares of stock for approximately $650 million.
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Three Months Ended
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March 31,
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December 31,
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2014
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2013
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2013
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Premiums and Fees
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$ | 5,994 | $ | 5,824 | $ | 5,723 | ||||||
Adjusted Income from Operations1
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$ | 439 | $ | 427 | $ | 318 | ||||||
Adjusted Margin, After-Tax7
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6.6 | % | 6.7 | % | 5.0 | % | ||||||
As of the Periods Ended
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March 31,
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December 31,
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Customers:
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2014
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2013
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2013
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Commercial (ex. Limited Benefits)2
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13,685 | 13,660 | 13,586 | |||||||||
Medicare and Medicaid
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483 | 474 | 492 | |||||||||
Medical (ex. Limited Benefits)2
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14,168 | 14,134 | 14,078 | |||||||||
Behavioral Care
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22,717 | 21,977 | 22,515 | |||||||||
Dental8
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12,628 | 12,285 | 12,234 | |||||||||
Pharmacy
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7,197 | 6,922 | 7,095 | |||||||||
Medicare Part D
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1,241 | 1,213 | 1,190 |
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Global Health Care results reflect continued growth in the Company’s targeted customer segments.
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First quarter premiums and fees increased approximately 3% relative to first quarter 2013, driven by Commercial specialty contributions and renewal rate increases, partially offset by the exit of the Limited Benefits business due to ACA regulation, funding mix shift in the Commercial business as well as rate pressure in our Seniors business.
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Adjusted income from operations1 and adjusted margin, after-tax7 reflect favorable operating expenses, in part due to timing, and effective medical cost management in both our Commercial Employer and Medicare Advantage businesses. These results include favorable prior year reserve development on an after-tax basis of approximately $30 million for first quarter 2014, compared to $48 million for first quarter 2013.
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Global Health Care net medical claims payable9 was approximately $1.9 billion at both March 31, 2014 and December 31, 2013.
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Three Months Ended
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March 31,
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December 31,
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2014
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2013
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2013
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Premiums and Fees10
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$ | 680 | $ | 604 | $ | 662 | ||||||
Adjusted Income from Operations1
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$ | 53 | $ | 55 | $ | 40 | ||||||
Adjusted Margin, After-Tax7
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7.4 | % | 8.6 | % | 5.8 | % | ||||||
As of the Periods Ended
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March 31,
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December 31,
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2014
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2013
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2013
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Policies10
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12,021 | 11,586 | 11,869 |
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First quarter 2014 premiums and fees grew 13% relative to first quarter 2013, reflecting customer growth across multiple markets.
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Adjusted income from operations1 and adjusted margin, after-tax7 reflect the impact of strong customer retention, business growth and effective operating expense management as well as modest claim pressure in South Korea.
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Three Months Ended
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March 31,
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December 31,
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2014
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2013
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2013
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Premiums and Fees
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$ | 916 | $ | 858 | $ | 873 | ||||||
Adjusted Income from Operations1
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$ | 67 | $ | 49 | $ | 66 | ||||||
Adjusted Margin, After-Tax7
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6.7 | % | 5.2 | % | 6.9 | % |
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First quarter 2014 results benefited from premium and fee growth of 7% relative to first quarter 2013, due to business growth and strong retention in both disability and life businesses.
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Adjusted income from operations1 and adjusted margin, after-tax7 for the first quarter 2014 reflect business growth and lower benefit and operating expense ratios compared to first quarter 2013.
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Three Months Ended
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March 31,
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December 31,
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2014
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2013
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2013
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Corporate & Other Operations6
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$ | (58 | ) | $ | (34 | ) | $ | (37 | ) | |||
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First quarter 2014 results reflect higher operating expenses and a less favorable effective tax rate.
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Cigna's outlook for full year 2014 consolidated adjusted income from operations1,3 is in the range of $1.93 billion to $2.0 billion, or $7.05 to $7.35 per share4. Cigna’s outlook excludes the potential effects of future capital deployment.4
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(dollars in millions, except where noted and per share amounts)
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Full-Year Ended
December 31, 2014
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Projected Adjusted Income (Loss) from Operations1,3
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Global Health Care
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$ | 1,605 to 1,635 | |
Global Supplemental Benefits
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195 to 215
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Group Disability and Life
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305 to 325
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Ongoing Businesses
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$ | 2,105 to 2,175 | |
Corporate & Other Operations
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$ | (175) | |
Consolidated Projected Adjusted Income from Operations1,3
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$ | 1,930 to 2,000 | |
Consolidated Projected Adjusted Income from Operations, per share1,3
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$ | 7.05 to 7.35 | |
Projected Global Medical Customer Growth (ex-Limited benefits)2
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1% to 2%
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1.
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Adjusted income (loss) from operations is defined as segment earnings (loss) excluding (i) special items (which are identified and quantified in Exhibit 2 to this release) and (ii) the results of Cigna's Guaranteed Minimum Income Benefits (GMIB) business. Segment earnings (loss) is defined as shareholders’ net income (loss) before net realized investment results.
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2.
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In connection with U.S. health care reform legislation, the Company ceased offering Limited Medical Benefits products effective December 31, 2013. Therefore, the Company’s medical customer growth expectations for 2014 exclude these products from the 2013 customer numbers. As of March 31, 2013 and December 31, 2013, there were 188,000 and 139,000 customers enrolled in these products, respectively.
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3.
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Management is unable to provide a forward-looking reconciliation of adjusted income from operations to shareholders’ net income for full year 2014 since future net realized investment results and special items cannot be identified or reasonably estimated at this time.
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4.
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The Company may repurchase shares of its common stock from time to time. The Company’s outlook excludes the potential effects of any share repurchases that may occur after the date of this release.
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5.
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Special items are included in shareholders’ net income and segment earnings (loss), but excluded from adjusted income (loss) from operations. Special items are identified on Exhibit 2 to this earnings release.
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6.
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The GMIB business and Guaranteed Minimum Death Benefits business, also known as Variable Annuity Death Benefits (VADBe), have been in run-off since 2000. Cigna entered into a definitive agreement with Berkshire Hathaway to exit the GMIB and VADBe businesses, effective February 4, 2013.
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Prior to first quarter of 2014, the GMIB and VADBe businesses were reported within the Runoff Reinsurance segment. Beginning with the first quarter of 2014, Cigna reports its run-off reinsurance business in Other Operations. In addition, in this earnings release, Other Operations and Corporate have been combined under the heading “Corporate and Other Operations.” Prior year information has been conformed to the current presentation.
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7.
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Adjusted margin, after-tax, is calculated by dividing segment earnings (loss) excluding special items by segment revenues. Segment margin is calculated by dividing segment earnings (loss) by segment revenue. For the three months ended March 31, 2014 segment margins were equal to adjusted margins. For the three months ended December 31, 2013 and March 31, 2013, segment margins were 4.5% and 6.7% for Global Health Care, respectively, 4.6% and 8.6% for Global Supplemental Benefits, respectively, and 6.8% and -0.2% for Group Disability and Life, respectively.
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8.
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Prior period dental membership has been revised to conform to current presentation.
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9.
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Global Health Care medical claims payable are presented net of reinsurance and other recoverables. The gross Global Health Care medical claims payable balance was $2,151 million as of March 31, 2014 and $2,050 million as of December 31, 2013.
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10.
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Cigna owns a 50% noncontrolling interest in its China joint venture. Cigna's 50% share of the joint venture’s earnings is reported in Other Revenues using the equity method of accounting under GAAP. As such, the premiums and fees and policy counts for the Global Supplemental Benefits segment do not include the China joint venture.
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CIGNA CORPORATION
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COMPARATIVE SUMMARY OF FINANCIAL RESULTS (unaudited)
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Exhibit 1
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(Dollars in millions, except per share amounts)
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Three Months Ended
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March 31,
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2014
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2013
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REVENUES
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Premiums and fees
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$ | 7,616 | $ | 7,314 | ||||
Net investment income
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277 | 287 | ||||||
Mail order pharmacy revenues
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495 | 425 | ||||||
Other revenues (1)
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66 | 18 | ||||||
Total operating revenues
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8,454 | 8,044 | ||||||
Net realized investment gains
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42 | 139 | ||||||
Total
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$ | 8,496 | $ | 8,183 | ||||
ADJUSTED INCOME (LOSS) FROM OPERATIONS (2)
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Global Health Care
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$ | 439 | $ | 427 | ||||
Global Supplemental Benefits
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53 | 55 | ||||||
Group Disability and Life
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67 | 49 | ||||||
Ongoing Operations
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559 | 531 | ||||||
Corporate and Other
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(58 | ) | (34 | ) | ||||
Total
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$ | 501 | $ | 497 | ||||
SHAREHOLDERS' NET INCOME
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Segment Earnings (Loss) (2)
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Global Health Care
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$ | 439 | $ | 427 | ||||
Global Supplemental Benefits
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53 | 55 | ||||||
Group Disability and Life
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67 | (2 | ) | |||||
Ongoing Operations
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559 | 480 | ||||||
Corporate and Other
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(58 | ) | (516 | ) | ||||
Total
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501 | (36 | ) | |||||
Net realized investment gains, net of taxes
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27 | 93 | ||||||
Shareholders' net income
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$ | 528 | $ | 57 | ||||
DILUTED EARNINGS PER SHARE
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Adjusted income from operations (2)
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$ | 1.83 | $ | 1.72 | ||||
Results of guaranteed minimum income benefits business, after-tax
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- | 0.09 | ||||||
Net realized investment gains, net of taxes
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0.09 | 0.32 | ||||||
Special items, after-tax
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- | (1.93 | ) | |||||
Shareholders' net income
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$ | 1.92 | $ | 0.20 | ||||
Weighted average shares (in thousands)
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274,467 | 289,258 | ||||||
SHAREHOLDERS' EQUITY at March 31,
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$ | 10,556 | $ | 9,660 | ||||
SHAREHOLDERS' EQUITY PER SHARE at March 31,
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$ | 39.28 | $ | 33.79 | ||||
Beginning with the first quarter of 2014, Cigna reports its run-off reinsurance business in Other Operations. In addition, Other Operations and Corporate have been combined under the heading "Corporate and Other." Prior year information has been conformed to the new format.
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(1) Includes pre-tax futures and swaps contracts associated with the dynamic hedge program that was terminated after February 4, 2013 as a result of Cigna's agreement with Berkshire Hathaway in which Cigna effectively exited the Run-off Reinsurance business.
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(2) Adjusted income (loss) from operations is defined as segment earnings excluding special items (identified and quantified on Exhibit 2) and results of Cigna's guaranteed minimum income benefits business. Segment earnings (loss) is defined as shareholders' net income (loss) before net realized investment gains (losses).
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CIGNA CORPORATION
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RECONCILIATION OF ADJUSTED INCOME (LOSS) FROM OPERATIONS TO SHAREHOLDERS' NET INCOME
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Exhibit 2 | ||||||||||||||||||||||||||
(Dollars in millions, except per share amounts)
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Diluted
Earnings |
Global
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Per Share
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Consolidated
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Health Care
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1Q14 | 1Q13 | 4Q13 | 1Q14 | 1Q13 | 4Q13 | 1Q14 | 1Q13 | 4Q13 | ||||||||||||||||||||||||||||
Adjusted income (loss) from operations
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$ | 1.83 | $ | 1.72 | $ | 1.39 | $ | 501 | $ | 497 | $ | 387 | $ | 439 | $ | 427 | $ | 318 | ||||||||||||||||||
Results of guaranteed minimum income benefits business
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- | 0.09 | - | - | 25 | - | - | - | - | |||||||||||||||||||||||||||
Special items, after-tax:
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Charge related to reinsurance transaction
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- | (1.75 | ) | - | - | (507 | ) | - | - | - | - | |||||||||||||||||||||||||
Charge for disability claims regulatory matter
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- | (0.18 | ) | - | - | (51 | ) | - | - | - | - | |||||||||||||||||||||||||
Charges for organization efficiency plans
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- | - | (0.15 | ) | - | - | (40 | ) | - | - | (31 | ) | ||||||||||||||||||||||||
Segment earnings (loss)
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1.83 | (0.12 | ) | 1.24 | 501 | (36 | ) | 347 | $ | 439 | $ | 427 | $ | 287 | ||||||||||||||||||||||
Net realized investment gains, net of taxes
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0.09 | 0.32 | 0.05 | 27 | 93 | 14 | ||||||||||||||||||||||||||||||
Shareholders' net income
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$ | 1.92 | $ | 0.20 | $ | 1.29 | $ | 528 | $ | 57 | $ | 361 | ||||||||||||||||||||||||
Special items, pre-tax:
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Charge related to reinsurance transaction
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$ | - | $ | (781 | ) | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||||||
Charge for disability claims regulatory matter
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- | (77 | ) | - | - | - | - | |||||||||||||||||||||||||||||
Charges for organization efficiency plans
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- | - | (60 | ) | - | - | (47 | ) | ||||||||||||||||||||||||||||
$ | - | $ | (858 | ) | $ | (60 | ) | $ | - | $ | - | $ | (47 | ) | ||||||||||||||||||||||
CIGNA CORPORATION
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RECONCILIATION OF ADJUSTED INCOME (LOSS) FROM OPERATIONS TO SHAREHOLDERS' NET INCOME
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Exhibit 2
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(Dollars in millions, except per share amounts)
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Global
Supplemental
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Group Disability
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Corporate
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Benefits
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and Life
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and Other
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1Q14 | 1Q13 | 4Q13 | 1Q14 | 1Q13 | 4Q13 | 1Q14 | 1Q13 | 4Q13 | ||||||||||||||||||||||||||||
Adjusted income (loss) from operations
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$ | 53 | $ | 55 | $ | 40 | $ | 67 | $ | 49 | $ | 66 | $ | (58 | ) | $ | (34 | ) | $ | (37 | ) | |||||||||||||||
Results of guaranteed minimum income benefits business
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- | - | - | - | - | - | - | 25 | - | |||||||||||||||||||||||||||
Special items, after-tax:
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Charge related to reinsurance transaction
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- | - | - | - | - | - | - | (507 | ) | - | ||||||||||||||||||||||||||
Charge for disability claims regulatory matter
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- | - | - | - | (51 | ) | - | - | - | - | ||||||||||||||||||||||||||
Charges for organization efficiency plans
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- | - | (8 | ) | - | - | (1 | ) | - | - | - | |||||||||||||||||||||||||
Segment earnings (loss)
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$ | 53 | $ | 55 | $ | 32 | $ | 67 | $ | (2 | ) | $ | 65 | $ | (58 | ) | $ | (516 | ) | $ | (37 | ) | ||||||||||||||
Net realized investment gains, net of taxes
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Shareholders' net income
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Special items, pre-tax:
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Charge related to reinsurance transaction
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$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | (781 | ) | $ | - | |||||||||||||||||
Charge for disability claims regulatory matter
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- | - | - | - | (77 | ) | - | - | - | - | ||||||||||||||||||||||||||
Charges for organization efficiency plans
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- | - | (11 | ) | - | - | (2 | ) | - | - | - | |||||||||||||||||||||||||
$ | - | $ | - | $ | (11 | ) | $ | - | $ | (77 | ) | $ | (2 | ) | $ | - | $ | (781 | ) | $ | - |