CIGNA reports net income of $330M for fourth quarter 2009

CIGNA Corporation (NYSE: CI) today reported shareholders’ net income of $330 million, or $1.19 per share, for the fourth quarter of 2009 compared with a shareholders’ net loss of $209 million, or $0.77 per share, for the same period last year.

Shareholders’ net income for the fourth quarter 2009 included income related to the GMIB business of $60 million after-tax, or $0.22 per share, primarily related to favorable interest rate movements. Shareholders’ net income for the fourth quarter 2008 included losses of $408 million after-tax, or $1.51 per share, related to the GMIB and VADBe businesses.

“In 2009, each of our ongoing operations delivered solid earnings in a challenging economic and competitive environment. We continue to deliver strong service and clinical results while driving ongoing efficiency gains”

CIGNA's adjusted income from operations for the fourth quarter of 2009 was $285 million, or $1.03 per share, compared to adjusted income from operations of $132 million, or $0.48 per share, for the same period last year. Fourth quarter 2008 results included losses of $192 million after-tax, or $0.71 per share, from the VADBe business. As a result of continued stability in the equity markets, no reserve strengthening was required for the VADBe business in the fourth quarter of 2009.

For full year 2009, adjusted income from operations was $1.1 billion, or $3.98 per share, compared to adjusted income from operations of $946 million, or $3.39 per share in 2008. The adjusted income from operations³ for full year 2008 included losses of $267 million after-tax, or $0.96 per share, from the VADBe business.

"In 2009, each of our ongoing operations delivered solid earnings in a challenging economic and competitive environment. We continue to deliver strong service and clinical results while driving ongoing efficiency gains," said David M. Cordani, Chief Executive Officer of CIGNA Corporation. “In 2010 and beyond, we are committed to delivering differentiated value for our customers and attractive returns for our shareholders through the execution of our growth strategy. We remain focused on our mission to improve the health, well-being, and sense of security of the people we serve on a global basis.”

CONSOLIDATED HIGHLIGHTS

The following is a reconciliation of adjusted income from operations to shareholders’ net income (after-tax; dollars in millions, except per share amounts):

• Consolidated revenues were $4.6 billion and $18.4 billion for the fourth quarter and full year of 2009, respectively, and $4.8 billion and $19.1 billion for the comparable periods of 2008.
• Health care medical claims payable were approximately $715 million at December 31, 2009 and $713 million at December 31, 2008.
• Cash and short term investments at the parent company were approximately $475 million at December 31, 2009 and $90 million at December 31, 2008.

HIGHLIGHTS OF SEGMENT RESULTS

• “Adjusted segment earnings (loss)” are adjusted income (loss) from operations, 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 and medical management, stop-loss, and pharmacy-related products and services.

Financial Results (dollars in millions, medical membership in thousands):

• Fourth quarter 2009 adjusted segment earnings reflect effective operating expense management, as well as sustained contributions from our specialty businesses. The fourth quarter 2008 earnings included a net favorable expense adjustment of $35 million after-tax, reflecting a significant reduction in management incentive compensation.

• Premiums and fees in the fourth quarter 2009 decreased approximately 3% relative to fourth 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):

• Fourth quarter 2009 adjusted segment earnings reflect strong accident results. In addition, results continue to reflect competitively strong margins driven by the sustained value we deliver to our customers from our disability management programs.

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):

• Adjusted segment earnings in the quarter reflect unfavorable claims experience in the expatriate benefits business, due in part to the impact of global economic pressures. Fourth quarter 2009 results also included an unfavorable adjustment of $4 million after-tax related to a change in tax legislation in South Korea. Our International business continues to deliver competitively strong margins.

Other Segments

• Adjusted segment earnings (losses) for CIGNA's remaining operations are presented below (after-tax, dollars in millions):

• Run-off Reinsurance results for the fourth quarter 2009 reflect favorable commutations in the workers compensation business. As a result of continued stability in the equity markets, no reserve strengthening was required for the VADBe business this quarter.

OUTLOOK

• CIGNA continues to estimate full year 2010 consolidated adjusted income from operations to be in the range of $1.05 billion to $1.15 billion, or $3.75 to $4.15 per share. This outlook includes an assumption that VADBe results will be approximately break-even for full-year 2010, reflective of management’s view that the long-term reserve assumptions are appropriate and that capital markets remain stable during the year.
• CIGNA continues to estimate full year 2010 adjusted income from operations for the Health Care segment to be in the range of $720 million to $790 million.
• CIGNA continues to estimate full year 2010 adjusted income from operations for the Group Disability and Life and International segments to be in the range of $465 million to $495 million.
• CIGNA’s earnings and earnings per share outlooks exclude the impact of any future stock repurchase.
• Full year 2010 medical membership outlook has been updated to reflect the growth in our Individual Private Fee for Services business of approximately 80,000 to 90,000 members. Our current full-year outlook is now a range of -1% to +2%.
• Management will provide additional information about the 2010 earnings outlook on CIGNA's fourth quarter 2009 earnings call.