CIGNA second-quarter consolidated revenues increase to $5.4 billion

CIGNA Corporation (NYSE: CI) today reported shareholders' net income of $294 million, or $1.06 per share, for the second quarter of 2010 compared with shareholders' net income of $435 million, or $1.58 per share, for the same period last year. Shareholders' net income included a loss of $0.37 per share in the second quarter of 2010 and income of $0.40 per share for the same period last year from results of the GMIB business, primarily related to interest rate movements. Second quarter 2009 results also included two special items; a benefit of $30 million after-tax, or $0.11 per share, related to the decision to freeze the CIGNA Pension Plan and CIGNA Supplemental Pension Plan and an after-tax charge of $9 million, or $0.04 per share, which represented incremental actions related to CIGNA's previously announced cost reduction plan.

“Our second quarter 2010 results demonstrate that we continue to effectively execute our global growth strategy”

CIGNA's adjusted income from operations for the second quarter of 2010 was $384 million, or $1.38 per share, compared to adjusted income from operations of $313 million, or $1.14 per share, for the same period last year.

"Our second quarter 2010 results demonstrate that we continue to effectively execute our global growth strategy," said David M. Cordani, President and Chief Executive Officer of CIGNA Corporation. "Our focus is on delivering value for our customers and shareholders. We do that by listening, understanding, and helping our customers and by leveraging our diverse portfolio of solutions that are aligned with our mission to help people around the world improve their health, well-being and sense of security. I'm proud of what we've accomplished and now look forward to continuing to deliver on our mission and maintaining our positive trajectory."

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 $5.4 billion and $4.5 billion for the second quarters of 2010 and 2009, respectively. Year over year growth reflects strong retention and new sales in targeted market segments. This is a result of the Company's efforts to enhance customer access, improve the quality of care and provide products and services on a cost effective basis through more than 60 million customer relationships we maintain with individuals we serve throughout the United States and around the world.
• Cash and short term investments at the parent company were approximately $720 million at June 30, 2010 and $475 million at December 31, 2009.
• The Company repurchased approximately 3.7 million shares of its stock on the open market for $123 million during the second quarter of 2010 and approximately 2.5 million shares for $77 million from July 1, 2010 to August 4, 2010.

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):

• Overall, results in our Health Care segment reflect focused execution of our growth strategy, driven by strong retention and new sales in our key customer segments and geographies. In addition, results demonstrate strong clinical quality and competitively attractive medical costs for all of our customers, 80% of which we serve through self-funded relationships.
• Second quarter 2010 adjusted segment earnings include favorable prior year claim development of approximately $14 million after-tax, as well as favorable first quarter claim development of approximately $26 million after-tax related to lower-than-expected utilization levels and seasonally low claims related to growth in high deductible plans. Results also include membership growth and strong contributions from our specialty products, as well as continued operating expense improvements.
• Premiums and fees in the second quarter 2010 increased approximately 15% relative to second quarter 2009, primarily due to net membership growth and a change in membership mix, which includes a higher percentage of commercial and Medicare related risk businesses.
• Health care medical claims payable increased to approximately $1.0 billion at June 30, 2010 from $715 million at December 31, 2009, primarily due to membership growth in our commercial and Medicare related risk businesses.

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):

• Segment results include strong retention and new sales of our disability management programs which help employees return to work, resulting in increased productivity and lower costs for our customers.
• Second quarter 2010 adjusted segment earnings also include the net favorable impact of $29 million after-tax related to reserve studies on our disability book of business, reflecting continued operating excellence in our disability management programs. Second quarter 2009 and first quarter 2010 results also included the net favorable impact of reserve studies of $20 million after-tax for our disability and $10 million after-tax for our life books of business, respectively.

International

• This segment includes CIGNA's supplemental health, life, and accident insurance and expatriate benefits businesses operating in select international markets.

Financial Results (dollars in millions):

• Segment results reflect continued effective execution of our global growth strategy, as evidenced by strong revenue growth in both our supplemental Health, Life and Accident and Expatriate Benefits businesses.
• Adjusted segment earnings for second quarter 2010 also continued to benefit from favorable claims experience in the Expatriate Benefits business, as well as rate increases on renewals. The net favorable after-tax impact from foreign currency movements was $4 million in the quarter compared to the same period last year, which was in line with expectations. Second quarter 2009 and first quarter 2010 results also included the net favorable adjustments of $14 million and $5 million, respectively, related to the implementation of a capital management strategy.

Other Segments

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

• Second quarter 2010 adjusted income from operations reflect break-even results for the VADBe business included in our Run-off Reinsurance operations.

OUTLOOK

• CIGNA now estimates full year 2010 consolidated adjusted income from operations to be in the range of $1.13 billion to $1.21 billion, or $4.10 to $4.40 per share. This outlook reflects approximately break-even results for VADBe for full-year 2010. This assumes that actual experience, including capital market performance, will be consistent with long term reserve assumptions. However, if the current environment of sustained equity market volatility and low levels of interest rates persists, the Company may increase reserves, which could result in losses in the second half of 2010 for VADBe. See the Critical Accounting Estimates section of the Management's Discussion and Analysis of the Company's 2009 Form 10-K for more information on the effect of capital market assumption changes on shareholders' net income.
• CIGNA now estimates full year 2010 adjusted income from operations for the Health Care segment to be in the range of $765 million to $825 million.
• CIGNA now estimates full year 2010 adjusted income from operations for the Group Disability and Life, and International segments to be in the range of $510 million to $530 million.
• CIGNA's earnings and earnings per share outlooks exclude the impact of any future stock repurchase.
• CIGNA now estimates full year 2010 medical membership outlook to reflect growth of approximately 3%.

The foregoing statements represent management's current estimate of CIGNA's 2010 consolidated and segment adjusted income from operations 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).

Source CIGNA Corporation