CIGNA fourth quarter shareholders' net income increases to $461 million

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Feb 3 2011CIGNA Corporation

CIGNA Corporation (NYSE: CI) today reported shareholders' net income of $461 million, or $1.69 per share, for the fourth quarter of 2010 compared with shareholders' net income of $330 million, or $1.19 per share, for the fourth quarter of 2009. Shareholders' net income included income of $0.31 per share in the fourth quarter of 2010 and $0.22 per share for the fourth quarter of 2009 related to the Guaranteed Minimum Income Benefits (GMIB) business, primarily due to favorable interest rate movements. Shareholders' net income also included special items with income of $0.15 per share in 2010, compared to a loss of $0.05 per share in 2009.

“In 2011, we will continue to focus on meeting the needs of our customers and partnering with health care professionals to improve the health, well being and sense of security of the individuals we serve around the globe.”

CIGNA's adjusted income from operations for the fourth quarter of 2010 was $313 million, or $1.15 per share, compared to adjusted income from operations of $285 million, or $1.03 per share, for the fourth quarter of 2009. Adjusted income from operations in the quarter included favorable claim development in the Health Care business related to lower-than-expected medical utilization, which benefits our customers as well as our shareholders.

For full year 2010, shareholders' net income was $1.35 billion, or $4.89 per share, compared to $1.30 billion, or $4.73 per share, for 2009. Shareholders' net income for 2010 included losses of $24 million, or $0.09 per share, compared to income of $209 million, or $0.76 per share, in 2009 related to the GMIB business.

For full year 2010, adjusted income from operations was $1.28 billion, or $4.64 per share, compared to $1.10 billion, or $3.98 per share, for full year 2009.

"In 2010, we effectively executed on our growth strategy, which drove solid revenue and earnings growth in each of our ongoing businesses," said David M. Cordani, President and Chief Executive Officer of CIGNA Corporation. "In 2011, we will continue to focus on meeting the needs of our customers and partnering with health care professionals to improve the health, well being and sense of security of the individuals we serve around the globe."

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):

Cash and short term investments at the parent company were $810 million at December 31, 2010 and $475 million at December 31, 2009.
The Company repurchased approximately 6.2 million shares of its stock on the open market for $200 million during 2010 and approximately 1.8 million shares for $73 million from January 1, 2011 to February 2, 2011.

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 continued growth in our targeted customer segments, Middle Market and Select, driven by strong retention and new customer growth. Results also benefited from attractive medical cost trend, aided by our continued focus on clinical quality, as well as sustained contributions from our specialty products.
Premiums and fees in the fourth quarter 2010 increased approximately 20% relative to fourth quarter 2009, primarily due to net membership growth and a change in membership mix to reflect a higher percentage of commercial and Medicare related risk businesses. Excluding the Medicare Advantage Individual Private Fee for Service business, fourth quarter premiums and fees increased approximately 14% relative to fourth quarter 2009.
Fourth quarter 2010 adjusted segment earnings reflect favorable in year claim development of approximately $42 million after-tax related to lower-than-expected utilization, partially offset by increased operating expenses related to investments to support business growth, compliance costs and market segment expansion opportunities.
Health Care medical claims payable increased to approximately $1.0 billion at December 31, 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 continued strong retention and new sales of our disability management programs which improve productivity and lower costs for our customers and clients.
Fourth quarter 2010 adjusted segment earnings include an after-tax gain of $11 million from the sale of the workers' compensation and case management business.

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 demonstrate continued effective execution of our growth strategy with strong revenue growth driven by attractive retention and sales in targeted markets within our supplemental Health, Life and Accident and Expatriate Benefits businesses. Our International segment 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 includes the results for the Variable Annuity Death Benefits (VADBe) business and the workers compensation and personal accident businesses.
During the fourth quarter of 2010, we entered into a reinsurance transaction to transfer the remaining risk on the workers compensation and personal accident businesses to a third party.

OUTLOOK

CIGNA estimates full year 2011 consolidated adjusted income from operations to be in the range of $1.19 billion to $1.29 billion, or $4.30 to $4.70 per share. This outlook reflects continued solid execution of our growth strategy, the expected impact of current health reform regulations and some acceleration of medical services utilization during 2011.
CIGNA's earnings and earnings per share outlooks exclude the impact of any stock repurchase subsequent to the date of this release.
CIGNA estimates full year 2011 medical membership growth to be in the range of 0% to +3%, excluding membership losses from exits of non-strategic markets including the Medicare Advantage Individual Private Fee for Service business.
CIGNA's earnings and earnings per share outlooks assume break-even results for VADBe for full year 2011, which assumes that actual experience, including capital market performance, will be consistent with long term reserve assumptions. See the Critical Accounting Estimates section of the Management's Discussion and Analysis of the Company's Form 10-K for more information on the effect of capital market assumption changes in shareholders' net income.
Management will provide additional information about the 2011 earnings outlook on CIGNA's fourth quarter 2010 earnings call.

The foregoing statements represent management's current estimate of CIGNA's 2011 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). A link to the conference call, on which management will review fourth quarter and full year 2010 results and discuss full year 2011 outlook is available in the Investor Relations, Event Calendar section of CIGNA's website (http://www.cigna.com/about_us/investor_relations/events.html).

Fourth Quarter 2010 and Year ended December 31, 2010

After-tax benefit of $101 million related to completion of an IRS examination and the after-tax charges of $39 million related to the early extinguishment of debt and $20 million related to the transfer of the workers compensation and personal accident businesses that are included in our Run-off Reinsurance operations.

Fourth Quarter 2009