05 November 2009
CIGNA Reports Third Quarter 2009 Results
- Shareholders' net income1 was $1.19 per share2 in the quarter, compared to $0.62 per share2 for the same period last year.
- Adjusted income from operations5 was $1.13 per share2, a 27% increase over third quarter 2008.
- The company continues to estimate full year 2009 earnings per share2, on an adjusted income from operations5,9 basis, to be in the range of $3.80 to $4.00 per share2.
- The company now 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.
PHILADELPHIA, November 05, 2009 - 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."
- 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).
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.