PHILADELPHIA, October 29, 2010 - CIGNA Corporation (NYSE: CI) today reported shareholders' net income of $307 million, or $1.13 per share, for the third quarter of 2010 compared with shareholders' net income of $329 million, or $1.19 per share, for the same period last year. Shareholders' net income included a loss of $44 million, or $0.16 per share, in the third quarter of 2010 from results of the VADBe2 and GMIB2 businesses within our Run-off Reinsurance segment, primarily related to the impact of low levels of interest rates. Shareholders' net income in the quarter included favorable claim development in the Health Care business related to lower-than-expected utilization. Third quarter 2009 results included income of $16 million, or $0.06 per share, from the GMIB2 business.
CIGNA's adjusted income from operations1 for the third quarter of 2010 was $299 million, or $1.10 per share, which included after-tax losses of $34 million, or $0.12 per share, from results of the VADBe2 business. Third quarter 2009 adjusted income from operations1 was $311 million, or $1.13 per share.
"This quarter's continued business growth is a result of strong customer retention, expansion of existing relationships and new business sales in our targeted market segments and geographies, which is validation of the value we deliver to the customers and clients we serve around the world," said David M. Cordani, President and Chief Executive Officer of CIGNA Corporation. "We continue to drive innovation by developing new products and designing new provider relationships to increase engagement among health care professionals and consumers, which in turn improves health and well-being."
- Cash and short term investments at the parent company were $635 million at September 30, 2010 and $475 million at December 31, 2009.
- The Company repurchased approximately 2.5 million shares of its stock on the open market for $77 million during the third quarter of 2010 and approximately 6.2 million shares for $200 million year to date.
HIGHLIGHTS OF SEGMENT RESULTS
- "Adjusted segment earnings (loss)" are adjusted income (loss) from operations1, as applicable, for each segment (see Exhibit 2).
- 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.
- Overall, results in our Health Care segment reflect continued growth in our Middle Market and Select customer segments, driven by strong retention and new customer growth. Results also demonstrate differentiated clinical quality and attractive medical cost trend, as well as sustained contributions from our specialty products.
- Third quarter 2010 adjusted segment earnings reflect favorable prior year claim development of approximately $9 million after-tax, as well as favorable in year claim development of approximately $21 million after-tax related to lower-than-expected utilization.
- Premiums and fees in the third quarter 2010 increased approximately 19% relative to third quarter 2009, primarily due to net membership growth and a change in membership mix, which reflects a higher percentage of commercial and Medicare related risk businesses. Excluding the Medicare Individual Private Fee for Service business, third quarter premiums and fees increased approximately 12% relative to third quarter 2009.
- Health Care medical claims payable6 increased to approximately $1.1 billion at September 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.
- Segment results include continued strong retention and new sales of our disability management programs which help employees return to work more quickly, resulting in increased productivity and lower costs for our customers and clients.
- Third quarter 2010 adjusted segment earnings continue to reflect competitively attractive margins. Second quarter 2010 results included the net favorable impact of $29 million after-tax related to reserve studies on our disability book of business.
- This segment includes CIGNA's supplemental health, life, and accident insurance and expatriate benefits businesses operating in select international markets.
- Segment results demonstrate continued effective execution of our global growth strategy, as evidenced by strong revenue growth, driven by attractive retention and sales in targeted markets within our supplemental Health, Life and Accident and Expatriate Benefits businesses.
- Adjusted segment earnings for third quarter 2010 include transaction costs of approximately $5 million after-tax related to the Vanbreda International acquisition which closed during the third quarter.
- Third quarter 2010 adjusted income from operations includes reserve strengthening of $34 million after-tax related to the impact of low levels of interest rates on the VADBe2 business included in our Run-off Reinsurance operations. Run-off Reinsurance results for the third quarter 2010 also include favorable claim development in the workers compensation and personal accident businesses.
- CIGNA now estimates full year 2010 consolidated adjusted income from operations1,3 to be in the range of $1.2 billion to $1.25 billion, or $4.35 to $4.50 per share. This outlook reflects break-even results for VADBe2 for the fourth quarter 2010, 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 2009 Form 10-K for more information on the effect of capital market assumption changes in shareholders' net income.
- CIGNA now estimates full year 2010 adjusted income from operations1,3 for the Health Care segment to be in the range of $825 million to $855 million.
- CIGNA continues to estimate full year 2010 adjusted income from operations1,3 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 repurchase8.
- CIGNA now estimates full year 2010 medical membership growth to be approximately 3.5%.
The foregoing statements represent management's current estimate of CIGNA's 2010 consolidated and segment adjusted income from operations1,3 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 2010 results and discuss full year 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).