CIGNA reports consolidated revenues of $4.5 billion for the third quarter of 2009

Nov 5 2009

CIGNA Corporation (NYSE: CI) today reported shareholders’ net income of $329 million, or $1.19 per share, for the third quarter of 2009 compared with shareholders’ net income of $171 million, or $0.62 per share, for the same period last year. Shareholders’ net income for the third quarter 2009 included income related to the variable annuity products within our Run-off Reinsurance segment of $16 million after-tax, or $0.06 per share, primarily related to favorable performance in the equity markets. Shareholders’ net income for the third quarter 2008 included losses of $133 million after-tax, or $0.47 per share, related to the variable annuity products within our Run-off Reinsurance segment.

CIGNA's adjusted income from operations for the third quarter of 2009 was $311 million, or $1.13 per share, compared to adjusted income from operations of $246 million, or $0.89 per share, for the same period last year. Third quarter 2008 results included losses of $72 million after-tax, or $0.25 per share, 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.”

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 $4.5 billion for the third quarter of 2009 and $4.9 billion for the third quarter of 2008.
• Health care medical claims payable⁷ were approximately $735 million at September 30, 2009 and $713 million at December 31, 2008.
• Cash and short term investments at the parent company were approximately $210 million at September 30, 2009 and $90 million at December 31, 2008.

HIGHLIGHTS OF SEGMENT RESULTS

• “Adjusted segment earnings (loss)” are adjusted income (loss) from operations⁵, 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 management, stop-loss, and pharmacy-related products and services.

• Third quarter 2009 adjusted segment earnings reflect effective operating expense management tempered by medical cost pressure on our guaranteed cost book of business. Results reflect sustained contributions from the specialty businesses.
• Premiums and fees in the third quarter 2009 decreased approximately 6% relative to third 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.

• Third quarter 2009 adjusted segment earnings continue to reflect competitively strong margins driven by the sustained value we deliver to our customers from our disability management programs. Second quarter 2009 results include a net favorable impact of $20 million after-tax related to a reserve study.

International

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

• Adjusted segment earnings in the quarter reflect the impact of global economic pressures, which included unfavorable claims experience. Our International business continues to deliver competitively strong margins. Second quarter 2009 results include a favorable adjustment of $14 million related to the implementation of a capital management strategy which reduces our effective tax rate for future periods.

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 third quarter 2009 reflect favorable claim development in the workers compensation and personal accident businesses. As a result of continued stability in the equity markets, no reserve strengthening was required for the VADBe business this quarter.

OUTLOOK

• CIGNA currently estimates full year 2009 consolidated adjusted income from operations 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 operations^5,9 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 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 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).

Source: CIGNA Corporation