Earnings Reflect Strong Results in Each of the Health and Related Benefits
Businesses
-- Net income was $2.93 per share(1,2) in the quarter, a 2% increase over
first quarter 2006. Adjusted income from operations(3) was $2.67 per
share(1,2), a 27% increase over first quarter 2006.
-- Medical membership increased by 4.7% during the first quarter of 2007.
Medical membership is expected to grow by 5% to 6.5% in 2007.
-- The company repurchased approximately 4.2 million shares for $575
million during first quarter 2007, and approximately 4.9 million shares for
$680 million year to date through May 1, 2007.
-- The company currently estimates 2007 earnings per share(1,9), on an
adjusted income from operations(3) basis, to be in the range of $10.25 to
$10.95. This is higher than the company's previous estimate, primarily
reflecting the impact of share repurchase to date.
PHILADELPHIA, May 2, 2007 /PRNewswire-FirstCall/ -- CIGNA Corporation
(NYSE: CI) today reported net income of $289 million, or $2.93 per
share(1,2), for the first quarter of 2007 compared with $352 million, or
$2.87 per share(1,2), for the same period last year. Net income for the
first quarter of 2006 included after-tax realized investment gains of $94
million.
CIGNA's adjusted income from operations(3) was $264 million, or $2.67
per share(1,2), for the first quarter of 2007 versus $258 million, or $2.11
per share(1,2), for the same period last year. This quarter's earnings
reflect strong results in CIGNA's health care, disability and life, and
international businesses.
"We generated strong earnings in each of our businesses in the first
quarter of 2007," said H. Edward Hanway, chairman and chief executive
officer of CIGNA Corporation. "We grew health care membership, and our
group disability and life as well as our international results reflect the
strength of their respective competitive positions. Looking ahead, we are
confident that we will continue to succeed in the marketplace by using our
strengths and differentiated capabilities to enhance and improve the
health, well-being, and security of our members."
CONSOLIDATED HIGHLIGHTS
The following is a reconciliation of adjusted income from operations(3)
to net income (after-tax; dollars in millions, except per share amounts):
Three months ended
March 31, March 31, December 31,
2007 2006 2006
Adjusted income from operations(3) $264 $258 $266
Realized investment gains, net of
taxes 13 94 14
Special items,(4) net of taxes - - (48)
Income from continuing operations $277 $352 $232
Income from discontinued operations 12 - -
Net income $289 $352 $232
Adjusted income from operations(3), per
share(1,2) $2.67 $2.11 $2.61
Income from continuing operations, per
share(1,2) $2.80 $2.87 $2.28
Net income per share(1,2) $2.93 $2.87 $2.28
-- Consolidated revenues were $4.4 billion for the first quarter of 2007
and $4.1 billion for the first quarter of 2006.
-- Health care medical claims payable(5) were approximately $755 million
at March 31, 2007 and $710 million at December 31, 2006.
-- The company repurchased(6) on the open market approximately 4.2 million
shares of its stock for $575 million during the first quarter of 2007
and approximately 4.9 million shares for $680 million year to date. As
of May 2, 2007, the company has approximately $300 million of stock
repurchase authority available.
-- Cash and short term investments at the parent company were
approximately $770 million at March 31, 2007 and $425 million at
December 31, 2006.
-- On April 25, 2007, CIGNA's Board of Directors declared a three-for-one
stock split of the company's common shares, in the form of a stock
dividend, to all shareholders of record on May 21, 2007. Additionally,
the Board of Directors authorized a 20 percent increase in the current
dividend rate. Quarterly earnings per share on a post-split basis are
presented in Note 2.
HIGHLIGHTS OF SEGMENT RESULTS
-- "Adjusted segment earnings (loss)" are adjusted income (loss) from
operations(3), 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 and pharmacy-related products
and services.
Financial Results (dollars in millions, medical membership in thousands):
First First Fourth
Qtr. Qtr. Qtr.
2007 2006 Change 2006 Change
Adjusted Segment Earnings,
After-Tax $168 $156 8% $176 (5)%
Premiums and Fees $2,675 $2,356 14% $2,577 4%
Segment Margin, After-Tax(7) 5.5% 5.6% (10) bps 5.9% (40) bps
Total Medical Membership 9,830 9,018 9.0% 9,389 4.7%
-- Adjusted segment earnings include favorable after-tax prior year claim
development of $3 million for the first quarter 2007, $11 million for
the fourth quarter 2006, and $16 million for the first quarter 2006.
Excluding prior year claim development, the first quarter 2007 adjusted
segment earnings were driven by strong execution of our guaranteed cost
pricing strategy, membership growth, and strong contribution from the
specialty health care businesses.
-- Premiums and fees increased by approximately 14% year-over-year,
reflecting medical membership growth including voluntary and limited
benefits members, guaranteed cost rate increases, and higher Medicare
Part D premiums.
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):
First First Fourth
Qtr. Qtr. Qtr.
2007 2006 Change 2006 Change
Adjusted Segment Earnings,
After-Tax $60 $58 3% $46 30%
Premiums and Fees $577 $508 14% $546 6%
Segment Margin, After-Tax(7) 8.8% 9.4% (60) bps 7.2% 160 bps
-- Adjusted segment earnings in the quarter resulted from competitively
attractive margins driven by strong disability management results and
favorable mortality in the group accident business.
International
-- This segment includes CIGNA's life, accident and supplemental health
insurance and expatriate benefits businesses operating in select
international markets.
Financial Results (dollars in millions):
First First Fourth
Qtr. Qtr. Qtr.
2007 2006 Change 2006 Change
Adjusted Segment Earnings,
After-Tax $38 $37 3% $34 12%
Premiums and Fees $414 $357 16% $409 1%
Segment Margin, After-Tax(7) 8.7% 9.9% (120) bps 7.9% 80 bps
-- Adjusted segment earnings in the quarter reflect competitively strong
margins.
Other Segments
-- Adjusted segment earnings (losses) for CIGNA's remaining operations are
presented below (after-tax, dollars in millions):
First First Fourth
Qtr. Qtr. Qtr.
2007 2006 Change 2006 Change
Run-off Reinsurance $1 $- -- $8 (88%)
Other Operations(8) $23 $25 (8)% $25 (8)%
Corporate $(26) $(18) (44)% (23) (13)%
-- Run-off Reinsurance results for the quarter include the favorable
impact of settlement activity related to the workers' compensation and
personal accident lines of business, largely offset by unfavorable
claims experience in the guaranteed minimum income benefit product.
OUTLOOK
-- CIGNA currently estimates full year 2007 consolidated adjusted income
from operations(3,9) to be in the range of $1.005 billion to $1.070
billion, $10.25 to $10.95 per share(1) on a pre-stock split basis and
$3.40 to $3.65 per share(1) on a post-stock split basis, including $665
million to $720 million for the Health Care segment.
-- CIGNA currently estimates second quarter 2007 consolidated adjusted
income from operations(3,9) to be in the range of $240 million to $265
million, or $2.45 to $2.70 per share(1) on a pre-stock split basis and
$0.82 to $0.90 per share(1) on a post-stock split basis, including $155
million to $170 million for the Health Care segment.
-- CIGNA's earnings per share(1) outlook excludes the impact of any future
stock repurchase.
-- Full year 2007 medical membership is expected to grow by 5% to 6.5%.
-- Management will provide additional information about the 2007 earnings
outlook on CIGNA's first quarter 2007 earnings call.
The foregoing statements represent management's current estimate of
CIGNA's consolidated and Health Care segment adjusted income from
operations(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 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 first
quarter 2007 results and discuss the full year and second quarter 2007
outlook, is available in the Investor Relations, Event Calendar section of
CIGNA's website
(http://www.cigna.com/about_us/investor_relations/events.html).
Notes:
1. Earnings per share (EPS) are on a diluted basis.
2. Below is the presentation of EPS on a diluted basis, adjusted to
reflect the impending 3-for-1 stock split, which was declared on April
25, 2007 by the Board of Directors:
March 31, March 31, December 31,
2007 2006 2006
Adjusted income from
operations, per share $0.89 $0.70 $0.87
Income from continuing
operations, per share $0.93 $0.96 $0.76
Net income per share $0.98 $0.96 $0.76
3. CIGNA measures the financial results of its segments using Segment
Earnings (Loss), which is defined as income (loss) from continuing
operations excluding realized investment results. Adjusted income
(loss) from operations is segment earnings (loss) excluding special
items (which are identified and quantified in Note 4). 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 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), income from
continuing operations, and net income. See Exhibit 2 for a
reconciliation of adjusted income (loss) from operations to segment
earnings (loss), income from continuing operations, and consolidated
net income.
4. The special items included in net income and segment earnings (loss),
but excluded from adjusted income (loss) from operations, adjusted
segment earnings, and the calculation of segment margins are:
Fourth Quarter 2006
-- After-tax charge of $25 million resulting from settlement of the
shareholder class-action lawsuit.
-- After-tax charge of $23 million related to CIGNA's continuing
efforts to improve operating efficiency in its Health Care
operations and supporting areas.
5. Health care medical claims payable are presented net of reinsurance and
other recoverables. The gross health care medical claims payable
balance was $989 million as of March 31, 2007 and $960 million as of
December 31, 2006.
6. Repurchases were also made and 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-imposed trading blackout
periods.
7. Segment margins in this press release are calculated by dividing
adjusted segment earnings by segment revenues. Segment margin including
special items for the Health Care segment was 5.4% for the three months
ended December 31, 2006.
8. Effective January 1, 2007, CIGNA changed its segment presentation to
report the results of the Run-off Retirement business within Other
Operations. Prior period results have been restated to conform to the
new segment presentation.
9. Information is not available for management to reasonably estimate
future net income at this time. Full year 2007 net income will include
realized investment results, which are not predictable, and may include
special items. Information is not available for management to identify,
or reasonably estimate 2007 special items.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
CIGNA and its representatives may from time to time make written and
oral forward-looking statements, including statements contained in press
releases, in CIGNA'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, CIGNA's productivity initiatives, litigation and other legal
matters, operational improvement in the health care operations, and the
outlook for CIGNA's full year 2007 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.
You should not place undue reliance on these forward-looking
statements. CIGNA cautions that actual results could differ materially from
those that management expects, depending on the outcome of certain factors.
Some factors that could cause actual results to differ materially from the
forward-looking statements include:
1. increased medical costs that are higher than anticipated in
establishing premium rates in CIGNA's health care operations, including
increased use and costs of medical services;
2. increased medical, administrative, technology or other costs resulting
from new legislative and regulatory requirements imposed on CIGNA's
employee benefits;
3. challenges and risks associated with implementing operational
improvement initiatives and strategic actions in the health care
operations, including those related to: (i) offering products that meet
emerging market needs, (ii) strengthening underwriting and pricing
effectiveness, (iii) strengthening medical cost and medical membership
results, (iv) delivering quality member and provider service using
effective technology solutions, and (v) lowering administrative costs;
4. risks associated with pending and potential state and federal class
action lawsuits, purported securities class action lawsuits, disputes
regarding reinsurance arrangements, other litigation and regulatory
actions challenging CIGNA's businesses and the outcome of pending
government proceedings and federal tax audits;
5. heightened competition, particularly price competition, which could
reduce product margins and constrain growth in CIGNA's businesses,
primarily the health care business;
6. significant changes in interest rates;
7. downgrades in the financial strength ratings of CIGNA's insurance
subsidiaries, which could, among other things, adversely affect new
sales and retention of current business;
8. limitations on the ability of CIGNA's insurance subsidiaries to
dividend capital to the parent company as a result of downgrades in the
subsidiaries' financial strength ratings, changes in statutory reserve
or capital requirements or other financial constraints;
9. inability of the program adopted by CIGNA to substantially reduce
equity market risks for reinsurance contracts that guarantee minimum
death benefits under certain variable annuities (including possible
market difficulties in entering into appropriate futures contracts and
in matching such contracts to the underlying equity risk);
10. adjustments to the reserve assumptions (including lapse, partial
surrender, mortality, interest rates and volatility) used in
estimating CIGNA's liabilities for reinsurance contracts covering
guaranteed minimum death benefits under certain variable annuities;
11. adjustments to the assumptions (including annuity election rates and
reinsurance recoverables) used in estimating CIGNA's assets and
liabilities for reinsurance contracts that guarantee minimum income
benefits under certain variable annuities;
12. significant stock market declines, which could, among other things,
result in increased pension expenses of CIGNA's pension plans in
future periods and the recognition of additional pension obligations;
13. unfavorable claims experience related to workers' compensation and
personal accident exposures of the run-off reinsurance business,
including losses attributable to the inability to recover claims from
retrocessionaires;
14. significant deterioration in economic conditions, which could have an
adverse effect on CIGNA's operations and investments;
15. changes in public policy and in the political environment, which could
affect state and federal law, including legislative and regulatory
proposals related to health care issues, which could increase cost and
affect the market for CIGNA's health care products and services; and
amendments to income tax laws, which could affect the taxation of
employer provided benefits, and pension legislation, which could
increase pension cost;
16. potential public health epidemics and bio-terrorist activity, which
could, among other things, cause CIGNA's covered medical and
disability expenses, pharmacy costs and mortality experience to rise
significantly, and cause operational disruption, depending on the
severity of the event and number of individuals affected;
17. risks associated with security or interruption of information systems,
which could, among other things, cause operational disruption; and
18. challenges and risks associated with the successful management of
CIGNA's outsourcing projects or key vendors, including the agreement
with IBM for provision of technology infrastructure and related
services.
This list of important factors is not intended to be exhaustive. Other
sections of our most recent Annual Report on Form 10-K, including the "Risk
Factors" section, the Cautionary Statement in Management's Discussion and
Analysis of Financial Condition and Results of Operations, and other
documents filed with the Securities and Exchange Commission include both
expanded discussion of these factors and additional risk factors and
uncertainties that could preclude CIGNA from realizing the forward-looking
statements. CIGNA does not assume any obligation to update any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by law.
CIGNA CORPORATION
COMPARATIVE SUMMARY OF FINANCIAL RESULTS
(Dollars in millions, except per share amounts)
Three Months Ended
March 31,
2007 2006
REVENUES
Premiums and fees $3,708 $3,268
Net investment income 280 329
Other revenues * 365 366
Realized investment gains (losses) 21 144
Total $4,374 $4,107
ADJUSTED INCOME (LOSS) FROM OPERATIONS **
Health Care $168 $156
Disability and Life 60 58
International 38 37
Run-off Reinsurance 1 -
Other Operations 23 25
Corporate (26) (18)
Total $264 $258
NET INCOME
Segment Earnings (Loss)
Health Care $168 $156
Disability and Life 60 58
International 38 37
Run-off Reinsurance 1 -
Other Operations 23 25
Corporate (26) (18)
Total 264 258
Realized investment gains
(losses), net of taxes 13 94
Income from continuing operations 277 352
Income (loss) from discontinued
operations 12 -
Net income $289 $352
DILUTED EARNINGS PER SHARE:
Adjusted income from operations $2.67 $2.11
Realized investment gains
(losses), net of taxes 0.13 0.76
Special items, after-tax - -
Income from continuing operations 2.80 2.87
Income (loss) from discontinued
operations 0.13 -
Net income $2.93 $2.87
Weighted average shares (in
thousands) 98,784 122,513
SHAREHOLDERS' EQUITY at March 31: $4,152 $5,352
SHAREHOLDERS' EQUITY PER SHARE at
March 31: $43.28 $44.69
* Includes the following item:
- Pre-tax results from certain derivatives recorded in run-off
reinsurance operations ($7 million loss for the first quarter of 2007, $40
million loss for the first quarter of 2006, $40 million loss for the fourth
quarter of 2006). CIGNA recorded corresponding offsets in other benefit
expenses to adjust liabilities for certain specialty life reinsurance
contracts.
** See Exhibit 2 for a detailed reconciliation of adjusted income
(loss) from operations to segment earnings (loss) and consolidated income
from continuing operations and consolidated net income presented in
accordance with generally accepted accounting principles (GAAP).
CIGNA Corporation
Supplemental Financial Information
Reconciliation of Adjusted Income from Operations to GAAP Net Income
(Dollars in millions, except per share amounts)
Diluted
Earnings
Per Share Consolidated
Three Months Ended March 31, 2007 2006 2007 2006
Adjusted income (loss) from
operations $2.67 $2.11 $264 $258
Special items, after-tax: - - - -
Segment earnings (loss) * 2.67 2.11 264 258
Realized investment gains (losses),
net of taxes 0.13 0.76 13 94
Income from continuing operations ** 2.80 2.87 277 352
Income (loss) from discontinued
operations 0.13 - 12 -
Net income ** $2.93 $2.87 $289 $352
Disability
Health Care & Life International
Three Months Ended March 31, 2007 2006 2007 2006 2007 2006
Adjusted income (loss) from
operations $168 $156 $60 $58 $38 $37
Special items, after-tax: - - - - - -
Segment earnings (loss) * $168 $156 $60 $58 $38 $37
Run-off Other
Reinsurance Operations Corporate
Three Months Ended March 31, 2007 2006 2007 2006 2007 2006
Adjusted income (loss) from
operations $1 $- $23 $25 $(26) $(18)
Special items, after-tax: - - - - - -
Segment earnings (loss) * $1 $- $23 $25 $(26) $(18)
Diluted
Earnings
Three Months Ended December 31, 2006 Per Share Consolidated
Adjusted income (loss) from
operations $2.61 $266
Special items, after-tax:
Charge associated with shareholder
litigation settlement (0.24) (25)
Charge for cost reduction program (0.23) (23)
Segment earnings (loss) * 2.14 218
Realized investment gains (losses),
net of taxes 0.14 14
Income from continuing operations ** 2.28 232
Income (loss) from discontinued
operations - -
Net income ** $2.28 $232
Disability
Three Months Ended December 31, 2006 Health Care & Life International
Adjusted income (loss) from
operations $176 $46 $34
Special items, after-tax:
Charge associated with shareholder
litigation settlement - - -
Charge for cost reduction program (15) - -
Segment earnings (loss) * $161 $46 $34
Three Months Ended December Run-off Other
31, 2006 Reinsurance Operations Corporate
Adjusted income (loss) from
operations $8 $25 $(23)
Special items, after-tax:
Charge associated with shareholder
litigation settlement - - (25)
Charge for cost reduction program - - (8)
Segment earnings (loss) * $8 $25 $(56)
* CIGNA measures the financial results of its segments using "segment
earnings (loss)," which is defined as income (loss) from continuing
operations before realized investment gains (losses).
** Income from continuing operations and net income are presented in
accordance with generally accepted accounting principles (GAAP).
SOURCE CIGNA Corporation
 back to top
Related links:
http://www.cigna.com/
http://www.prnewswire.com/comp/165050.html/
CONTACT:
Ted Detrick, Investor Relations,
+1-215-761-1414, or Wendell Potter, Media Relations,
+1-215-761-4450, both of CIGNA Corporation
|
