Cigna Reports Strong Second Quarter 2013 Results, Raises Outlook

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Cigna Reports Strong Second Quarter 2013 Results, Raises Outlook

  • Consolidated revenues increased 8% to $8.0 billion in the second quarter.
  • Adjusted income from operations1was $512 million, or $1.78 per share, which represents per share growth of 19% over second quarter 2012.
  • Shareholders' net income1was $505 million, or $1.76 per share.
  • Cigna grew its global medical business by 241,000 customers, or 2%, through the first six months of 2013.
  • The Company now estimates full year 2013 earnings, on an adjusted income from operations1,3basis, to be in the range of $1.8 billion to $1.9 billion, or $6.25 to $6.65 per share.

BLOOMFIELD, Conn.--(BUSINESS WIRE)-- Cigna Corporation (NYS: CI) today reported strong second quarter 2013 results, with each of the Company's business segments posting revenue and earnings growth.

Consolidated revenues in the second quarter of 2013 were $8.0 billion, an increase of 8% over the second quarter of 2012. Revenues reflect growth in premiums and fees of 5% in Global Health Care, 35% in Global Supplemental Benefits and 10% in Group Disability and Life, driven by continued growth in our targeted customer segments.


Cigna's adjusted income from operations1 for the second quarter of 2013 was $512 million, or $1.78 per share, compared with $434 million, or $1.49 per share, for the second quarter of 2012. These second quarter results include strong revenue growth and favorable medical costs and operating expenses.

"We are creating value for our customers and clients in each of our business segments through sustained investments in capabilities and innovation to deliver on our ongoing commitment to quality, service and affordability," said David M. Cordani, President and Chief Executive Officer. "Our performance this quarter continues Cigna's track-record of attractive financial results driven by the effective execution of our strategy across all of our business lines."

Cigna reported shareholders' net income1 of $505 million, or $1.76 per share, for the second quarter of 2013, compared with shareholders' net income1 of $380 million, or $1.31 per share, for the second quarter of 2012. Shareholders' net income1 for the second quarter of 2013 included a special item4, which was a loss of $24 million after-tax, or $0.08 per share, related to transaction costs associated with our previously announced pharmacy benefits arrangement with Catamaran. Shareholders' net income1 for the second quarter of 2012 included losses of $51 million, or $0.17 per share, related to the Guaranteed Minimum Income Benefits (GMIB)2 business.

CONSOLIDATED HIGHLIGHTS

The following table includes highlights of results anda reconciliation of adjusted income from operations1 to shareholders' net income1 (dollars in millions, except per share amounts; customers in thousands):

  
Six Months
Three Months EndedEnded
June 30, March 31,June 30,
2013 2012 2013 2013
 
Total Revenues$7,980$7,422$8,183$16,163
 
Consolidated Earnings
Adjusted income from operations1$512$434$497$1,009
Net realized investment gains (losses), net of taxes17(3)93110
GMIB results, net of taxes2-(51)2525
Special items, net of taxes4 (24)  -  (558) (582)
Shareholders' net income1$505 $380 $57$562
 
Adjusted income from operations1, per share$1.78 $1.49 $1.72$3.50
Shareholders' net income1, per share$1.76 $1.31 $0.20$1.95
 
As of the Periods Ended
June 30,March 31,December 31,
2013 2012 2013 2012
 
Global Medical Customers

14,286

13,84314,32214,045
 
  • Cash and short term investments at the parent company were approximately $575 million at June 30, 2013 and $700 million at December 31, 2012.
  • During the period May 2 through August 1, 2013, the Company repurchased5 approximately 3.3 million shares of stock for approximately $250 million.
  • Year to date, as of August 1, 2013, the Company repurchased5 approximately 7.2 million shares of stock for approximately $500 million.

HIGHLIGHTS OF SEGMENT RESULTS

See Exhibit 2 for a reconciliation of adjusted income (loss) from operations1 to segment earnings (loss)1.

Global Health Care

This segment includes Cigna's Commercial and Government businesses which deliver medical and specialty health care products and services to domestic and multi-national clients and customers on guaranteed cost, retrospectively experience-rated and Administrative Services Only ("ASO") 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, customers in thousands):

 
Six Months
Three Months EndedEnded
June 30,

 

March 31,

June 30,

2013 2012 2013 

2013

 
Premiums and Fees$5,687$5,398$5,824$11,511
Adjusted Income from Operations1$403$368$427$830
Adjusted Margin, After-Tax66.4%6.2%6.7%6.6%
 
As of the Periods Ended
June 30,March 31,December 31,
Customers:2013 2012 2013 2012
Commercial13,80413,40613,84813,596
Medicare and Medicaid 482  437  474 449
Medical14,28613,84314,32214,045
 
Behavioral Care22,38621,20821,97721,750
Dental12,05811,24812,12511,392
Pharmacy6,9466,6346,9226,772
Medicare Part D1,2001,2641,2131,264
 
  • Overall, Global Health Care results reflect continued growth in our targeted customer segments.
  • Second quarter premiums and fees increased approximately 5% relative to second quarter 2012, due to business growth, specialty contributions reflecting the continued attractiveness of our ASO solutions, and renewal rate increases.
  • Second quarter 2013 adjusted income from operations1 reflects sustained growth in targeted medical and specialty businesses, favorable prior year reserve development of approximately $20 million after-tax, and improvement in the operating expense ratio.
  • Adjusted income from operations1 for second quarter 2012 and first quarter 2013 included favorable prior year reserve development on an after-tax basis of approximately $17 million and $48 million, respectively.
  • Global Health Care medical claims payable7 was approximately $1.8 billion at June 30, 2013 and $1.6 billion at December 31, 2012.

Global Supplemental Benefits

This segment includes Cigna's supplemental health, life, and accident insurance, including Medicare supplement coverage, in the U.S. and in foreign markets, primarily in Asia.

  

Financial Results (dollars in millions, policies in thousands):

 
Six Months
Three Months EndedEnded
June 30, March 31,June 30,
2013 2012 2013 2013
 
Premiums and Fees8$613$455$604$1,217

Adjusted Income from Operations1

$49$27$55$104
Adjusted Margin, After-Tax67.6%5.6%8.6%8.1%
 
As of the Periods Ended:
June 30,March 31,December 31,
2013 2012 2013 2012
Policies811,7988,95411,58611,436
 
  • Second quarter 2013 premiums and fees grew 35% relative to second quarter 2012, reflecting recent acquisitions of Great American Supplemental Benefits and the Turkey joint venture as well as attractive customer retention and business growth, primarily in South Korea.
  • Second quarter 2013 adjusted income from operations1, and the quarter over quarter improvement in segment margins6, reflect the impact of strong customer retention and business growth as well as changes in business mix.
  • The quarter over quarter increase in policies as of June 30, 2013 reflects the recent acquisitions as well as organic business growth.

Group Disability and Life

This segment includes Cigna's group disability, life, and accident insurance operations.

  

Financial Results (dollars in millions):

 
Six Months
Three Months EndedEnded
June 30, March 31,June 30,
2013 2012 2013 2013
 
Premiums and Fees$846$767$858$1,704

Adjusted Income from Operations1

$104$91$49$153
Adjusted Margin, After-Tax611.2%10.8%5.2%8.2%
 
  • Second quarter 2013 results benefited from premium and fee growth of 10% due to growth in both disability and life businesses.
  • Adjusted income from operations1 and segment margins6 for the second quarter of 2013 reflect the favorable after-tax impact of reserve studies and a $14 million after-tax favorable impact related to an updated discount rate assumption, as well as favorable disability claim volumes, partially offset by unfavorable life claims.
  • Second quarter 2013 and 2012 adjusted income from operations1 include the favorable after-tax impacts related to reserve studies of $27 million and $35 million, respectively.

Other Segments

Adjusted income (loss) from operations1 for Cigna's remaining operations is presented below (dollars in millions):

  
Six Months
Three Months EndedEnded
June 30, March 31,June 30,
2013 2012 2013 2013
 

Run-off Reinsurance2

$

(3)

$(11)$(1)$(4)
Other Operations$18$21$21$39
Corporate$(59)$(62)$(54)$(113)
 

OUTLOOK

  • Cigna increased its outlook for full year 2013 consolidated adjusted income from operations1,3 to be in the range of $1.8 billion to $1.9 billion, or $6.25 to $6.65 per share.
 
Full-Year Ended
(dollars in millions, except where noted and per share amounts)December 31, 2013
 
Adjusted income (losses) from operations1,3
Global Health Care$1,495 to 1,570
Global Supplemental Benefits180 to 200
Group Disability and Life 280 to 300
Ongoing Businesses$1,955 to 2,070
 
Corporate and other (165)
Consolidated$1.8 billion to $1.9 billion
 
Consolidated Adjusted income from operations, per share1,3$6.25 to 6.65
 
Global medical customer growth

1% to 2%

 
  • Cigna's outlook excludes the potential effects of future capital deployment5.

The foregoing statements represent management's current estimate of Cigna's 2013 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 Financial Supplement are available on Cigna's website in the Investor Relations section (http://www.cigna.com/aboutcigna/investors). A link to the conference call, during which management will review second quarter 2013 results and discuss full year 2013 outlook, is available in the Investor Relations section of Cigna's website (http://www.cigna.com/cignadotcom/aboutcigna/investors/events/index.page).

Notes:

   

1.

Cigna measures the financial results of its segments using segment earnings (loss), which is defined as shareholders' net income (loss) before net realized investment results. Adjusted income (loss) from operations is defined as segment earnings (loss) excluding special items (which are identified and quantified in Note 4) and the 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) and shareholders' net income; see Exhibits 1 and 2 for reconciliations of the non-GAAP measure to the most directly comparable GAAP measures.

 

Effective December 31, 2012, Cigna made changes to its external reporting segments to reflect the Company's realignment of its businesses to leverage distribution and service delivery capabilities for the benefit of our global clients and customers. Prior period a

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