Cigna Reports Strong Third Quarter Results and Raises 2012 Outlook

Cigna Reports Strong Third Quarter Results and Raises 2012 Outlook

• Consolidated revenues increased 31% to $7.4 billion in the third quarter of 2012.

• Adjusted income from operations^1,2was $496 million, or $1.71 per share, excluding the after-tax loss of $7 million, or $0.02 per share, from results of the Run-off Guaranteed Minimum Death Benefits (VADBe)²business. Shareholders' net income¹was $466 million, or $1.61 per share.

• Cigna's medical customer base grew by 1.25 million people through the first nine months of 2012.

• The Company now estimates full year 2012 earnings, on an adjusted income from operations^1,3basis, to be in the range of $1.655 billion to $1.705 billion, or $5.70 to $5.90 per share.

BLOOMFIELD, Conn.--(BUSINESS WIRE)-- Cigna Corporation (NYS: CI) today reported third quarter 2012 consolidated revenues of $7.4 billion, an increase of 31% over the third quarter of 2011. Revenues reflect growth in premiums and fees of 51% in Health Care, 22% in International and 9% in Disability and Life, primarily driven by contributions from the HealthSpring acquisition and continued organic growth in our targeted customer segments.

Cigna's adjusted income from operations^1,2 for the third quarter of 2012 was $496 million, or $1.71 per share, excluding the after-tax loss of $7 million, or $0.02 per share, from results of the VADBe² business. This result compares with $353 million, or $1.29 per share, excluding the after-tax loss of $45 million, or $0.16 per share, from results of the VADBe² business, for the third quarter of 2011.

Cigna reported shareholders' net income¹ of $466 million, or $1.61 per share, for the third quarter of 2012, compared with shareholders' net income¹ of $183 million, or $0.67 per share, for the third quarter of 2011. Shareholders' net income¹ included income of $0.11 per share in the third quarter of 2012 and a loss of $0.50 per share for the same period last year related to the Guaranteed Minimum Income Benefits (GMIB)^2,5 business. Shareholders' net income¹ also included special items⁴ which generated a loss of $62 million, or $0.21 per share, in the third quarter of 2012.

"Our differentiated approach to understanding and helping our global clients and customers as well as partnering with physicians continues to deliver real value. Our third quarter 2012 results were strong, driven by consistent and disciplined execution of our strategy," said David M. Cordani, President and Chief Executive Officer. "We continue to make strategic investments to position Cigna to deliver long-term value for the benefit of our customers and shareholders."

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):

• Cash and short term investments at the parent company were approximately $435 million at September 30, 2012 and $3.8 billion at December 31, 2011, which included amounts held at year-end to fund the HealthSpring acquisition that closed on January 31, 2012.

• As of November 1, 2012, the Company repurchased⁶ approximately 4.4 million shares of stock for approximately $210 million.

• Consistent with our strategy to deliver differentiated value and affordable solutions for our customers and clients, we have initiated a series of actions to improve our organizational alignment, operational effectiveness, and efficiency, resulting in a $50 million after-tax charge which is reported as a special item. We expect the impact of these actions to reduce annualized operating expenses by approximately $60 million after taxes. The majority of the expense savings is expected to be reinvested in the business to further our differentiated programs that improve the health, well-being and sense of security of our customers.

HIGHLIGHTS OF SEGMENT RESULTS

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

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 and medical management, stop-loss, and pharmacy-related products and services.

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

• Overall, Health Care results reflect contributions from the HealthSpring acquisition effective February 1, 2012 and sustained growth in our targeted customer segments.

• Third quarter premiums and fees increased 51% relative to third quarter 2011, due to the contributions from the HealthSpring acquisition, organic business growth, rate increases, and increased specialty penetration, partially offset by business mix, which reflects a continued shift by clients to our Administrative Services Only ("ASO") solutions.

• Third quarter 2012 adjusted income from operations¹ reflects continued growth in targeted medical and specialty businesses, favorable pharmacy results primarily for our Medicare Part D business, and favorable medical costs, including prior year claim development of approximately $6 million after-tax. The third quarter 2012 results also reflect further operating expense leverage, while continuing to make strategic investments in service capabilities and programs to increase efficiency.

• Third quarter 2012 segment margins⁷ are higher than third quarter 2011 and second quarter 2012 primarily as a result of favorable pharmacy results.

• Adjusted income from operations¹ for third quarter 2011 and second quarter 2012 included favorable prior year claim development of approximately $5 million after-tax and $17 million after-tax, respectively.

• Health Care medical claims payable⁹ was approximately $1.4 billion at September 30, 2012 and $900 million at December 31, 2011. The increase in the September 30, 2012 balance is primarily attributable to the HealthSpring acquisition.

International

This segment includes Cigna's supplemental health, life, and accident insurance and global health expatriate benefits businesses operating in international markets as well as the U.S.

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

• Third quarter premium and fees grew 22% relative to third quarter 2011, driven by attractive customer retention and business growth from sales in targeted markets within our individual Health, Life and Accident and Global Health Benefits businesses as well as revenues from recent acquisitions.

• Third quarter 2012 adjusted income from operations¹ reflects the impact of strong customer retention and business growth from both of our International businesses, improvements in operating expense efficiency, as well as favorable loss ratios. Third quarter 2012 segment margins⁷ have increased sequentially primarily due to favorable loss ratios in Korea and Global Health Benefits.

• As previously disclosed, effective January 1, 2012, Cigna retrospectively adopted amended accounting rules for costs related to the acquisition or renewal of insurance contracts ("deferred policy acquisition costs"). Prior period amounts have been presented on a comparable basis.

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):

• Third quarter 2012 results reflect continued strong premium and fee growth, including an 11% increase in disability premiums and fees, and favorable life claim experience, partially offset by unfavorable claims experience in the disability business.

• Adjusted income from operations¹ and segment margins⁷ for the third and second quarter of 2012 include the favorable after-tax impacts related to reserve studies of $5 million and $35 million, respectively.

Other Segments

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

• Run-off Reinsurance includes the results for the VADBe² business. Adjusted income from operations¹ for the third quarter 2012, second quarter 2012, and third quarter 2011 includes reserve strengthenings of $6 million, $10 million, and $45 million after-tax, respectively, primarily related to updating reserve assumptions for VADBe².

• Second quarter 2012 Corporate results include a $10 million after-tax charge related to the termination of a vendor contract.

OUTLOOK

• Cigna now estimates full year 2012 consolidated adjusted income from operations^1,3 to be in the range of $1.655 billion to $1.705 billion, or $5.70 to $5.90 per share. This outlook reflects expected continued solid execution of our strategy resulting in strong organic growth, an expected increase in medical services utilization during the remainder of 2012, and contributions from the acquisition of HealthSpring.

• Cigna's earnings and earnings per share outlooks exclude the potential effects of future capital deployment⁶.

• Cigna's earnings and earnings per share outlooks include the impact of year-to-date results for VADBe², but do not include an estimate for future impacts. Future potential impacts from VADBe² are not known or reasonably estimable, including the impact of changes in capital markets or periodic updates to long-term reserve assumptions. See the Critical Accounting Estimates section of the Management's Discussion and Analysis of the Company's Annual Report on Form 10-K for the year ended December 31, 2011, as updated by the Current Report on Form 8-K filed on August 8, 2012, for more information on the potential effects of capital market and other assumption changes on shareholders' net income.

The foregoing statements represent management's current estimate of Cigna's 2012 consolidated and segment adjusted income from operations^1,3 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/aboutus/investor-relations). A link to the conference call, during which management will review third quarter 2012 results and discuss full year 2012 outlook is available in the Investor Relations section of Cigna's website (http://www.cigna.com/aboutcigna/investors/events/index.page).

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