Cigna Reports Strong First Quarter 2013 Results, Raises Outlook
Cigna Reports Strong First Quarter 2013 Results, Raises Outlook
Consolidated revenues increased 21% to $8.2 billion in the first quarter.
Adjusted income from operations1was $497 million, or $1.72 per share, which represents per share growth of 39% over first quarter 2012.
Shareholders' net income was $57 million, or $0.20 per share, which includes an after-tax charge of $507 million related to the previously announced exit of the Run-off Reinsurance business.
Cigna grew its global medical customer base by 277,000 people in the first quarter.
The Company now estimates full year 2013 earnings, on an adjusted income from operations1,3basis, to be in the range of $1.735 billion to $1.865 billion, or $6.00 to $6.45 per share.
BLOOMFIELD, Conn.--(BUSINESS WIRE)-- Cigna Corporation (NYS: CI) today reported first quarter 2013 consolidated revenues of $8.2 billion, an increase of 21% over the first quarter of 2012. Revenues reflect growth in premiums and fees of 20% in Global Health Care, 36% in Global Supplemental Benefits and 12% in Group Disability and Life, driven by continued growth in our targeted customer segments.
"Cigna's strong first quarter results reflect continued execution of our strategy to deliver value to our customers and clients around the world," said David M. Cordani, President and Chief Executive Officer. "Our diversified portfolio of individual and employer-based solutions that focus on quality and affordability, positions us well for continued growth through 2013 and beyond."
Cigna's adjusted income from operations1 for the first quarter of 2013 was $497 million, or $1.72 per share. This result compares with $359 million, or $1.24 per share, for the first quarter of 2012. Adjusted income from operations1 in the first quarter of 2013 reflects strong revenue growth, favorable operating expenses and medical costs, including favorable prior year reserve development in the Global Health Care business of $48 million after-tax, or $0.17 per share.
Cigna reported shareholders' net income1 of $57 million, or $0.20 per share, for the first quarter of 2013, compared with shareholders' net income1 of $371 million, or $1.28 per share, for the first quarter of 2012. Shareholders' net income1 included special items4 which generated losses of $558 million after-tax, or $1.93 per share in the first quarter of 2013, and $41 million after-tax, or $0.14 per share, in the first quarter of 2012. Shareholders' net income1 also included realized investment gains of $93 million after-tax, or $0.32 per share, in the first quarter of 2013.
The special items recorded in the first quarter of 2013, include an after-tax charge of $507 million related to our previously announced exit of the Run-off Reinsurance businesses, and an after-tax charge of $51 million related to a regulatory matter within our Disability business.
CONSOLIDATED HIGHLIGHTS
The following table includes highlights of results anda reconciliation of adjusted income from operations1 to shareholders' net income (dollars in millions, except per share amounts; customers in thousands):
Three Months Ended | |||||||||
March 31, | December 31, | ||||||||
2013 | 2012 | 2012 | |||||||
Total Revenues | $ | 8,183 | $ | 6,754 | $ | 7,620 | |||
Consolidated Earnings | |||||||||
Adjusted income from operations1 | $ | 497 | $ | 359 | $ | 452 | |||
Net realized investment gains, net of taxes | 93 | 12 | 15 | ||||||
GMIB results, net of taxes2 | 25 | 41 | 7 | ||||||
Special items, net of taxes4 | (558) | (41) | (68) | ||||||
Shareholders' net income1 | $ | 57 | $ | 371 | $ | 406 | |||
Adjusted income from operations1, per share | $ | 1.72 | $ | 1.24 | $ | 1.57 | |||
Shareholders' net income1, per share | $ | 0.20 | $ | 1.28 | $ | 1.41 | |||
As of the Periods Ended | |||||||||
March 31, | December 31, | ||||||||
2013 | 2012 | 2012 | |||||||
Global Medical Customers | 14,322 | 13,865 | 14,045 | ||||||
Cash and short term investments at the parent company were approximately $620 million at March 31, 2013 and $700 million at December 31, 2012.
As of May 2, 2013, the Company repurchased5 approximately 3.9 million shares of stock for approximately $250 million.
HIGHLIGHTS OF SEGMENT RESULTS
See Exhibit 2 for a reconciliation of adjusted income (loss) from operations1 to segment earnings (loss)1.
Effective in the fourth quarter of 2012, Cigna realigned its businesses to better leverage distribution and service capabilities for the benefit of our global clients and customers, which resulted in a change to Cigna's external reporting segments. Results for all periods presented are now aggregated based on the nature of the products and services delivered, rather than the geographies in which we operate.
Global Health Care
This segment includes Cigna's Commercial and Government businesses which deliver medical and specialty health care products and services provided to domestic and multi-national clients and customers 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):
Three Months Ended | |||||||||
March 31, | December 31, | ||||||||
2013 | 2012 | 2012 | |||||||
Premiums and Fees | $ | 5,824 | $ | 4,869 | $ | 5,399 | |||
Adjusted Income from Operations1 | $ | 427 | $ | 296 | $ | 397 | |||
Adjusted Margin, After-Tax6 | 6.7% | 5.5% | 6.7% | ||||||
Customers: | |||||||||
Commercial | 13,848 | 13,431 | 13,596 | ||||||
Medicare and Medicaid | 474 | 434 | 449 | ||||||
Medical | 14,322 | 13,865 | 14,045 | ||||||
Behavioral Care | 21,977 | 19,803 | 21,750 | ||||||
Dental | 12,125 | 11,279 | 11,392 | ||||||
Pharmacy | 6,922 | 6,584 | 6,772 | ||||||
Medicare Part D | 1,213 | 1,268 | 1,264 | ||||||
Overall, Global Health Care results reflect continued growth in our targeted customer segments.
First quarter premiums and fees increased approximately 20% relative to first quarter 2012, due to an additional month of HealthSpring premium reflecting the timing of the acquisition on January 31, 2012, business growth, rate increases, and increased specialty penetration, partially offset by current medical business mix, reflecting a continued shift by clients to our Administrative Services Only ("ASO") solutions.
First quarter 2013 adjusted income from operations1 reflects continued growth in targeted medical and specialty businesses, favorable prior year reserve development of approximately $48 million after-tax, compared to $41 million after-tax of favorable development in first quarter 2012, and improvement in the operating expense ratio. First quarter 2013 results also reflect elevated medical and pharmacy costs for flu-related illness primarily impacting the Seniors business.
First quarter 2013 segment margins6 are higher than first quarter 2012 primarily as a result of continued growth in targeted medical and specialty businesses, as well as improvement in the operating expense ratio.
Global Health Care medical claims payable7 was approximately $1.8 billion at March 31, 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):
Three Months Ended | |||||||||
March 31, | December 31, | ||||||||
2013 | 2012 | 2012 | |||||||
Premiums and Fees | $ | 604 | $ | 444 | $ | 592 | |||
AdjustedIncome from Operations1 | $ | 55 | $ | 43 | $ | 38 | |||
Adjusted Margin, After-Tax6 | 8.6% | 9.1% | 6.1% | ||||||
As of the Periods Ended: | |||||||||
March 31, | December 31, | ||||||||
2013 | 2012 | 2012 | |||||||
Policies (excluding China joint venture) | 11,586 | 8,847 | 11,436 | ||||||
First quarter 2013 premiums and fees grew 36% relative to first quarter 2012, reflecting recent acquisitions and attractive customer retention and business growth, primarily South Korea.
First quarter 2013 adjusted income from operations1 reflects the impact of strong customer retention and business growth as well as favorable claim experience and improvement in the operating expense ratio.
First quarter 2013 segment margins6 are higher than fourth quarter 2012 due to lower operating expenses.
First quarter 2012 adjusted income from operations1 also includes an after-tax benefit of $8 million related to the implementation of a capital management strategy.
The quarter over quarter increase in policies as of March 31, 2013 reflects the acquisitions of the Turkey joint venture and Great American Supplemental Benefits as well as business growth.
Group Disability and Life
This segment includes Cigna's group disability, life, and accident insurance operations.
Financial Results (dollars in millions):
Three Months Ended | |||||||||
March 31, | December 31, | ||||||||
2013 | 2012 | 2012 | |||||||
Premiums and Fees | $ | 858 | $ | 763 | $ | 804 | |||
AdjustedIncome from Operations1 | $ | 49 | $ | 68 | $ | 56 | |||
Adjusted Margin, After-Tax6 | 5.2% | 8.1% | 6.4% | ||||||
First quarter 2013 results benefited from premium and fee growth of 12%.
Adjusted income from operations1 and segment margins6 for the first quarter of 2013 reflect the effect of unfavorable claims experience, primarily in the disability business.
Other Segments
Adjusted income (loss) from operations1 for Cigna's remaining operations are presented below (dollars in millions):
Three Months Ended | |||||||||
March 31, | December 31, | ||||||||
2013 | 2012 | 2012 | |||||||
Run-off Reinsurance2 | $ | (1) | $ | (11) | $ | - | |||
Other Operations | $ | 21 | $ | 20 | $ | 19 | |||
Corporate | $ | (54) | $ | (57) | $ | (58) | |||
During the first quarter of 2013, Cigna entered into a definitive agreement with Berkshire Hathaway to exit the Run-off Reinsurance businesses4.
OUTLOOK
Cigna increased its outlook for full year 2013 consolidated adjusted income from operations1,3 to be in the range of $1.735 billion to $1.865 billion, or $6.00 to $6.45 per share.
Full-Year Ended | |||
(dollars in millions, except per share amounts) | December 31, 2013 | ||
Adjusted income (losses) from operations1,3 | |||
Global Health Care | $ | 1,465 to 1,555 | |
Global Supplemental Benefits | 160 to 180 | ||
Group Disability and Life | 270 to 290 | ||
Ongoing Businesses | $ | 1,895 to 2,025 | |
Corporate and other | (160) | ||
Consolidated | $ | 1,735 to 1,865 | |
Consolidated Adjusted income from operations, per share1,3 | $ | 6.00 to 6.45 | |
Global medical customer growth | 1% to 2% | ||
Cigna's outlook excludes the potential effects of additional prior year reserve development and 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/aboutus/investor-relations). A link to the conference call, during which management will review first quarter 2013 results and discuss full year 2013 outlook, is available in the Investor Relations section of Cigna's website (http://www.cigna.com/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 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 amounts have been presented on a comparable basis. | ||
2. | The Guaranteed Minimum Income Benefits (GMIB) business and Guaranteed Minimum Death Benefits business, also known as Variable Annuity Death Benefits (VADBe), are included in our Run-off Reinsurance operations. These businesses have been in run-off since 2000. | |
During the first quarter of 2013, Cigna entered into a definitive agreement with Berkshire Hathaway to exit the Run-off Reinsurance businesses, effective February 4, 2013. | ||
3. | Information is not available for management to reasonably estimate (1) future net realized investment gains (losses) or (2) fair value changes in GMIB assets and liabilities; therefore, it is not possible to provide a forward-looking reconciliation of adjusted income from operations to shareholders' income from continuing operations. We expect that special items for 2013 may include potential adjustments associated with litigation and other items. Information is not available for management to identify, or reasonably estimate additional 2013 special items. | |
4. | Special items included in shareholders' net income and segment earnings (loss), but excluded from adjusted income (loss) from operations, and the calculation of adjusted margins include: | |
First Quarter 2013 | ||
-- After-tax loss of $507 million related to the exit of the Run-off Reinsurance businesses. | ||
-- After-tax loss of $51 million related to a regulatory matter within the Disability business. | ||
Fourth Quarter 2012 | ||
-- After-tax loss of $68 million related to litigation matters. | ||
First Quarter 2012 | ||
-- After-tax loss of $28 million related to transaction costs for the 2012 acquisition of HealthSpring. | ||
-- After-tax loss of $13 million related to a litigation matter. | ||
5. | Share repurchases 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-employed trading blackout periods. | |
6. | Adjusted margins in this press release are calculated by dividing adjusted income from operations1by segment revenues. Segment margins including special items were (0.2%) for Group Disability and Life for the three months ended March 31, 2013, and 5.1% for Global Health Care for the three months ended March 31, 2012. | |
7. | Global Health Care medical claims payable are presented net of reinsurance and other recoverables. The gross Global Health Care medical claims payable balance was $2,000 million as of March 31, 2013 and $1,856 million as of December 31, 2012. | |
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Cigna Corporation and its subsidiaries (the "Company") and its representatives may from time to time make written and oral forward-looking statements, including statements contained in press releases, in the Company'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, the Company's strategic initiatives, litigation and other legal matters, operational improvement initiatives in the health care operations, and the outlook for the Company's full year 2013 and beyond 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.
By their nature, forward-looking statements: (i) speak only as of the date they are made, (ii) are not guarantees of future performance or results and (iii) are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors. Some factors that could cause actual results to differ materially from the forward-looking statements include:
1. | health care reform legislation, as well as additional changes in state or federal regulation, that could, among other items, affect the way the Company does bus |
