Cigna (ticker: CI, exchange: New York Stock Exchange (.N))
News Release -
30-Oct-2008
CIGNA Reports Third Quarter 2008 Results PHILADELPHIA--(BUSINESS WIRE)--Oct. 30, 2008--CIGNA Corporation
(NYSE:CI):
-- Net income was $0.62 per share(1) in the quarter, which
included losses from the Guaranteed Minimum Income Benefits
(GMIB) business(2) of $0.22 per share(1) and losses from the
Guaranteed Minimum Death Benefits also known as Variable
Annuity Death Benefits (VADBe) of $0.25 per share(1). VADBe
results are included in the Run-off Reinsurance segment.
-- Adjusted income from operations(3) was $0.89 per share(1) in
the quarter, which included losses of $0.25 per share(1) from
VADBe.
-- The company currently estimates 2008 earnings per share(1), on
an adjusted income from operations(3,10) basis, to be in the
range of $3.40 to $3.50 per share(1), including an expected
fourth quarter loss of $0.45 per share(1) related to the VADBe
business. Management will provide additional information about
the 2008 and 2009 earnings outlook on the third quarter 2008
earnings call.
-- The company's diversified investment portfolio(11) continues
to perform well, generating attractive yields with limited
credit impairment charges.
CIGNA Corporation (NYSE:CI) today reported net income of $171
million, or $0.62 per share(1), for the third quarter of 2008 compared
with $365 million, or $1.28 per share(1), for the same period last
year. Net income for the third quarter 2008 included losses from the
GMIB business(2) of $61 million after-tax, or $0.22 per share(1),
primarily related to unfavorable equity market and interest rate
movements.
CIGNA's adjusted income from operations(3) for the third quarter
of 2008 was $246 million, or $0.89 per share(1), which included losses
of $0.25 per share(1) from the VADBe business versus $321 million, or
$1.13 per share(1), for the same period last year.
"In today's challenging economic and competitive environment our
ongoing businesses posted solid results in the quarter. However, the
results of our Run-off Reinsurance segment were adversely impacted
this quarter by the capital market turmoil," said H. Edward Hanway,
Chairman and Chief Executive Officer of CIGNA Corporation. "Our
ongoing businesses continue to deliver strong value to our customers.
We remain committed to improving performance in 2009 for the benefit
of our shareholders."
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 Nine months ended
---------------------------- -----------------
Sept. 30, Sept. 30, June 30, Sept. 30,
--------- --------- -------- -----------------
2008 2007 2008 2008
--------- --------- -------- -----------------
Adjusted income from
operations(3) $246 $321 $303 $814
Net realized investment
gains (losses), net of
taxes (15) 17 (12) (18)
GMIB results(2), net of
taxes (61) 2 34 (222)
Special items(4), net
of taxes - 23 (52) (76)
--------- --------- -------- -----------------
Income from continuing
operations $170 $363 $273 $498
Income (Loss) from
discontinued
operations(5) 1 2 (1) 3
--------- --------- -------- -----------------
Net income $171 $365 $272 $501
========= ========= ======== =================
Adjusted income from
operations(3), per
share(1) $0.89 $1.13 $1.08 $2.92
========= ========= ======== =================
Income from continuing
operations, per
share(1) $0.62 $1.28 $0.98 $1.78
========= ========= ======== =================
Net income per share(1) $0.62 $1.28 $0.97 $1.80
========= ========= ======== =================
-- Consolidated revenues were $4.9 billion for the third quarter
of 2008 and $4.4 billion for the third quarter of 2007.
-- Health care medical claims payable(6) were approximately $790
million at September 30, 2008 and $715 million at December 31,
2007.
-- The company repurchased(7) on the open market approximately
3.3 million shares of its stock for $125 million during the
third quarter of 2008, approximately 1.2 million shares for
$30 million in the month of October, and approximately 10
million shares for $380 million year to date.
-- Cash and short term investments at the parent company were
approximately $130 million at September 30, 2008 and $885
million at December 31, 2007. CIGNA spent approximately $1.5
billion to acquire Great-West Healthcare on April 1, 2008
through a combination of cash and debt financing.
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):
Third Qtr. Third Qtr. Second Qtr. Nine months ended
-----------------
2008 2007 2008 Sept. 30, 2008
---------- ---------- ----------- -----------------
Adjusted Segment
Earnings, After-
Tax $187 $173 $181 $506
Premiums and Fees $2,975 $2,643 $3,049 $8,728
Segment Margin,
After-Tax(8) 5.5% 5.7% 5.2% 5.1%
Aggregate Medical
Membership 11,900 10,223 12,067
-- Third quarter 2008 adjusted segment earnings included
after-tax earnings of $13 million related to Great-West
Healthcare, which was acquired on April 1, 2008. Third quarter
earnings reflect continued focus on managing operating
expenses while investing in key strategic initiatives, strong
contributions from our specialty businesses, tempered by
continued pressure on the guaranteed cost medical loss ratio.
On a sequential basis, results reflect improvement in both the
guaranteed cost medical loss ratio and experience-rated
results.
-- Premiums and fees in third quarter 2008 increased
approximately 13% relative to third quarter 2007 primarily due
to the acquisition of Great-West Healthcare, rate increases
and higher specialty premiums, partially offset by a decline
in guaranteed cost membership.
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 Qtr. Third Qtr. Second Qtr. Nine months ended
-----------------
2008 2007 2008 Sept. 30, 2008
---------- ---------- ----------- -----------------
Adjusted Segment
Earnings, After-
Tax $70 $63 $73 $211
Premiums and Fees $627 $610 $638 $1,896
Segment Margin,
After-Tax(8) 9.7% 8.8% 10.0% 9.7%
-- Adjusted segment earnings in the quarter were strong,
reflecting attractive revenue growth and margins. Third
quarter 2008, third quarter 2007, second quarter 2008, and
year to date 2008 results included a net favorable impact
related to reserve studies of $5 million, $3 million, $8
million, and $16 million after-tax, respectively.
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):
Third Qtr. Third Qtr. Second Qtr. Nine months ended
-----------------
2008 2007 2008 Sept. 30, 2008
---------- ---------- ----------- -----------------
Adjusted Segment
Earnings, After-
Tax $44 $47 $48 $144
Premiums and Fees $471 $454 $479 $1,422
Segment Margin,
After-Tax(8) 8.8% 9.9% 9.6% 9.6%
-- Adjusted segment earnings in the quarter reflect year over
year revenue growth and strong margins in both the life,
accident, and supplemental health insurance and the expatriate
benefit businesses, as well as a $3 million after-tax impact
from unfavorable currency movement in South Korea, CIGNA's
largest non-US market.
Other Segments
-- Adjusted segment earnings (losses) for CIGNA's remaining
operations are presented below (after-tax, dollars in
millions):
Third Qtr. Third Qtr. Second Qtr. Nine months ended
-----------------
2008 2007 2008 Sept. 30, 2008
---------- ---------- ----------- -----------------
Run-off
Reinsurance(9) $ (44) $ 37 $ 8 $ (30)
Other Operations $ 20 $ 30 $ 22 $ 64
Corporate $ (31) $ (29) $ (29) $ (81)
-- Run-off Reinsurance results for the quarter include reserve
strengthening of approximately $70 million after-tax related
to the VADBe business partially offset by favorable claim
development for the workers compensation and personal accident
businesses.
OUTLOOK
-- CIGNA currently estimates full year 2008 consolidated adjusted
income from operations(3,10) to be in the range of $950
million to $980 million, or $3.40 to $3.50 per share(1). These
estimates include an expected fourth quarter loss of
approximately $125 million after-tax related to the VADBe
business, based on market conditions as of October 28, 2008.
Actual fourth quarter results for VADBe could differ
materially from this estimate due to changes in market
conditions through year-end.
-- CIGNA currently estimates full year 2008 adjusted income from
operations(3,10) for the Health Care segment to be in the
range of $690 million to $710 million.
-- CIGNA's earnings and earnings per share(1) outlooks exclude
the impact of any future stock repurchase(7).
-- Full year 2008 medical membership is expected to decline by
approximately 1% on an organic basis. This estimate excludes
the membership related to the acquisition of Great-West
Healthcare.
-- Management will provide additional information about the 2008
earnings outlook and discuss the 2009 earnings outlook on
CIGNA's third quarter 2008 earnings call.
The foregoing statements represent management's current estimate
of CIGNA's 2008 consolidated and Health Care segment adjusted income
from operations(3,10) 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, the Quarterly Statistical
Supplement, and the Investment Supplement are available on CIGNA's
website in the Investor Relations, Most Recent Disclosures section
(www.cigna.com/about_us/investor_relations/recent_disclosures.html). A
link to the conference call, on which management will review third
quarter 2008 results, discuss full year 2008 and 2009 outlook is
available in the Investor Relations, Event Calendar section of CIGNA's
website (www.cigna.com/about_us/investor_relations/events.html).
Notes:
1. Earnings per share (EPS) are on a diluted basis.
2. Effective January 1, 2008, CIGNA adopted Statement of Financial
Accounting Standards No. 157 (SFAS No. 157), entitled "Fair Value
Measurements", which clarifies the measurement of and expands
disclosures regarding the fair valuing of certain assets and
liabilities. At adoption of SFAS No. 157, there were no effects to
CIGNA's measurements of fair values for financial instruments other
than for assets and liabilities for reinsurance contracts covering
GMIB. Accordingly, CIGNA recorded, in first quarter 2008, an after-tax
charge of $131 million in the GMIB business related to adoption of
SFAS No. 157. Although the implementation and prospective application
of SFAS No. 157 has no economic impact on CIGNA, changes in underlying
policyholder account values, interest rates, stock market volatility,
and other factors may result in changes to the amount that will be
required to ultimately settle the Company's obligations and/or to the
fair value assumptions, which could result in a material adverse or
favorable impact on the Run-off Reinsurance segment and CIGNA's
results of operations in 2008 and future periods.
3. CIGNA measures the financial results of its segments using
Segment Earnings (Loss), which is defined as income (loss) from
continuing operations before net realized investment results. Adjusted
income (loss) from operations is defined as segment earnings excluding
special items (which are identified and quantified in Note 4) and
beginning in 2008, also excludes results of CIGNA's GMIB business,
which are more volatile after the implementation of SFAS No. 157 and
more difficult to project into the future. Prior period results have
been restated to conform to the new presentation. 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. 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:
Third Quarter 2007
-- After-tax benefit of $23 million related to completion of an
IRS examination.
Second Quarter 2008
-- After-tax charge of $52 million related to a litigation
matter.
Nine Months ended September 30, 2008
-- After-tax charge of $76 million related to litigation matters.
5. The discontinued operations included in net income are:
Third Quarter 2008
-- Primarily due to after-tax benefit of $1 million related to
past divestitures.
Third Quarter 2007
-- Primarily due to after-tax benefit of $2 million related to
completion of an IRS examination.
Second Quarter 2008
-- After-tax loss of $1 million primarily related to the sale of
life operations in Brazil.
Nine months ended September 30, 2008
-- After-tax gain of $3 million primarily related to
divestitures.
6. Health care medical claims payable are presented net of
reinsurance and other recoverables. The gross health care medical
claims payable balance was $1.05 billion as of September 30, 2008 and
$975 million as of December 31, 2007.
7. 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-imposed trading blackout periods.
8. Segment margins in this press release are calculated by
dividing adjusted segment earnings by segment revenues. Segment
margins including special items for Health Care were 4.8% for the nine
months ended September 30, 2008. Segment margins including special
items for Disability and Life were 9.7% for the three months ended
September 30, 2007. Segment margins including special items for
International were 10.4% for the three months ended September 30,
2007.
9. Effective January 1, 2008, CIGNA changed its segment
presentation to exclude results of the GMIB business from the Run-off
Reinsurance segment. Prior period results have been restated to
conform to the new segment presentation.
10. Information is not available for management (1) to reasonably
estimate future net realized investment gains (losses) or (2) to
reasonably estimate future GMIB business results due in part to
interest rate and stock market volatility and other internal and
external factors; therefore it is not possible to provide a
forward-looking reconciliation of adjusted income from operations to
income from continuing operations. Special items for the remainder of
2008 may include potential charges associated with cost reduction
initiatives. Information is not available for management to identify,
other than these items, or reasonably estimate 2008 or 2009 special
items.
11. Please refer to the Third Quarter 2008 Statistical Supplement
on cigna.com to review disclosures regarding CIGNA's fixed maturities
and commercial mortgage investment portfolio.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
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 productivity initiatives, litigation
and other legal matters, operational improvement in the health care
operations, and the outlook for the Company's full year 2008 and 2009
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. The Company 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 the Company'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
the Company's employee benefits businesses;
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, disputes regarding reinsurance arrangements,
other litigation and regulatory actions challenging the Company's
businesses, government investigations and proceedings, and tax audits;
5. heightened competition, particularly price competition, which
could reduce product margins and constrain growth in the Company's
businesses, primarily the health care business;
6. risks associated with the Company's mail order pharmacy
business which, among other things, includes any potential operational
deficiencies or service issues as well as loss or suspension of state
pharmacy licenses;
7. significant changes in interest rates for a sustained period of
time;
8. downgrades in the financial strength ratings of the Company's
insurance subsidiaries, which could, among other things, adversely
affect new sales and retention of current business;
9. limitations on the ability of the Company'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;
10. inability of the program adopted by the Company to
substantially reduce equity market risks for reinsurance contracts
that guarantee minimum death benefits also known as variable annuity
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);
11. adjustments to the reserve assumptions (including lapse,
partial surrender, mortality, interest rates and volatility) used in
estimating the Company's liabilities for reinsurance contracts
covering guaranteed minimum death benefits also known as variable
annuity death benefits under certain variable annuities;
12. adjustments to the assumptions (including annuity election
rates and reinsurance) used in estimating the Company's assets and
liabilities for reinsurance contracts covering guaranteed minimum
income benefits under certain variable annuities;
13. significant stock market declines, which could, among other
things, result in increased expenses for guaranteed minimum income
benefits contracts and pension expenses for the Company's pension plan
in future periods as well as the recognition of additional pension
obligations;
14. 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;
15. significant deterioration in economic conditions and
significant market volatility, which could have an adverse effect on
the Company's operations, investments, liquidity and access to capital
markets;
16. significant deterioration in economic conditions and
significant market volatility, which could have an adverse effect on
the businesses of our customers (including the amount and type of
healthcare services provided to their workforce and our customers'
ability to pay receivables) and our vendors (including their ability
to provide services);
17. 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 the Company'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;
18. potential public health epidemics and bio-terrorist activity,
which could, among other things, cause the Company'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;
19. risks associated with security or interruption of information
systems, which could, among other things, cause operational
disruption;
20. challenges and risks associated with the successful management
of the Company's outsourcing projects or key vendors, including the
agreement with IBM for provision of technology infrastructure and
related services;
21. the ability to successfully integrate and operate the
businesses acquired from Great-West by, among other things, renewing
insurance and administrative services contracts on competitive terms,
retaining and growing membership, realizing revenue, expense and other
synergies, successfully leveraging the information technology platform
of the acquired businesses, and retaining key personnel; and
22. the ability of the Company to execute its growth plans by
successfully managing Great-West Healthcare's outsourcing projects and
leveraging the Company's capabilities and those of the business
acquired from Great-West to further enhance the combined
organization's network access position, underwriting effectiveness,
delivery of quality member and provider service, and increased
penetration of its membership base with differentiated product
offerings.
This list of important factors is not intended to be exhaustive.
Other sections of the Company's most recent Annual Report on Form
10-K, including the "Risk Factors" section, our Forms 10-Q for the
quarters ended March 31, 2008 and June 30, 2008 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 the Company from realizing the
forward-looking statements. The Company 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.
Exhibit 1
CIGNA CORPORATION
COMPARATIVE SUMMARY OF FINANCIAL RESULTS (unaudited)
(Dollars in millions, except per share amounts)
----------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
----------------------------------------------------------------------
REVENUES
Premiums and fees $ 4,112 $ 3,744 $ 12,165 $ 11,209
Net investment income 272 281 802 840
Mail order pharmacy
revenues 300 278 882 826
Other revenues (1) 191 83 463 256
Net realized investment
gains (losses) (23) 27 (28) 37
----------------------------------------------------------------------
Total $ 4,852 $ 4,413 $ 14,284 $ 13,168
----------------------------------------------------------------------
ADJUSTED INCOME (LOSS) FROM
OPERATIONS (2)
Health Care $ 187 $ 173 $ 506 $ 509
Disability and Life 70 63 211 191
International 44 47 144 129
Run-off Reinsurance (44) 37 (30) 53
Other Operations 20 30 64 80
Corporate (31) (29) (81) (78)
----------------------------------------------------------------------
Total $ 246 $ 321 $ 814 $ 884
----------------------------------------------------------------------
NET INCOME
Segment Earnings (Loss)
----------------------------
Health Care (4) $ 187 $ 173 $ 482 $ 509
Disability and Life 70 69 211 197
International 44 49 144 131
Run-off Reinsurance (3) (105) 39 (252) (21)
Other Operations 20 35 64 85
Corporate (4) (31) (19) (133) (68)
----------------------------------------------------------------------
Total 185 346 516 833
Net realized investment
gains (losses), net of
taxes (15) 17 (18) 24
----------------------------------------------------------------------
Income from continuing
operations 170 363 498 857
Income (loss) from
discontinued operations 1 2 3 (5)
----------------------------------------------------------------------
Net income $ 171 $ 365 $ 501 $ 852
----------------------------------------------------------------------
DILUTED EARNINGS PER SHARE:
Adjusted income from
operations (2) $ 0.89 $ 1.13 $ 2.92 $ 3.04
Results of guaranteed
minimum income benefits
business, after-tax (3) (0.22) 0.01 (0.80) (0.25)
Net realized investment
gains (losses), net of
taxes (0.05) 0.06 (0.07) 0.08
Special items, after-tax
(4) - 0.08 (0.27) 0.08
----------------------------------------------------------------------
Income from continuing
operations 0.62 1.28 1.78 2.95
Income (loss) from
discontinued operations - - 0.02 (0.01)
----------------------------------------------------------------------
Net income $ 0.62 $ 1.28 $ 1.80 $ 2.94
----------------------------------------------------------------------
Weighted average shares
(in thousands) 274,842 284,462 279,072 290,233
----------------------------------------------------------------------
SHAREHOLDERS' EQUITY at
September 30: $ 4,642 $ 4,236
----------------------------------------------------------------------
SHAREHOLDERS' EQUITY PER
SHARE at September 30: $ 17.05 $ 15.17
----------------------------------------------------------------------
(1) Includes a pre-tax gain of $70 million for the third quarter
of 2008, a pre-tax gain of $118 million for the nine months of 2008, a
pre-tax loss of $11 million for the third quarter of 2007, and a
pre-tax loss of $46 million for the nine months of 2007 from futures
contracts entered into as part of a program to manage equity risks in
CIGNA's run-off reinsurance operations. CIGNA recorded corresponding
offsets in benefits and expenses to adjust liabilities for reinsured
guaranteed minimum death benefit contracts.
(2) Adjusted income (loss) from operations is segment earnings
(loss) (income (loss) from continuing operations before net realized
investment gains (losses)) excluding results of CIGNA's guaranteed
minimum income benefits business and special items. See Exhibit 2 for
a detailed reconciliation of adjusted income (loss) from operations to
segment earnings (loss), consolidated income from continuing
operations and consolidated net income presented in accordance with
generally accepted accounting principles.
(3) The nine months ended September 30, 2008 include a pre-tax
charge of $202 million ($131 million after-tax) on the adoption of
SFAS No. 157 for guaranteed minimum income benefit contracts recorded
in the first quarter of 2008. The nine months ended September 30, 2007
include a pre-tax charge of $86 million ($56 million after-tax)
related to guaranteed minimum income benefits reserves recorded in the
second quarter of 2007.
(4) The nine months ended September 30, 2008 include a pre-tax
charge of $80 million ($52 million after-tax) in Corporate for the
second quarter of 2008 and a pre-tax charge of $37 million ($24
million after-tax) in Health Care for the first quarter of 2008, both
of which related to litigation matters. Includes income tax benefit of
$23 million for the third quarter and nine months of 2007 related to
the completion of an IRS examination.
CIGNA Corporation
Supplemental Financial Information Exhibit 2
Reconciliation of Adjusted Income from Operations to GAAP Net Income
----------------------------------------------------------------------
(Dollars in millions, except per share amounts)
Diluted
Earnings
Per Share (1) Consolidated
Quarterly Results: 3Q08 3Q07 2Q08 3Q08 3Q07 2Q08
--------------------------------------
Adjusted income (loss) from
operations (2) $ 0.89 $1.13 $ 1.08 $246 $321 $303
Results of guaranteed minimum
income benefits business,
excluding charge on adoption
of SFAS No. 157
(0.22) 0.01 0.12 (61) 2 34
Special items, after-tax:
Charge associated with
litigation matters (5) - - (0.18) - - (52)
Income tax benefit related
to the completion of an IRS
examination (6) - 0.08 - - 23 -
--------------------------------------
Segment earnings (loss) (2) 0.67 1.22 1.02 185 346 285
Net realized investment gains
(losses), net of taxes (0.05) 0.06 (0.04) (15) 17 (12)
--------------------------------------
Income from continuing
operations (3) 0.62 1.28 0.98 170 363 273
Income (loss) from
discontinued operations - - (0.01) 1 2 (1)
--------------------------------------
Net income (3) $ 0.62 $1.28 $ 0.97 $171 $365 $272
======================================
Disability
Health Care & Life
Quarterly Results: 3Q08 3Q07 2Q08 3Q08 3Q07 2Q08
--------------------------------------
Adjusted income (loss) from
operations (2) $ 187 $ 173 $ 181 $ 70 $ 63 $ 73
Results of guaranteed minimum
income benefits business,
excluding charge on adoption
of SFAS No. 157
- - - - - -
Special items, after-tax:
Charge associated with
litigation matters (5) - - - - - -
Income tax benefit related
to the completion of an IRS
examination (6) - - - - 6 -
--------------------------------------
Segment earnings (loss) (2) $ 187 $ 173 $ 181 $ 70 $ 69 $ 73
--------------------------------------
Net realized investment gains
(losses), net of taxes
Income from continuing
operations (3)
Income (loss) from
discontinued operations
Net income (3)
Run-off
International Reinsurance
Quarterly Results: 3Q08 3Q07 2Q08 3Q08 3Q07 2Q08
---------------------------------------
Adjusted income (loss) from
operations (2) $ 44 $ 47 $ 48 $ (44) $ 37 $ 8
Results of guaranteed minimum
income benefits business,
excluding charge on adoption
of SFAS No. 157
- - - (61) 2 34
Special items, after-tax:
Charge associated with
litigation matters (5) - - - - - -
Income tax benefit related
to the completion of an IRS
examination (6) - 2 - - - -
---------------------------------------
Segment earnings (loss) (2) $ 44 $ 49 $ 48 $(105) $ 39 $ 42
---------------------------------------
Net realized investment gains
(losses), net of taxes
Income from continuing
operations (3)
Income (loss) from
discontinued operations
Net income (3)
Other
Operations Corporate
Quarterly Results: 3Q08 3Q07 2Q08 3Q08 3Q07 2Q08
---------------------------------------
Adjusted income (loss) from
operations (2) $ 20 $ 30 $ 22 $(31) $(29) $(29)
Results of guaranteed minimum
income benefits business,
excluding charge on adoption
of SFAS No. 157
- - - - - -
Special items, after-tax:
Charge associated with
litigation matters (5) - - - - - (52)
Income tax benefit related
to the completion of an IRS
examination (6) - 5 - - 10 -
---------------------------------------
Segment earnings (loss) (2) $ 20 $ 35 $ 22 $(31) $(19) $(81)
---------------------------------------
Net realized investment gains
(losses), net of taxes
Income from continuing
operations (3)
Income (loss) from
discontinued operations
Net income (3)
Diluted
Earnings
Per Share (1) Consolidated
Nine Months Ended September 30, 2008 2007 2008 2007
-----------------------------
Adjusted income (loss) from operations
(2) $ 2.92 $ 3.04 $ 814 $ 884
Results of guaranteed minimum income
benefits business, after-tax:
Charge on adoption of SFAS No. 157 (0.47) - (131) -
Results of guaranteed minimum income
benefits business, excluding charge
on adoption of SFAS No. 157 (4)
(0.33) (0.25) (91) (74)
-----------------------------
Total (0.80) (0.25) (222) (74)
Special items, after-tax:
Charges associated with litigation
matters (5) (0.27) - (76) -
Income tax benefit related to the
completion of an IRS examination (6) - 0.08 - 23
-----------------------------
Segment earnings (loss) (2) 1.85 2.87 516 833
Net realized investment gains (losses),
net of taxes (0.07) 0.08 (18) 24
-----------------------------
Income from continuing operations (3) 1.78 2.95 498 857
Income (loss) from discontinued
operations 0.02 (0.01) 3 (5)
-----------------------------
Net income (3) $ 1.80 $ 2.94 $ 501 $ 852
=============================
Disability
Health Care & Life
Nine Months Ended September 30, 2008 2007 2008 2007
------------------------------
Adjusted income (loss) from operations
(2) $ 506 $ 509 $ 211 $ 191
Results of guaranteed minimum income
benefits business, after-tax:
Charge on adoption of SFAS No. 157 - - - -
Results of guaranteed minimum income
benefits business, excluding charge
on adoption of SFAS No. 157 (4)
- - - -
------------------------------
Total - - - -
Special items, after-tax:
Charges associated with litigation
matters (5) (24) - - -
Income tax benefit related to the
completion of an IRS examination (6) - - - 6
------------------------------
Segment earnings (loss) (2) $ 482 $ 509 $ 211 $ 197
-----------------------------
Net realized investment gains (losses),
net of taxes
Income from continuing operations (3)
Income (loss) from discontinued
operations
Net income (3)
Run-off
International Reinsurance
Nine Months Ended September 30, 2008 2007 2008 2007
------------------------------
Adjusted income (loss) from operations
(2) $ 144 $ 129 $ (30) $ 53
Results of guaranteed minimum income
benefits business, after-tax:
Charge on adoption of SFAS No. 157 - - (131) -
Results of guaranteed minimum income
benefits business, excluding charge
on adoption of SFAS No. 157 (4)
- - (91) (74)
------------------------------
Total - - (222) (74)
Special items, after-tax:
Charges associated with litigation
matters (5) - - - -
Income tax benefit related to the
completion of an IRS examination (6) - 2 - -
------------------------------
Segment earnings (loss) (2) $ 144 $ 131 $ (252) $ (21)
------------------------------
Net realized investment gains (losses),
net of taxes
Income from continuing operations (3)
Income (loss) from discontinued
operations
Net income (3)
Other
Operations Corporate
Nine Months Ended September 30, 2008 2007 2008 2007
------------------------------
Adjusted income (loss) from operations
(2) $ 64 $ 80 $ (81) $ (78)
Results of guaranteed minimum income
benefits business, after-tax:
Charge on adoption of SFAS No. 157 - - - -
Results of guaranteed minimum income
benefits business, excluding charge
on adoption of SFAS No. 157 (4)
- - - -
------------------------------
Total - - - -
Special items, after-tax:
Charges associated with litigation
matters (5) - - (52) -
Income tax benefit related to the
completion of an IRS examination (6) - 5 - 10
------------------------------
Segment earnings (loss) (2) $ 64 $ 85 $ (133) $ (68)
------------------------------
Net realized investment gains (losses),
net of taxes
Income from continuing operations (3)
Income (loss) from discontinued
operations
Net income (3)
(1) All earnings per share figures have been adjusted to reflect
the three-for-one stock split of CIGNA's common shares effective June
4, 2007.
(2) CIGNA measures the financial results of its segments using
"segment earnings (loss)," which is defined as income (loss) from
continuing operations before net realized investment gains (losses).
Adjusted income (loss) from operations is defined as segment earnings
excluding special items, and beginning in 2008, also excludes results
of CIGNA's guaranteed minimum income benefit business. Prior period
results have been reclassified to conform to the new presentation.
(3) Income from continuing operations and net income are presented
in accordance with generally accepted accounting principles (GAAP).
(4) The nine months ended September 30, 2007 include a pre-tax
charge of $86 million ($56 million after-tax) related to guaranteed
minimum income benefits reserves recorded in the second quarter of
2007.
(5)The nine months ended September 30, 2008 include a pre-tax
charge of $80 million ($52 million after-tax) in Corporate for the
second quarter of 2008 and a pre-tax charge of $37 million ($24
million after-tax) in Health Care for the first quarter of 2008, both
of which related to litigation matters.
(6) Includes income tax benefit of $23 million for the third
quarter and nine months of 2007 related to the completion of an IRS
examination.
CONTACT: CIGNA Corporation
Ted Detrick, Investor Relations, 215-761-1414
Chris Curran, Media Relations, 215-761-1560
SOURCE: CIGNA Corporation
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