CIGNA Reports Third Quarter 2009 Results
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-- Shareholders' net income1was $1.19 per share2in the quarter, compared to
$0.62 per share2for the same period last year.
-- Adjusted income from operations5was $1.13 per share2, a 27% increase
over third quarter 2008.
-- The company continues to estimate full year 2009 earnings per share2, on
an adjusted income from operations5,9basis, to be in the range of $3.80
to $4.00 per share2.
-- The company now estimates full year 2009 adjusted income from
operations5,9for the Health Care segment to be in the range of $700
million to $750 million.
PHILADELPHIA--(BUSINESS WIRE)-- CIGNA Corporation (NYSE: CI) today reported shareholders' net income1 of $329 million, or $1.19 per share2, for the third quarter of 2009 compared with shareholders' net income1 of $171 million, or $0.62 per share2, for the same period last year. Shareholders' net income1 for the third quarter 2009 included income related to the variable annuity products3 within our Run-off Reinsurance segment of $16 million after-tax, or $0.06 per share2, primarily related to favorable performance in the equity markets. Shareholders' net income1 for the third quarter 2008 included losses of $133 million after-tax, or $0.47 per share2, related to the variable annuity products3 within our Run-off Reinsurance segment.
CIGNA's adjusted income from operations5 for the third quarter of 2009 was $311 million, or $1.13 per share2, compared to adjusted income from operations5 of $246 million, or $0.89 per share2, for the same period last year. Third quarter 2008 results included losses of $72 million after-tax, or $0.25 per share2, from the Variable Annuity Death Benefits (VADBe) business. As a result of continued stability in the equity markets, no reserve strengthening was required for the VADBe business in the third quarter of 2009.
"Our third quarter 2009 earnings were solid and reflect our continued focus on ongoing operating effectiveness initiatives to drive strong service delivery and further reduce expenses, particularly in our Health Care business," said H. Edward Hanway, Chairman and Chief Executive Officer of CIGNA Corporation. "We remain committed to creating value for our customers, as we continue to pursue our mission to improve the health, well-being, and sense of security of the people we serve."
CONSOLIDATED HIGHLIGHTS
The following is a reconciliation of adjusted income from operations5 to shareholders' net income1 (after-tax; dollars in millions, except per share amounts):
Three months ended Nine months ended
Sept. 30, Sept. 30, June 30, Sept. 30,
2009 2008 2009 2009
Adjusted income from $ 311 $ 246 $ 313 $ 812
operations5
Net realized investment gains 9 (15) (9) (24)
(losses), net of taxes
GMIB results3, net of taxes 16 (61) 110 149
Special items4, net of taxes (7) - 21 34
Shareholders' income1 from $ 329 $ 170 $ 435 $ 971
continuing operations
Shareholders' income
(losses)1 from discontinued - 1 - 1
operations6
Shareholders' net income1 $ 329 $ 171 $ 435 $ 972
Adjusted income from $ 1.13 $ 0.89 $ 1.14 $ 2.96
operations5, per share2
Shareholders' income1 from
continuing operations, per $ 1.19 $ 0.62 $ 1.58 $ 3.54
share2
Shareholders' net income1, $ 1.19 $ 0.62 $ 1.58 $ 3.54
per share2
-- Consolidated revenues were $4.5 billion for the third quarter of 2009
and $4.9 billion for the third quarter of 2008.
-- Health care medical claims payable7 were approximately $735 million at
September 30, 2009 and $713 million at December 31, 2008.
-- Cash and short term investments at the parent company were approximately
$210 million at September 30, 2009 and $90 million at December 31, 2008.
HIGHLIGHTS OF SEGMENT RESULTS
-- "Adjusted segment earnings (loss)" are adjusted income (loss) from
operations5, 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, stop-loss, and pharmacy-related
products and services.
Financial Results (dollars in millions, medical membership in thousands):
Third Qtr. Third Qtr. Second Qtr. Nine months ended
2009 2008 2009 Sept. 30, 2009
Adjusted Segment $ 204 $ 187 $ 177 $ 535
Earnings, After-Tax
Premiums and Fees $ 2,812 $ 2,991 $ 2,855 $ 8,578
Segment Margin, 6.3% 5.5% 5.4% 5.4%
After-Tax8
Aggregate Medical 11,104 11,900 11,189
Membership
-- Third quarter 2009 adjusted segment earnings reflect effective operating
expense management tempered by medical cost pressure on our guaranteed
cost book of business. Results reflect sustained contributions from the
specialty businesses.
-- Premiums and fees in the third quarter 2009 decreased approximately 6%
relative to third quarter 2008 primarily due to a decline in medical
membership, partially offset by rate increases.
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
2009 2008 2009 Sept. 30, 2009
Adjusted Segment $ 65 $ 70 $ 90 $ 213
Earnings, After-Tax
Premiums and Fees $ 654 $ 627 $ 661 $ 1,987
Segment Margin, 8.7% 9.7% 12.0% 9.4%
After-Tax8
-- Third quarter 2009 adjusted segment earnings continue to reflect
competitively strong margins driven by the sustained value we deliver to
our customers from our disability management programs. Second quarter
2009 results include a net favorable impact of $20 million after-tax
related to a reserve study.
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
2009 2008 2009 Sept. 30, 2009
Adjusted Segment $ 40 $ 44 $ 63 $ 144
Earnings, After-Tax
Premiums and Fees $ 482 $ 471 $ 462 $ 1,378
Segment Margin, 8.0% 8.8% 13.0% 10.0%
After-Tax8
-- Adjusted segment earnings in the quarter reflect the impact of global
economic pressures, which included unfavorable claims experience. Our
International business continues to deliver competitively strong
margins. Second quarter 2009 results include a favorable adjustment of
$14 million related to the implementation of a capital management
strategy which reduces our effective tax rate for future periods.
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
2009 2008 2009 Sept. 30, 2009
Run-off Reinsurance $ 14 $ (44) $ 2 $ (33)
Other Operations $ 23 $ 20 $ 21 $ 62
Corporate $ (35) $ (31) $ (40) $ (109)
-- Run-off Reinsurance results for the third quarter 2009 reflect favorable
claim development in the workers compensation and personal accident
businesses. As a result of continued stability in the equity markets, no
reserve strengthening was required for the VADBe business this quarter.
OUTLOOK
-- CIGNA currently estimates full year 2009 consolidated adjusted income
from operations5,9 to be in the range of $1.04 billion to $1.10 billion,
or $3.80 to $4.00 per share2. This outlook includes an assumption that
VADBe results will be approximately break-even for the remaining three
months of 2009, reflective of management's view that the long-term
reserve assumptions are appropriate and that capital markets remain
stable over the balance of the year.
-- CIGNA currently estimates full year 2009 adjusted income from
operations5,9 for the Health Care segment to be in the range of $700
million to $750 million.
-- CIGNA's earnings and earnings per share2 outlooks exclude the impact of
any future stock repurchase10.
-- Full year 2009 medical membership is expected to decline by
approximately 5% to 5.5%.
-- Management will provide additional information about the 2009 earnings
outlook and discuss the 2010 earnings outlook on CIGNA's third quarter
2009 earnings call.
The foregoing statements represent management's current estimate of CIGNA's 2009 consolidated and Health Care segment adjusted income from operations5,9 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 inclusive of the Investment 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 third quarter 2009 results and discuss full year 2009 and 2010 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. Effective January 1, 2009, CIGNA adopted the Financial Accounting Standards Board's (FASB's) updated consolidation guidance on accounting for noncontrolling interests (ASC 810-10), which requires income attributable to noncontrolling interests to be included in income from continuing operations, income from discontinued operations, and net income, but then be subtracted out to determine shareholders' income from continuing operations, shareholders' income from discontinued operations, and shareholders' net income.
2. Earnings per share (EPS) are on a diluted basis. Effective January 1, 2009, CIGNA adopted the FASB's updated earnings per share guidance (ASC 260-10) which requires unvested restricted stock awards that contain rights to non-forfeitable dividends to be included in both basic and diluted earnings per share calculations. Prior period earnings per share data have been restated to reflect the adoption of this guidance.
3. The application of the FASB's fair value disclosure and measurement guidance (ASC 820-10), which impacts reinsurance contracts covering GMIB, does not represent management's expectation of the ultimate payout. Changes in underlying contract holder account values, interest rates, stock market volatility, and other factors may result in changes to the fair value assumptions, and/or amount that will be required to ultimately settle the Company's obligations, which could result in a material adverse or favorable impact on the Run-off Reinsurance segment and CIGNA's results of operations.
4. Special items included in shareholders' 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 2009
- After-tax charge of $7 million related to CIGNA's previously announced cost reduction plan.
Second Quarter 2009
- After-tax benefit of $30 million related to the decision to freeze the CIGNA Pension Plan and CIGNA Supplemental Pension Plan, effective July 1, 2009.
- After-tax charge of $9 million related to CIGNA's previously announced cost reduction plan.
Nine months ended September 30, 2009
- After-tax benefit of $20 million related to completion of an IRS examination and after-tax benefit of $30 million related to the decision to freeze the CIGNA Pension Plan and CIGNA Supplemental Pension Plan, effective July 1, 2009, partially offset by after-tax charge of $16 million related to CIGNA's cost reduction plan.
5. CIGNA measures the financial results of its segments using Segment Earnings (Loss), which is defined as shareholders' 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 excludes 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), shareholders' income from continuing operations, and shareholders' net income. See Exhibit 2 for a reconciliation of adjusted income (loss) from operations to segment earnings (loss), shareholders' income from continuing operations, and consolidated shareholders' net income.
6. The discontinued operations included in shareholders' net income are:
Third Quarter 2008 and Nine months ended September 30, 2009
- Primarily due to after-tax benefit of $1 million related to past divestitures.
7. Health care medical claims payable are presented net of reinsurance and other recoverables. The gross health care medical claims payable balance was $932 million as of September 30, 2009 and $924 million as of December 31, 2008.
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 6.2% for the three months ended September 30, 2009, 5.9% for the three months ended June 30, 2009, and 5.6% for the nine months ended September 30, 2009. Segment margins including special items for Disability and Life were 8.6% for the three months ended September 30, 2009, 12.4% for the three months ended June 30, 2009, and 9.8% for the nine months ended September 30, 2009. Segment margins including special items for International were 7.6% for the three months ended September 30, 2009, 13.2% for the three months ended June 30, 2009, and 10.0% for the nine months ended September 30, 2009.
9. 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 shareholders' income from continuing operations. Special items for the remainder of 2009 may include potential charges associated with the previously announced cost reduction plan as well as litigation related items. Information is not available for management to identify, other than this item, or reasonably estimate additional 2009 special items.
10. 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.
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 2009 and 2010 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:
increased medical costs that are higher than anticipated in establishing
1. premium rates in the Company's Health Care operations, including increased
use and costs of medical services;
increased medical, administrative, technology or other costs resulting from
2. new legislative and regulatory requirements imposed on the Company's
employee benefits businesses;
challenges and risks associated with implementing operational improvement
initiatives and strategic actions in the ongoing operations of the
businesses, including those related to: (i) offering products that meet
emerging market needs, (ii) strengthening underwriting and pricing
3. effectiveness, (iii) strengthening medical cost and medical membership
results, (iv) delivering quality member and provider service using
effective technology solutions, (v) lowering administrative costs and (vi)
transitioning to an integrated operating company model, including operating
efficiencies related to the transition;
risks associated with pending and potential state and federal class action
4. lawsuits, disputes regarding reinsurance arrangements, other litigation and
regulatory actions challenging the Company's businesses, government
investigations and proceedings, and tax audits and related litigation;
heightened competition, particularly price competition, which could reduce
5. product margins and constrain growth in the Company's businesses, primarily
the Health Care business;
risks associated with the Company's mail order pharmacy business which,
6. among other things, includes any potential operational deficiencies or
service issues as well as loss or suspension of state pharmacy licenses;
significant changes in interest rates and deterioration in the loan to
7. value ratios of commercial real estate investments for a sustained period
of time;
downgrades in the financial strength ratings of the Company's insurance
subsidiaries, which could, among other things, adversely affect new sales,
8. retention of current business as well as a downgrade in financial strength
ratings of reinsurers which could result in increased statutory reserve or
capital requirements;
limitations on the ability of the Company's insurance subsidiaries to
9. 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;
inability of the program adopted by the Company to substantially reduce
equity market risks for reinsurance contracts that guarantee minimum death
10. 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);
adjustments to the reserve assumptions (including lapse, partial surrender,
11. mortality, interest rates and volatility) used in estimating the Company's
liabilities for reinsurance contracts covering guaranteed minimum death
benefits under certain variable annuities;
adjustments to the assumptions (including annuity election rates and
12. amounts collectible from reinsurers) used in estimating the Company's
assets and liabilities for reinsurance contracts covering guaranteed
minimum income benefits under certain variable annuities;
significant stock market declines, which could, among other things, result
in increased expenses for guaranteed minimum income benefit contracts,
13. guaranteed minimum death benefit contracts and the Company's pension plans
in future periods as well as the recognition of additional pension
obligations;
unfavorable claims experience related to workers' compensation and personal
14. accident exposures of the run-off reinsurance business, including losses
attributable to the inability to recover claims from retrocessionaires;
significant deterioration in economic conditions and significant market
15. volatility, which could have an adverse effect on the Company's operations,
investments, liquidity and access to capital markets;
significant deterioration in economic conditions and significant market
volatility, which could have an adverse effect on the businesses of our
16. customers (including the amount and type of health care services provided
to their workforce, loss in workforce and our customers' ability to pay
receivables) and our vendors (including their ability to provide services);
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 (including health care reform
legislation that could include, among other items, a broad based public
17. sector alternative and/or alternative assessments and tax increases
specific to the Company's industry), 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 certain insurance products such as corporate-owned
life insurance;
potential public health epidemics, pandemics and bio-terrorist activity,
which could, among other things, cause the Company's covered medical and
18. 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;
challenges and risks associated with the successful management of the
20. Company's outsourcing projects or key vendors, including the agreement with
IBM for provision of technology infrastructure and related services;
the ability to successfully integrate and operate the businesses acquired
from Great-West by, among other things, renewing insurance and
21. 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
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 businesses acquired from Great-West
22. 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, the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009, 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,
2009 2008 2009 2008
REVENUES
Premiums and fees $ 3,985 $ 4,128 $ 12,049 $ 12,197
Net investment income 263 272 752 802
Mail order pharmacy revenues 316 300 944 882
Other revenues (1) (61) 175 73 431
Net realized investment gains 14 (23) (40) (28)
(losses)
Total $ 4,517 $ 4,852 $ 13,778 $ 14,284
ADJUSTED INCOME (LOSS) FROM
OPERATIONS (2)
Health Care $ 204 $ 187 $ 535 $ 506
Disability and Life 65 70 213 211
International 40 44 144 144
Run-off Reinsurance 14 (44) (33) (30)
Other Operations 23 20 62 64
Corporate (35) (31) (109) (81)
Total $ 311 $ 246 $ 812 $ 814
SHAREHOLDERS' NET INCOME
Segment Earnings (Loss)
Health Care (3) (4) (5) (6) $ 200 $ 187 $ 549 $ 482
Disability and Life (3) (4) (5) 64 70 220 211
International (3) (4) (5) 38 44 144 144
Run-off Reinsurance (7) 30 (105) 116 (252)
Other Operations (5) 23 20 63 64
Corporate (5) (6) (35) (31) (97) (133)
Total 320 185 995 516
Net realized investment gains 9 (15) (24) (18)
(losses), net of taxes
Shareholders' income from continuing 329 170 971 498
operations
Shareholders' income from - 1 1 3
discontinued operations
Shareholders' net income $ 329 $ 171 $ 972 $ 501
DILUTED EARNINGS PER SHARE (8):
Adjusted income from operations (2) $ 1.13 $ 0.89 $ 2.96 $ 2.90
Results of guaranteed minimum income 0.06 (0.22) 0.55 (0.79)
benefits business, after-tax (7)
Net realized investment gains 0.03 (0.05) (0.09) (0.07)
(losses), net of taxes
Special item(s), after-tax (3) (4) (0.03) - 0.12 (0.27)
(5) (6)
Shareholders' income from continuing 1.19 0.62 3.54 1.77
operations
Shareholders' income from - - - 0.01
discontinued operations
Shareholders' net income $ 1.19 $ 0.62 $ 3.54 $ 1.78
Weighted average shares (in 276,130 276,806 274,691 280,947
thousands) (8)
SHAREHOLDERS' EQUITY at September $ 5,157 $ 4,642
30:
SHAREHOLDERS' EQUITY PER SHARE at $ 18.86 $ 17.05
September 30:
(1) Includes pre-tax losses of $161 million for the third quarter of 2009 and $232 million for the nine months of 2009 and pre-tax gains of $70 million for the third quarter of 2008 and $118 million for the nine months of 2008 from futures contracts entered into as part of a dynamic hedge 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) (shareholders' 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), shareholders' income from continuing operations and shareholders' net income presented in accordance with generally accepted accounting principles.
(3) The nine months ended September 30, 2009 reflect a pre-tax curtailment benefit of $46 million ($30 million after-tax) resulting from the freeze of CIGNA's pension plans.
- Pre-tax benefit of $39 million ($25 million after-tax) in Health Care; pre-tax benefit of $6 million ($4 million after-tax) in Disability and Life; and pre-tax benefit of $1 million ($1 million after-tax) in International.
(4) The nine months ended September 30, 2009 include a pre-tax charge of $10 million ($7 million after-tax) for the third quarter of 2009 and a pre-tax charge of $14 million ($9 million after-tax) for the second quarter of 2009 related to the previously announced cost reduction plan.
- Pre-tax charge of $7 million ($4 million after-tax) in Health Care, a pre-tax charge of $1 million ($1 million after-tax) in Disability and Life, and a pre-tax charge of $2 million ($2 million after-tax) in International for the third quarter of 2009.
- Pre-tax charge of $13 million ($8 million after-tax) in Health Care and a pre-tax charge of $1 million ($1 million after-tax) in Disability and Life for the second quarter of 2009.
(5) The nine months ended September 30, 2009 include a net tax benefit of $20 million resulting from the completion of the 2005 and 2006 IRS examinations.
-After-tax benefit of $1 million in Health Care; after-tax benefit of $5 million in Disability and Life; after-tax benefit of $1 million in International; after-tax benefit of $1 million in Other Operations; and an after-tax benefit of $12 million in Corporate.
(6) 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.
(7) The nine months ended September 30, 2008 include a pre-tax charge of $202 million ($131 million after-tax) on the adoption of FASB's fair value disclosure and measurement guidance (ASC 820) for guaranteed minimum income benefit contracts.
(8) Weighted average shares outstanding will be impacted by the following factors:
1. The accounting change related to earnings per share guidance (ASC 260) effective January 1, 2009 which requires unvested restricted stock with non-forfeitable dividends to be treated as outstanding common shares.
2. Higher common stock equivalents when CIGNA's stock price increases and exceeds the exercise price of its employees' outstanding stock options.
CIGNA CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION (unaudited) Exhibit 2
RECONCILIATION OF ADJUSTED INCOME FROM OPERATIONS TO GAAP SHAREHOLDERS' NET INCOME
(Dollars in
millions,
except per
share
amounts)
Diluted
Earnings Disability Run-off Other
Per Share (1)(8) Consolidated Health Care & Life International Reinsurance Operations Corporate
Quarterly 3Q09 3Q08 2Q09 3Q09 3Q08 2Q09 3Q09 3Q08 2Q09 3Q09 3Q08 2Q09 3Q09 3Q08 2Q09 3Q09 3Q08 2Q09 3Q09 3Q08 2Q09 3Q09 3Q08 2Q09
Results:
Adjusted
income (loss)
from $ 1.13 $ 0.89 $ 1.14 $ 311 $ 246 $ 313 $ 204 $ 187 $ 177 $ 65 $ 70 $ 90 $ 40 $ 44 $ 63 $ 14 $ (44) $ 2 $ 23 $ 20 $ 21 $ (35) $ (31) $ (40)
operations
(2)
Results of
guaranteed
minimum
income
benefits
business, 0.06 (0.22) 0.40 16 (61) 110 - - - - - - - - - 16 (61) 110 - - - - - -
excluding
charge on
adoption of
fair value
measurements
Special item
(s),
after-tax:
Curtailment - - 0.11 - - 30 - - 25 - - 4 - - 1 - - - - - - - - -
benefit (3)
Charge for
cost (0.03) - (0.04) (7) - (9) (4) - (8) (1) - (1) (2) - - - - - - - - - - -
reduction
plan (4)
Segment
earnings 1.16 0.67 1.61 320 185 444 $ 200 $ 187 $ 194 $ 64 $ 70 $ 93 $ 38 $ 44 $ 64 $ 30 $ (105) $ 112 $ 23 $ 20 $ 21 $ (35) $ (31) $ (40)
(loss) (2)
Net realized
investment
gains 0.03 (0.05) (0.03) 9 (15) (9)
(losses), net
of taxes
Shareholders'
income from
continuing 1.19 0.62 1.58 329 170 435
operations
(7)
Shareholders'
income from - - - - 1 -
discontinued
operations
Shareholders'
net income $ 1.19 $ 0.62 $ 1.58 $ 329 $ 171 $ 435
(7)
Diluted
Earnings Disability Run-off Other
Per Share (1)(8) Consolidated Health Care & Life International Reinsurance Operations Corporate
Nine Months
Ended 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008
September 30,
Adjusted
income (loss)
from $ 2.96 $ 2.90 $ 812 $ 814 $ 535 $ 506 $ 213 $ 211 $ 144 $ 144 $ (33) $ (30) $ 62 $ 64 $ (109) $ (81)
operations
(2)
Results of
guaranteed
minimum
income
benefits
business,
after-tax:
Charge on
adoption of - (0.47) - (131) - - - - - - - (131) - - - -
fair value
measurements
Results of
guaranteed
minimum
income
benefits
business, 0.55 (0.32) 149 (91) - - - - - - 149 (91) - - - -
excluding
charge on
adoption of
fair value
measurements
Total 0.55 (0.79) 149 (222) - - - - - - 149 (222) - - - -
Special item
(s),
after-tax:
Curtailment 0.11 - 30 - 25 - 4 - 1 - - - - - - -
benefit (3)
Charge for
cost (0.06) - (16) - (12) - (2) - (2) - - - - - - -
reduction
plan (4)
Completion of
IRS 0.07 - 20 - 1 - 5 - 1 - - - 1 - 12 -
examination
(5)
Charge
associated
with - (0.27) - (76) - (24) - - - - - - - - - (52)
litigation
matters (6)
Segment
earnings 3.63 1.84 995 516 $ 549 $ 482 $ 220 $ 211 $ 144 $ 144 $ 116 $ (252) $ 63 $ 64 $ (97) $ (133)
(loss) (2)
Net realized
investment (0.09) (0.07) (24) (18)
losses, net
of taxes
Shareholders'
income from
continuing 3.54 1.77 971 498
operations
(7)
Shareholders'
income from - 0.01 1 3
discontinued
operations
Shareholders'
net income $ 3.54 $ 1.78 $ 972 $ 501
(7)
(1) All earnings per share figures reflect the adoption of the FASB's updated earnings per share guidance (ASC 260), which requires non-vested restricted stock grants with non-forfeitable dividend rights to be included in weighted average shares outstanding.
(2) CIGNA measures the financial results of its segments using "segment earnings (loss)," which is defined as shareholders' 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 results of CIGNA's guaranteed minimum income benefit business.
(3) The nine months ended September 30, 2009 reflect a pre-tax curtailment benefit of $46 million ($30 million after-tax) resulting from the freeze of CIGNA's pension plans.
(4) The nine months ended September 30, 2009 include a pre-tax charge of $10 million ($7 million after-tax) for the third quarter of 2009 and a pre-tax charge of $14 million ($9 million after-tax) for the second quarter of 2009 related to the previously announced cost reduction plan.
(5) The nine months ended September 30, 2009 include a net tax benefit of $20 million resulting from the completion of the 2005 and 2006 IRS examinations.
(6) 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.
(7) Shareholders' income (loss) from continuing operations and shareholders' net income (loss) are presented in accordance with generally accepted accounting principles (GAAP). Effective January 1, 2009, CIGNA adopted the FASB's updated consolidation guidance (ASC 810), which requires income attributable to noncontrolling interests to be included in net income, but then subtracted to determine "shareholders' net income."
(8) Weighted average shares outstanding will be impacted by the following factors:
1. The accounting change related to earnings per share guidance (ASC 260) effective January 1, 2009 which requires unvested restricted stock with non-forfeitable dividends to be treated as outstanding common shares.
2. Higher common stock equivalents when CIGNA's stock price increases and exceeds the exercise price of its employees' outstanding stock options.
Source: CIGNA Corporation
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