- Total revenues increased 4% to $10.3
billion in the second quarter
- Shareholders’ net income for the
second quarter was $813 million, or $3.15 per share
- Adjusted income from
operations1 in the second quarter was $750 million,
or $2.91 per share
- Global medical customer
base2 is projected to grow in the range of 500,000 to
600,000 lives in 2017
- Adjusted income from
operations1,3 is now projected to be in the range of
$2.50 billion to $2.58 billion in 2017, or $9.75 to $10.05 per
share4, which represents per share growth of 20% to
24% over 2016
Cigna Corporation (NYSE: CI) today reported second quarter 2017
results with strong performance across the company’s Global Health
Care, Global Supplemental Benefits and Group Disability & Life
segments.
“Our strong second quarter results and significant growth across
our diversified portfolio of businesses demonstrate the focused
execution of our strategy,” said David M. Cordani, President and
Chief Executive Officer. “We continue to drive differentiated value
for our customers, clients and partners, and innovate in a rapidly
changing and dynamic environment.”
Total revenues in the quarter were $10.3 billion, an increase of
4% over second quarter 2016, driven by continued growth in Cigna's
targeted customer segments.
For the second quarter of 2017, shareholders’ net income was
$813 million, or $3.15 per share, compared with $510 million, or
$1.97 per share, for the second quarter of 2016.
Cigna's adjusted income from operations1 for the second quarter
of 2017 was $750 million, or $2.91 per share, compared with $515
million, or $1.98 per share, for the second quarter of 2016. This
reflects significantly increased earnings contributions from each
of our business segments.
Reconciliations of shareholders’ net income to adjusted income
from operations1 are provided on the following page, and on Exhibit
2 of this earnings release.
CONSOLIDATED HIGHLIGHTS
The following table includes highlights of results and
reconciliations of consolidated operating revenues5 to total
revenues and adjusted income from operations1 to shareholders’ net
income:
Consolidated Financial Results (dollars in millions,
customers in thousands): Six Months
Three Months Ended Ended June 30, March
31, June 30, 2017 2016
2017 2017 Total Revenues $ 10,318 $
9,960 $ 10,385 $ 20,703 Net Realized Investment Gains (51)
(67) (46) (97)
Consolidated Operating Revenues5 $ 10,267 $ 9,893 $ 10,339 $ 20,606
Consolidated Earnings, net of taxes Shareholders’ Net
Income $ 813 $ 510 $ 598 $ 1,411 Net Realized Investment Gains (34)
(44) (31) (65) Amortization of Other Acquired Intangible Assets 18
23 20 38 Special Items1 (47) 26
132 85 Adjusted Income from Operations1 $ 750
$ 515 $ 719 $ 1,469 Shareholders’ Net Income,
per share $ 3.15 $ 1.97 $ 2.30 $ 5.45 Adjusted
Income from Operations1, per share $ 2.91 $ 1.98 $
2.77 $ 5.67
- Second quarter 2017 shareholders’ net
income included a special item1 benefit of $47 million after-tax,
or $0.18 per share, associated with the terminated merger agreement
with Anthem, compared with a special item1 charge in second quarter
2016 of $26 million after-tax, or $0.10 per share, for
merger-related transaction costs. The second quarter 2017 special
item benefit1 was driven by a merger-related income tax benefit,
net of transaction costs.
- Cash and marketable investments at the
parent company were $2.2 billion at June 30, 2017 and $2.8 billion
at December 31, 2016.
- Year to date, as of August 3, 2017, the
Company repurchased 7.7 million shares of common stock for
approximately $1.25 billion.
HIGHLIGHTS OF SEGMENT RESULTS
See Exhibit 2 for a reconciliation of adjusted income (loss)
from operations1 to shareholders’ net income.
Global Health
Care
This segment includes Cigna’s Commercial and Government
businesses that deliver medical and specialty health care products
and services to domestic and multi-national clients and customers
using guaranteed cost, retrospectively experience-rated and
administrative services only (“ASO”) funding arrangements.
Specialty health care includes behavioral, dental, disease and
medical management, stop loss and pharmacy-related products and
services.
Financial Results (dollars in millions, customers
in thousands): Six Months Three
Months Ended Ended June 30, March 31,
June 30, 2017 2016 2017
2017 Premiums and Fees $ 7,179 $ 6,943 $ 7,339
$ 14,518 Adjusted Income from Operations1 $ 591 $ 486 $ 610 $ 1,201
Adjusted Margin, After-Tax6 7.3% 6.2% 7.4% 7.4%
As of the
Periods Ended June 30, March 31, December
31,
Customers:
2017 2016 2017
2016 Commercial 15,163 14,543 15,232 14,631 Government
491 598 502 566
Medical2 15,654 15,141 15,734 15,197 Behavioral Care7 26,014
25,312 26,006 25,790 Dental 15,760 14,880 15,788 14,981 Pharmacy
8,902 8,302 8,910 8,461 Medicare Part D 823 1,037 853 972
- Global Health Care delivered strong
results in the second quarter, reflecting consistent performance in
well-positioned growth businesses.
- Second quarter 2017 premiums and fees
increased 3% relative to second quarter 2016, driven by customer
growth and specialty contributions in our Commercial business,
partially offset by enrollment reductions as expected in our
Government business.
- The medical customer base2 at the end
of the second quarter 2017 totaled 15.7 million, an increase of
457,000 customers year to date, driven by organic growth in all of
our Commercial market segments.
- Second quarter 2017 adjusted income
from operations1 and adjusted margin, after-tax6 reflect strong
medical and specialty results, continued effective medical cost
management, favorable prior year reserve development and operating
expense discipline.
- Adjusted income from operations1 for
second quarter 2017 and first quarter 2017 included favorable prior
year reserve development on an after-tax basis of $36 million and
$61 million, respectively. Second quarter of 2016 did not have a
meaningful amount of net prior year development.
- The Total Commercial medical care
ratio8 (“MCR”) of 78.7% for second quarter 2017 reflects strong
performance and effective medical cost management, as well as
favorable prior year development, and the impact of the health
insurance tax moratorium.
- The Total Government MCR8 of 86.1% for
second quarter 2017 reflects solid performance in our Medicare
Advantage and Medicare Part D businesses.
- The second quarter 2017 Global Health
Care operating expense ratio8 of 19.9% reflects the impact of the
health insurance tax moratorium, business mix changes and continued
effective expense management.
- Global Health Care net medical costs
payable9 was approximately $2.59 billion at June 30, 2017 and $2.26
billion at December 31, 2016.
Global Supplemental
Benefits
This segment includes Cigna’s global individual supplemental
health, life and accident insurance business, primarily in Asia,
and Medicare supplement coverage in the United States.
Financial Results (dollars in millions,
policies in thousands):
Six Months Three Months
Ended Ended June 30, March 31, June
30, 2017 2016 2017
2017 Premiums and Fees10 $ 914 $ 800 $ 869 $ 1,783
Adjusted Income from Operations1 $ 105 $ 83 $ 74 $ 179 Adjusted
Margin, After-Tax6 11.0% 9.9% 8.1% 9.6%
As of the Periods
Ended June 30, March 31, December 31,
2017 2016 2017
2016 Policies10 13,058 11,965 12,611 12,151
- Global Supplemental Benefits results
continue to reflect the value created by affordable and
personalized solutions delivered directly to individual consumers
through a diversified set of distribution channels.
- Second quarter 2017 premiums and fees10
grew 14% over second quarter 2016, reflecting continued business
growth.
- Second quarter 2017 adjusted income
from operations1 and adjusted margin, after-tax6 reflect business
growth, favorable claims experience, particularly in South Korea,
and effective operating expense management.
Group Disability and
Life
This segment includes Cigna’s group disability, life and
accident insurance operations.
Financial Results (dollars in
millions):
Six Months Three Months Ended Ended
June 30, March 31, June 30, 2017
2016 2017 2017 Premiums
and Fees $ 1,022 $ 1,012 $ 1,031 $ 2,053 Adjusted Income (Loss)
from Operations1 $ 83 $ (12) $ 68 $ 151 Adjusted Margin, After-Tax6
7.5% (1.1%) 6.1% 6.8%
- Group Disability and Life results
reflect the value created for our customers and clients through
differentiated solutions that enhance health, productivity and
sense of security.
- Second quarter 2017 premiums and fees
are generally in-line with second quarter 2016.
- Second quarter 2017 adjusted income
from operations1 and adjusted margin, after-tax6 reflect further
improvement in disability performance and continued stable life
results.
Corporate & Other
Operations
Adjusted loss from operations1 for Cigna's remaining operations
is presented below:
Financial Results (dollars in
millions):
Six Months Three Months Ended
Ended June 30, March 31, June 30,
2017 2016 2017
2017 Corporate & Other Operations $ (29) $ (42) $
(33) $ (62)
- Second quarter 2017 adjusted loss from
operations1 improved relative to second quarter 2016 primarily due
to favorability in corporate income taxes.
2017 OUTLOOK
Cigna's outlook for full year 2017 consolidated adjusted income
from operations1,3 is in the range of $2.50 billion to $2.58
billion, or $9.75 to $10.05 per share. Cigna’s outlook excludes the
impact of additional prior year reserve development and potential
effects of any future capital deployment.4
(dollars in millions, except where noted
and per share amounts)
Projection for Full-Year Ending December 31, 2017
Adjusted Income (Loss) from Operations1,3
Global Health Care $ 2,100 to 2,140 Global Supplemental Benefits $
310 to 330 Group Disability and Life $ 260 to 280 Ongoing
Businesses $ 2,670 to 2,750 Corporate & Other Operations
$ (170) Consolidated Adjusted Income from Operations1,3 $ 2,500 to
2,580 Consolidated Adjusted Income from Operations, per
share1,3,4 $ 9.75 to 10.05
2017 Operating
Metrics and Ratios Outlook
Total Revenue Growth
3% to 4%
Full Year Total Commercial Medical Care Ratio8 80.5%
to 81.5%
Full Year Total Government Medical Care
Ratio8
84.5% to 85.5%
Full Year Global Health Care Operating
Expense Ratio8
20.5% to 21.5%
Global Medical Customer Growth2
500,000 to 600,000 customers
The foregoing statements represent the Company’s current
estimates of Cigna's 2017 consolidated and segment adjusted income
from operations1,3 and other key metrics as of the date of this
release. Actual results may differ materially depending on a number
of factors. Investors are urged to read the Cautionary Note
Regarding Forward-Looking Statements included in this release.
Management does not assume any obligation to update these
estimates.
This quarterly earnings release and the Quarterly Financial
Supplement are available on Cigna’s website in the Investor
Relations section (http://www.cigna.com/aboutcigna/investors).
Management will be hosting a conference call to review second
quarter 2017 results and discuss full year 2017 outlook beginning
today at 8:00 a.m. EDT. A link to the conference call is available
in the Investor Relations section of Cigna's website located at
http://www.cigna.com/cignadotcom/aboutcigna/investors/events/index.page.
The call-in numbers for the conference call are as follows:
Live Call(888) 324-8113 (Domestic)(517)
308-9070 (International)Passcode: 8042017
Replay(800) 839-1117 (Domestic)(203) 369-3355
(International)
It is strongly suggested you dial in to the conference call by
7:45 a.m. EDT.
Notes:
1.
Adjusted income (loss) from operations
is defined as shareholders’ net income (loss) excluding the
following after-tax adjustments: net realized investment results,
net amortization of other acquired intangible assets and special
items. Special items are identified in Exhibit 2 of this earnings
release.
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 consolidated measure is not
determined in accordance with accounting principles generally
accepted in the United States (GAAP) and should not be viewed as a
substitute for the most directly comparable GAAP measure,
shareholders’ net income. See Exhibits 1 and 2 for a reconciliation
of adjusted income from operations to shareholders’ net
income.
2.
Global medical customers include
individuals who meet any one of the following criteria: are covered
under a medical insurance policy, managed care arrangement, or
service agreement issued by Cigna; have access to Cigna's provider
network for covered services under their medical plan; or have
medical claims and services that are administered by Cigna.
3.
Management is not able to provide a
reconciliation to shareholders’ net income (loss) on a
forward-looking basis because we are unable to predict, without
unreasonable effort, certain components thereof including (i)
future net realized investment results and (ii) future special
items. These items are inherently uncertain and depend on various
factors, many of which are beyond our control. As such, any
associated estimate and its impact on shareholders’ net income
could vary materially.
4.
The Company’s outlook excludes the
potential effects of any share repurchases or business combinations
that may occur after the date of this earnings release.
5.
The measure “consolidated operating
revenues” is not determined in accordance with GAAP and should not
be viewed as a substitute for the most directly comparable GAAP
measure, “total revenues.” We define consolidated operating
revenues as total revenues excluding realized investment results.
We exclude realized investment results from this measure because
our portfolio managers may sell investments based on factors
largely unrelated to the underlying business purposes of each
segment. As a result, gains or losses created in this process may
not be indicative of past or future underlying performance of the
business. See Exhibit 1 for a reconciliation of consolidated
operating revenues to total revenues.
6.
Adjusted margin, after-tax, is
calculated by dividing adjusted income (loss) from operations by
operating revenues for each segment.
7.
Prior period behavioral care customers
have been revised to conform to current presentation.
8.
Operating ratios are defined as
follows:
•
Total Commercial medical care ratio
represents medical costs as a percentage of premiums for all
commercial risk products, including medical, pharmacy, dental, stop
loss and behavioral products provided through guaranteed cost or
experience-rated funding arrangements in both the United States and
internationally.
•
Total Government medical care ratio
represents medical costs as a percentage of premiums for Medicare
Advantage, Medicare Part D, and Medicaid products.
•
Global Health Care operating expense
ratio represents operating expenses excluding acquisition related
amortization expense as a percentage of operating revenue in the
Global Health Care segment.
9.
Global Health Care medical costs
payable are presented net of reinsurance and other recoverables.
The gross Global Health Care medical costs payable balance was
$2.85 billion as of June 30, 2017 and $2.53 billion as of December
31, 2016.
10.
Cigna owns a 50% noncontrolling
interest in its China joint venture. Cigna's 50% share of the joint
venture’s earnings is reported in Other Revenues using the equity
method of accounting under GAAP. As such, the premiums and fees and
policy counts for the Global Supplemental Benefits segment do not
include the China joint venture.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This press release, and oral statements made with respect to
information contained in this release, may contain forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are based on Cigna's
current expectations and projections about future trends, events
and uncertainties. These statements are not historical facts.
Forward-looking statements may include, among others, statements
concerning our projected adjusted income (loss) from operations
outlook for 2017, on both a consolidated and segment basis;
projected total revenue growth and global medical customer growth,
each over year end 2016; projected growth beyond 2017; projected
medical care and operating expense ratios and medical cost trends;
future financial or operating performance, including our ability to
deliver personalized and innovative solutions for our customers and
clients; future growth, business strategy, strategic or operational
initiatives; economic, regulatory or competitive environments,
particularly with respect to the pace and extent of change in these
areas; financing or capital deployment plans and amounts available
for future deployment; our prospects for growth in the coming
years; and other statements regarding Cigna's future beliefs,
expectations, plans, intentions, financial condition or
performance. You may identify forward-looking statements by the use
of words such as “believe,” “expect,” “plan,” “intend,”
“anticipate,” “estimate,” “predict,” “potential,” “may,” “should,”
“will” or other words or expressions of similar meaning, although
not all forward-looking statements contain such terms.
Forward-looking statements are subject to risks and
uncertainties, both known and unknown, that could cause actual
results to differ materially from those expressed or implied in
forward-looking statements. Such risks and uncertainties include,
but are not limited to: our ability to achieve our financial,
strategic and operational plans or initiatives; our ability to
predict and manage medical costs and price effectively and develop
and maintain good relationships with physicians, hospitals and
other health care providers; the impact of modifications to our
operations and processes, including those in our disability
business; our ability to identify potential strategic acquisitions
or transactions and realize the expected benefits of such
transactions; the substantial level of government regulation over
our business and the potential effects of new laws or regulations
or changes in existing laws or regulations; the outcome of
litigation, regulatory audits, investigations, actions and/or
guaranty fund assessments; uncertainties surrounding participation
in government-sponsored programs such as Medicare; the
effectiveness and security of our information technology and other
business systems; unfavorable industry, economic or political
conditions including foreign currency movements; acts of war,
terrorism, natural disasters or pandemics; uncertainty as to the
outcome of the litigation between Cigna and Anthem, Inc. with
respect to the termination of the merger agreement, the reverse
termination fee and/or contract and non-contract damages for claims
each party has filed against the other, including the risk that a
court finds that Cigna has not complied with its obligations under
the merger agreement, is not entitled to receive the reverse
termination fee or is liable for breach of the merger agreement; as
well as more specific risks and uncertainties discussed in our most
recent report on Form 10-K and subsequent reports on Forms 10-Q and
8-K available on the Investor Relations section of www.cigna.com.
You should not place undue reliance on forward-looking statements,
which speak only as of the date they are made, are not guarantees
of future performance or results, and are subject to risks,
uncertainties and assumptions that are difficult to predict or
quantify. Cigna undertakes no obligation to update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise, except as may be required by law.
CIGNA CORPORATION
COMPARATIVE SUMMARY OF FINANCIAL RESULTS (unaudited)
Exhibit 1 (Dollars in millions, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30, 2017
2016 2017 2016
REVENUES Premiums $ 8,010 $ 7,654 $ 16,113 $
15,400 Fees 1,124 1,127 2,280 2,260 Net investment income 308 294
611 566 Mail order pharmacy revenues 757 748 1,467 1,445 Other
revenues 68 70 135 138 Consolidated
operating revenues 10,267 9,893 20,606 19,809 Net realized
investment gains (losses) 51 67 97 35
Total revenues
$ 10,318 $ 9,960 $ 20,703
$ 19,844
SHAREHOLDERS' NET INCOME (LOSS)
Shareholders' net income $ 813 $ 510 $ 1,411 $ 1,029
After-tax adjustments to reconcile to adjusted income from
operations: Realized investment (gains) losses (34) (44) (65) (23)
Amortization of other acquired intangible assets, net 18 23 38 48
Special items (47) 26 85 62
Adjusted income from
operations (1)
$
750
$
515 $ 1,469 $ 1,116
Adjusted income
(loss) from operations by segment
Global Health Care $ 591 $ 486 $ 1,201 $ 1,030 Global Supplemental
Benefits 105 83 179 150 Group Disability and Life 83
(12) 151 3 Ongoing Operations 779 557 1,531 1,183
Corporate and Other (29) (42) (62) (67)
Total adjusted
income from operations $ 750 $ 515
$ 1,469 $ 1,116
DILUTED EARNINGS PER
SHARE Shareholders' net income $ 3.15 $ 1.97 $ 5.45 $
3.97 After-tax adjustments to reconcile to adjusted income from
operations: Realized investment (gains) losses (0.13) (0.18) (0.25)
(0.09) Amortization of other acquired intangible assets, net 0.07
0.09 0.15 0.18 Special items (0.18) 0.10 0.32 0.24
Adjusted income from operations (1) $ 2.91 $ 1.98
$ 5.67 $ 4.30 Weighted average shares
(in thousands) 258,061 259,500
258,913 259,473 Common shares
outstanding (in thousands)
252,859 256,558
SHAREHOLDERS' EQUITY at June 30,
$ 14,546 $ 13,356
SHAREHOLDERS' EQUITY PER SHARE at June 30,
$ 57.53 $ 52.06
(1) Adjusted income (loss) from operations is defined as
shareholders' net income (loss) excluding the following after-tax
adjustments: realized investment results; net amortization of other
acquired intangible assets; and special items (identified and
quantified on Exhibit 2).
CIGNA CORPORATION
RECONCILIATION OF SHAREHOLDERS' NET INCOME (LOSS) TO ADJUSTED
INCOME (LOSS) FROM OPERATIONS
Exhibit 2 (Dollars
in millions, except per share amounts)
Diluted Global
Group Corporate Earnings Global
Supplemental Disability and Per Share
Consolidated Health Care Benefits and
Life Other Three Months Ended, 2Q17
2Q16 1Q17 2Q17
2Q16 1Q17 2Q17
2Q16 1Q17 2Q17
2Q16 1Q17 2Q17
2Q16 1Q17 2Q17
2Q16 1Q17 Shareholders' net income
(loss) $ 3.15 $ 1.97 $ 2.30 $ 813 $ 510 $ 598 $ 599 $ 487 $ 544 $
101 $ 78 $ 77 $ 97 $ 3 $ 59 $ 16 $ (58 ) $ (82 ) After-tax
adjustments to reconcile to adjusted income (loss) from operations:
Realized investment (gains) losses (0.13 ) (0.18 ) (0.12 ) (34 )
(44 ) (31 ) (22 ) (19 ) (16 ) - - (9 ) (14 ) (15 ) (6 ) 2 (10 ) -
Amortization of other acquired intangible assets, net 0.07 0.09
0.08 18 23 20 14 18 14 4 5 6 - - - - - - Special items:
Long-term care guaranty fund
assessment
- -
0.32
- -
83
- -
68
- - - - -
15
- - - Merger-related transaction costs (1) (0.18 )
0.10 0.19 (47 )
26 49 -
- -
- - - -
- -
(47 ) 26 49 Adjusted
income (loss) from operations $ 2.91 $ 1.98
$ 2.77 $ 750 $ 515
$ 719 $ 591 $ 486 $ 610
$ 105 $ 83 $ 74 $
83 $ (12 ) $ 68 $ (29 ) $
(42 ) $ (33 ) Weighted average shares (in thousands) 258,061
259,500 259,774 Special items, pre-tax:
Long-term care guaranty fund
assessment
$ - $ - $ 129 $ - $ - $ 106 $ - $ - $ - $ - $ - $ 23 $ - $ - $ -
Merger-related transaction costs (1) 16
34 63 -
- - -
- - -
- - 16
34 63 Total $ 16
$ 34 $ 192 $ -
$ - $ 106 $ - $ -
$ - $ - $ - $ 23
$ 16 $ 34 $ 63
(Dollars in millions, except per share
amounts)
Diluted Global Group Corporate
Earnings Global Supplemental Disability
and Six Months Ended June 30, Per Share
Consolidated Health Care Benefits and
Life Other 2017 2016
2017 2016
2017 2016 2017
2016 2017
2016 2017
2016 Shareholders' net income (loss)
$
5.45
$
3.97
$
1,411
$
1,029
$
1,143
$
1,001
$
178
$
137
$
156
$
16
$
(66
)
$
(125
)
After-tax adjustments to reconcile to adjusted income (loss) from
operations:
Realized investment (gains) losses (0.25 ) (0.09 ) (65 ) (23 ) (38
) (7 ) (9 ) 1 (20 ) (13 ) 2 (4 ) Amortization of other acquired
intangible assets, net 0.15 0.18 38 48 28 36 10 12 - - - - Special
items: Long-term care guaranty fund assessment 0.32 - 83 - 68 - - -
15 - - - Merger-related transaction costs (1) -
0.24 2
62 -
- -
- -
- 2
62 Adjusted income (loss) from operations $ 5.67
$ 4.30 $ 1,469
$ 1,116 $ 1,201
$ 1,030 $ 179 $
150 $ 151 $ 3
$ (62 ) $ (67 ) Weighted average shares
(in thousands) 258,913 259,473 Common shares outstanding as of June
30, (in thousands) 252,859 256,558 Special items, pre-tax:
Long-term care guaranty fund assessment $ 129 $ - $ 106 $ - $ - $ -
$ 23 $ - $ - $ - Merger-related transaction costs (1) 79
74 -
-
-
- -
- 79
74 Total $ 208
$ 74 $ 106 $ -
$ - $ - $
23 $ - $ 79
$ 74
(1)
For additional information related to a
one-time tax benefit of approximately $60 million recorded in the
second quarter of 2017, please refer to Note 3 to the Consolidated
Financial Statements in Cigna's Form 10-Q for the period ended June
30, 2017 expected to be filed on August 4, 2017.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170804005123/en/
Cigna CorporationInvestor RelationsWill
McDowell, 215-761-4198orMedia RelationsMatt
Asensio, 860-226-2599
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