CIGNA Reports First Quarter 2011 Results

CIGNA Corporation (NYSE: CI) today reported first quarter 2011 results, that included consolidated revenue growth and strong earnings growth from each of our ongoing businesses, reflecting continued effective execution of our strategy.

Consolidated revenues increased 8%, excluding the effect from exiting Medicare IPFFS¹. Revenues reflect premium and fee increases of 6% in Health Care¹, 4% in Disability and Life, and 32% in International, driven by continued growth in our targeted customer segments.

CIGNA reported shareholders’ net income¹ of $429 million, or $1.57 per share, for the first quarter of 2011, compared with shareholders’ net income¹ of $283 million, or $1.02 per share, for the first quarter of 2010. Shareholders’ net income¹ for the first quarter of 2011 included a special item⁴ which generated income of $0.09 per share.

CIGNA's adjusted income from operations¹ for the first quarter of 2011 was $375 million, or $1.37 per share, compared with $281 million, or $1.01 per share, for the first quarter of 2010. Adjusted income from operations¹ in the quarter included prior year favorable claim development in the Health Care business of $22 million after-tax, or $0.08 per share, compared to $4 million after-tax, or $0.01 per share, in 2010.

"Our first quarter results represent a strong start towards achieving our full year 2011 goals, with good revenue growth and strong earnings contributions from each of our ongoing businesses,” said David M. Cordani, President and Chief Executive Officer of CIGNA Corporation. "These results reflect continued effective execution of our strategy for the benefit of our customers, health care partners and shareholders.”

CONSOLIDATED HIGHLIGHTS

The following table includes highlights of results and a reconciliation of adjusted income from operations¹ to shareholders’ net income (dollars in millions, except per share amounts; membership in thousands):

• Shareholders’ net income¹ in the first quarter of 2011 was $429 million, up 52% over the same period last year, and included positive contributions from adjusted income from operations¹, net realized investment gains, Guaranteed Minimum Income Benefits (GMIB)² business and a special item.
• Cash and short term investments at the parent company were approximately $790 million at March 31, 2011 and $810 million at December 31, 2010.
• Year to date through May 4, 2011, the Company repurchased⁶ approximately 4.9 million shares of stock for $210 million.

HIGHLIGHTS OF SEGMENT RESULTS

"Adjusted segment earnings (loss)” are adjusted income (loss) from operations¹, 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 and medical management, stop-loss, and pharmacy-related products and services.

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

• Overall, Health Care results reflect continued growth in our targeted customer segments and the expected declines in medical membership and premiums and fees due to exits from non-strategic markets, primarily Medicare IPFFS.
• Excluding Medicare IPFFS¹, first quarter premiums and fees increased approximately 6% relative to first quarter 2010, due to business growth, rate increases and increased specialty penetration.
• First quarter 2011 adjusted segment earnings reflect continued growth in targeted medical and specialty businesses.
• Earnings in the quarter include favorable prior year claim development of approximately $22 million after-tax.
• Health Care medical claims payable⁸ were approximately $1,026 million at March 31, 2011 and $1,010 million at December 31, 2010.

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):

• First quarter 2011 Disability and Life results reflect solid revenue growth, including a 9% increase in disability premiums and fees. Adjusted segment earnings benefited from favorable life and accident claims experience.
• First quarter 2011 and 2010 adjusted segment earnings include the favorable after-tax impacts related to reserve studies of $6 million and $10 million, respectively.

International

This segment includes CIGNA’s supplemental health, life, and accident insurance and expatriate benefits businesses operating in select international markets.

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

• International segment results reflect strong premium and fee growth driven by attractive customer retention and sales in targeted markets within our supplemental Health, Life and Accident and Expatriate Benefits businesses. Results also include contributions to the Expatriate business from Vanbreda International, which was acquired during the third quarter of 2010.
• First quarter 2010 results included a favorable adjustment of $5 million after-tax related to the implementation of a capital management strategy.

Other Segments

Adjusted segment earnings (losses) for CIGNA's remaining operations are presented below (after-tax, dollars in millions):

• Run-off Reinsurance includes the results for the Variable Annuity Death Benefits (VADBe)² business.

OUTLOOK

• CIGNA's updated 2011 outlook as of May 5, 2011 (dollars in millions, except per share amounts):

• CIGNA’s earnings and earnings per share outlooks exclude the impact of any stock repurchase⁶ subsequent to the date of this release.
• CIGNA's earnings and earnings per share outlooks assume break-even results for VADBe² for full year 2011, which assumes that actual experience, including capital market performance, will be consistent with long term reserve assumptions. See the Critical Accounting Estimates section of the Management’s Discussion and Analysis of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 for more information on the effect of capital market assumption changes in shareholders’ net income.

The foregoing statements represent management’s current estimate of CIGNA's 2011 consolidated and segment adjusted income from operations^1,3 as of the date of this release. Actual results may differ materially depending on a number of factors, and investors are urged to read the Cautionary Statement included in this release for a description of those factors. Management does not assume any obligation to update these estimates.

This quarterly earnings release and the Quarterly Financial Supplement 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 first quarter 2011 and discuss full year 2011 outlook is available in the Investor Relations section of CIGNA’s website (http://www.cigna.com/about_us/investor_relations/events.html).

First Quarter 2011

• After-tax benefit of $24 million related to the completion of an IRS examination.

Fourth Quarter 2010

• After-tax benefit of $101 million related to the completion of an IRS examination and the after-tax charges of $39 million related to the early extinguishment of debt and $20 million related to the transfer of the workers compensation and personal accident businesses that are included in our Run-off Reinsurance operations.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

CIGNA Corporation and its subsidiaries (the "Company”) and its representatives may from time to time make written and oral forward-looking statements, including statements contained in press releases, in the Company’s filings with the Securities and Exchange Commission, in its reports to shareholders and in meetings with analysts and investors. Forward-looking statements may contain information about financial prospects, economic conditions, trends and other uncertainties. These forward-looking statements are based on management’s beliefs and assumptions and on information available to management at the time the statements are or were made. Forward-looking statements include but are not limited to the information concerning possible or assumed future business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, trends and, in particular, the Company’s strategic initiatives, litigation and other legal matters, operational improvement initiatives in the health care operations, and the outlook for the Company’s full year 2011 and beyond results. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe”, "expect”, "plan”, "intend”, "anticipate”, "estimate”, "predict”, "potential”, "may”, "should” or similar expressions.

By their nature, forward-looking statements: (i) speak only as of the date they are made, (ii) are not guarantees of future performance or results and (iii) are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors. Some factors that could cause actual results to differ materially from the forward-looking statements include:

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 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.