News Column

Cigna Reports Full Year 2013 Results

February 13, 2014

Cigna Corp. reported strong full year 2013 results with each of the Company's business segments posting revenue and earnings growth over the prior year.

In a release on February 7, the Company noted that consolidated revenues for 2013 were $32.4 billion, an increase of 11 percent over 2012. Revenues reflect growth in premiums and fees of 9 percent in Global Health Care, 27 percent in Global Supplemental Benefits and 10 percent in Group Disability and Life, primarily driven by continued growth in Cigna's targeted customer segments.

Cigna's adjusted income from operations1 for full year 2013 increased 11 percent to $1.93 billion, or $6.79 per share, compared with $1.73 billion, or $5.99 per share, for 2012. This represents per share growth of 13 percent and reflects strong revenue growth, continued effective medical cost management in our Commercial book, and a lower operating expense ratio, partially offset by pressure in Medicare Advantage results. For the fourth quarter of 2013, adjusted income from operations1 was $387 million, or $1.39 per share, compared to $452 million, or $1.57 per share, for the fourth quarter of 2012.

"Cigna's operating performance in 2013 was strong, driven by the continued effective execution of our strategy which resulted in improved health outcomes and productivity for our customers and clients," said David M. Cordani, President and Chief Executive Officer. "In the midst of an environment undergoing rapid change and disruption, our focused strategy and differentiated capabilities will enable us to deliver continued future growth."

Cigna also reported shareholders' net income in 2013 of $1.48 billion, or $5.18 per share, compared to $1.62 billion, or $5.61 per share, for 2012. Shareholders' net income in 2013 included special items4 which resulted in after-tax charges of $622 million, or $2.19 per share, compared to after-tax charges of $171 million, or $0.59 per share, in 2012.

For the fourth quarter of 2013, shareholders' net income was $361 million, or $1.29 per share, compared with $406 million, or $1.41 per share, for the fourth quarter of 2012. Fourth quarter 2013 shareholders' net income included a special item4 which resulted in after-tax losses of $40 million, or $0.15 per share, related to costs associated with an organizational efficiency plan, compared to a special item4 which resulted in after-tax losses of $68 million, or $0.24 per share, for litigation matters in the fourth quarter of 2012.

CONSOLIDATED HIGHLIGHTS

-Cash and short term investments at the parent company were approximately $760 million at December 31, 2013 and approximately $700 million at December 31, 2012.

-In 2013, the Company repurchased approximately 13.6 million shares of stock for approximately $1.0 billion. During the period January 1, through February 6, the Company repurchased5 an additional approximately 2.6 million shares of common stock for approximately $225 million.

-In the fourth quarter of 2013, the Company initiated a series of actions to improve its organizational efficiency, resulting in a $40 million after-tax charge which is reported as a special item. The Company expects the impact of these actions to reduce annualized operating expenses by approximately $45 million after-tax.

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 on 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.

-Overall, Global Health Care results for 2013 reflect continued growth in the Company's targeted customer segments.

-Fourth quarter premiums and fees increased approximately 6 percent relative to fourth quarter 2012, driven by customer growth, specialty contributions, and renewal rate increases.

-Fourth quarter 2013 adjusted income from operations1 and adjusted margin6 reflect elevated medical costs in our Medicare Advantage business and claim variability in our Guaranteed Cost business.

-Adjusted income from operations1 included favorable prior year reserve development on an after-tax basis of approximately $77 million for full year 2013, compared to $66 million for full year 2012.

-Global Health Care net medical claims payable7 was approximately $1.9 billion at December 31, 2013 and $1.6 billion at December 31, 2012.

Global Supplemental Benefits

This segment includes Cigna's individual supplemental health, life, and accident insurance globally, primarily in Asia, and Medicare supplement coverage in the United States.

-Fourth quarter 2013 premiums and fees grew 12 percent relative to fourth quarter 2012, reflecting customer growth, primarily in South Korea, as well as the acquisition of our Cigna Finansbank joint venture in Turkey.

-Fourth quarter 2013 adjusted income from operations1 and adjusted margin6 reflect the impact of strong customer retention and business growth, partially offset by increased strategic investments supporting long term customer growth as well as elevated claims in Korea, in part due to seasonality.

Group Disability and Life

This segment includes Cigna's group disability, life, and accident insurance operations.

-Fourth quarter 2013 results benefited from premium and fee growth of 9 percent, relative to fourth quarter 2012, due to growth in both disability and life businesses.

-Adjusted income from operations1 and adjusted margin6 for the fourth quarter 2013 reflect improved life claims experience and lower operating expenses, partially offset by unfavorable disability claims experience.

-Third quarter adjusted income from operations1 includes a $26 million favorable after-tax impact related to a reserve study.

Other Segments

-Third quarter 2013 Other Operations results include a $14 million after-tax benefit related to an IRS examination.

Cigna's outlook for full year 2014 consolidated adjusted income from operations1,3 is in the range of $1.9 billion to $2.0 billion, or $6.80 to $7.20 per share5. Cigna's outlook excludes the potential effects of future capital deployment.

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