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Cigna Reports Strong Third Quarter 2015 Results, Raises Outlook

The following excerpt is from the company's SEC filing.

Consolidated revenues increased 7% to $9.4 billion in the third quarter

Adjusted income from operations

was $593 million, or $2.28 per share, with per share growth of 11% over third quarter 2014

Shareholders’ net income for the third quarter was $547 million, or $2.10 per share

Projected adjusted income from operations

for 2015 is now estimated to be in the range of $2.19 billion to $2.24 billion, or $8.40 to $8.60 per share

– Cigna Corporation (NYSE: CI) today reported third quarter 2015 results with strong revenue and earnings con tributions across the Company’s diversified portfolio of businesses driven by the continued effective execution of our strategy. Consolidated revenues in the quarter were $9.4 billion, an increase of 7% over third quarter 2014.

Cigna's adjusted income from operations

for the third quarter of 2015 was $593 million, or $2.28 per share, compared to $548 million, or $2.06 per share, for the third quarter of 2014. Results reflect strong revenue growth, continued favorable medical and operating costs in the Global Healthcare segment, as well as improvement in disability and life claims experience in the Group Disability and Life segment.

Cigna also reported shareholders’ net income of $547 million, or $2.10 per share, for the third quarter of 2015, compared to $534 million, or $2.01 per share, for third quarter of 2014. Shareholders’ net income for the third quarter of 2015 included a special item

, which was a charge of $29 million after-tax, or $0.11 per share, for transaction costs related to Cigna’s proposed merger with Anthem.

“Cigna’s third quarter results demonstrate the ongoing value we deliver to our customers and clients,” said David M. Cordani, President and Chief Executive Officer. “The effective execution of our focused strategy to provide affordable, personalized solutions is reflected in our increased outlook for 2015 and gives us the momentum to drive continued growth in 2016.”

Cigna expects to grow revenue, adjusted income from operations

, and adjusted income from operations on a per share basis

in 2016. The outlook for 2016 earnings reflects continued strong performance in our ongoing businesses, including growth in medical customers and specialty relationships, increased operating expense efficiencies, and margin improvement in our Medicare Advantage business. We expect those dynamics to be partially offset by foreign exchange pressure in our Global Supplemental Benefits business, increased spending for strategic initiatives, and the absence of prior year development in our forecast.

Expected revenue growth in 2016 reflects overall customer growth, with some offset from an expected reduction in Individual and Medicare Part D customers in 2016, as well as foreign exchange pressure in our Global Supplemental Benefits business.

CONSOLIDATED HIGHLIGHTS

The following table includes highlights of results and

a reconciliation of adjusted income from operations

to shareholders’ net income:

Consolidated Financial Results (dollars in millions, customers in thousands):

Three Months Ended

Nine Months

September 30,

June 30,

Consolidated Revenues

28,348

Consolidated Earnings, net of taxes

Net realized investment gains

Amortization of other acquired intangible assets

Special items

Shareholders' net income

, per share

Shareholders' net income, per share

As of the Periods Ended

December 31,

Global Medical Customers

14,849

14,346

14,771

14,456

Cash and short term investments at the parent company were approximately $980 million at September 30, 2015 and approximately $400 million at December 31, 2014.

Year to date, as of November 5, 2015, the Company repurchased approximately 4.3 million shares of stock for approximately $515 million.

After considering all sources and uses of cash for the remainder of 2015, the Company now expects to have approximately $1.4 billion available for capital deployment in addition to $250 million held at the parent for liquidity purposes, an increase of approximately $100 million over previous expectations.

HIGHLIGHTS OF SEGMENT RESULTS

See Exhibit 2 for a reconciliation of adjusted income (loss) from operations

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.

Premiums and Fees

20,082

Adjusted Income from Operations

Adjusted Margin, After-Tax

Customers:

14,291

13,832

14,215

13,938

Behavioral Care

24,591

23,494

24,164

23,853

Dental

13,872

13,546

13,818

13,571

Pharmacy

Global Health Care results were strong in both our Commercial employer and Government businesses this quarter.

Third quarter 2015 premiums and fees increased 8% relative to third quarter 2014, driven by customer growth, particularly in our Government businesses, specialty contributions including our Stop loss and Dental businesses, and rate actions in our Commercial employer group business. The decline in third quarter 2015 premiums and fees relative to second quarter 2015 is primarily driven by the seasonal impact of Medicare Part D risk corridor adjustments.

The third quarter 2015 medical customer base totaled 14.8 million, representing growth of approximately 400,000 on a year to date basis, including growth in our Regional, International, Select and Medicare businesses.

Third quarter 2015 adjusted income from operations

reflect consistent strong performance in our Commercial and Government businesses, including favorable specialty and medical cost results, as well as operating expense efficiency.

for third quarter 2015, third quarter 2014, and second quarter 2015 include favorable prior year reserve development on an after-tax basis of approximately $13 million, $7 million and $19 million respectively. Total prior period reserve development, inclusive of in year development, was relatively consistent for each of the respective time periods.

On a year to date basis, Cigna has recorded receivables of approximately $195 million, after-tax related to 2015 risk mitigation programs with approximately 40% of the total related to reinsurance and the remainder split fairly evenly between risk adjustment and risk corridor.

The Total Commercial medical care ratio of 79.3% in third quarter 2015 reflects the ongoing strong performance of our Commercial employer business. The increase in the MCR in the quarter relative to third quarter 2014 was primarily due to higher claims in our U.S. Individual business.

The Total Government medical care ratio of 83.6% in the third quarter 2015 reflects ongoing strong performance in our Medicare...


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