Cigna Corporation (CI)

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CIGNA Corporation (CI)

Q2 2009 Earnings Call

July 30, 2009 8:30 pm ET

Executives

Ted Detrick – Vice President of Investor Relations

Annmarie Hagan CPA – Chief Financial Officer, Executive Vice President

Edward Hanway – Chairman and Chief Executive Officer

David Cordani – President and Chief Operating Officer

Analysts

Matthew Borsch – Goldman Sachs

Ana Gupte – Sanford C. Bernstein & Company, Inc

Justin Lake – UBS

John Rex – JP Morgan

Scott Fidel – Deutsche Bank

Charles Boorady – Citigroup

Joshua Raskin – Barclays Capital

Christine Arnold – Cowen & Co

Carl McDonald – Oppenheimer & Co.

Peter Costa – FTN Equity Markets

Greg Nersessian – Credit Suisse

Doug Simpson – Morgan Stanley

Presentation

Operator

Ladies and gentlemen, thank you for standing by for CIGNA’s second quarter 2009 results review. At this time all callers in the listen-only-mode. We’ll conduct a question-and-answer session later during the conference. And review procedures on how to enter Q to ask questions at that time. (Operator Instructions) As a reminder ladies and gentlemen this conference including the Q&A session is being recorded. We’ll begin by turning the conference over to Ted Detrick. Please go ahead Mr.Detrick.

Ted Detrick

Good morning, everyone, and thank you for joining today's call. I'm Ted Detrick, Vice President of Investor Relations, and with me this morning are Ed Hanway, CIGNA's Chairman and CEO; David Cordani our President and Chief Operating Officer; and Annmarie Hagan CIGNA's Chief Financial Officer.

In our remarks today, Ed Hanway will begin by briefly commenting on CIGNA’S second quarter results. David Cordani will provide is perspective on the second quarter and the full year outlook for CIGNA’s on going businesses. We’ve also provide an update on our cost reduction initiatives.

Annmarie Hagan will then review the financial details for the quarter and provide the financial outlook for full year 2009. Ed will then conclude with an update on the topic of health care reform before we open the lines for your questions.

Annmarie Hagan CPA

Now it’s noted in our earnings release let me use the certain financial measures, which are not the term in accordance with Generally Accepted Accounting Principals or GAAP when describing its financing results. Specifically we use the term – adjusted income from operations as the principle measure of performance for CIGNA and our operating segments. Adjusted income from operations has defined a shareholders income from continuing operations excluding realized investment results, special items and the results of our guaranteed minimum income benefits business.

The reconciliation of adjusted income from operations to shareholders income from continuing operations, which is the most strictly comparable GAAP measure. This contained in today’s earnings release, which - this morning on Form 8-K with the Securities and Exchange Commission and is also posted in the investor relation section of cigna.com.

Now in our remarks today, we will be making some forward-looking comments. I would remind you that there are risks factors that could cause actual results to differ materially from our current expectations and those risk factors are discussed in today’s earnings release. Now before turning the call over to Ed, I will cover a few items pertaining to our second quarter results and disclosures.

At first I would note that we have recorded two special items in the quarter. The first is the $30 million after-tax benefits related to the - increase our pension plans. Uncertain special item is the $9 million aftertax charge related to CIGNA’s previously announced cost reduction plan.

I will remind you that these special items are excluded from adjusted income from operations in today’s discussion of both our second quarter results and our full year 2009 outlook.

The second quarter 10-Q will provide expanded disclosures resulting from our decisions for each customer. Now relative to our run of insurance operations, our second quarter shareholders net income included after-tax income of a $110 related to the guaranteed minimal income benefit business. Otherwise known as GMIB. I would remind that this impact of taking 157 reporting on our GMIB results is for GAAP accounting purposes only.

We believe that the application of this statement does not represent management’s expectations of the ultimate liability pay off. Because of taken 157 CIGNA’s future results for the GMIB business will be more volatile as any future change in the exit value of GMIB asset and liabilities will be recorded in shareholders net income.

CIGNA’s 2009 earnings outlook, which Emily will discuss in a few moments. Exclude the results of the GMIB business and therefore any potential volatility related to the perspective application has taken 157. But on the last item, we would like to remind you that CIGNA will be hosting it’s annual Investor Day this year on November 20 in New York City. With that I am going to turn it over to Ed.

Ed Hanway

Thanks Ted. Good morning everyone. Our second quarter 2009 adjusted income from operations, we’ve a $313 or 1.14 per share. The second quarter consolidated results reflect solid earnings contribution from each of our on going operations. And in this challenging economic environment demonstrate the benefit of our diversified portfolio. In fact each of our on going business that is healthcare, visibility on life and are international operations, delivered meaningful earnings growth compared with our first quarter results.

For healthcare earnings was a $177 in the second quarter representing a $23 improvement over the first quarter of 2009. This earnings result reflects good execution on the performance improvement initiatives that we mentioned last quarter including our cost reduction activities. The results are also consistent with the growth trajectory we expected in order to achieve our full year health care earnings target.

Well our group disability on life business. We had earnings of $90 million and we continued to achieve comparable strong margins. Which is evident that our value proposition related to our superior disability management programs continues to resonate well in the market place.

The second quarter earnings in our international segment were $63 million and reflected solid margins in both Life accident and health and its – benefits business. Now our international’s results include the impact of unfavorable currency movement we continued to be quite pleased with both the top line growth and earnings contribution to this segment.

Overall our investment portfolio continues to perform well relative to the market conditions, which we believed is a direct result of our disciple approach to investing.

In addition our capital position remains strong and we continue to maintain the financial flexibility to weather potential challenges in the capital markets.

Now regarding the full year 2009 outlook we now expect the earnings per share will be in a range of $3.80 to $4 of share. This outlook is modestly higher than our previous expectations reflecting the strength of our second quarter results and it resumes break-even results from – for the remainder of the year.

We also note that the earnings outlook for our healthcare business remains unchanged. Overall I’m confident in our ability to achieve our 2009 operating goals and earnings estimates and thereby creating value for our shareholders continuing to improve the health well being in terms of security of the people reserve. After David and – remarks I will be making some including comment and including some observations regarding healthcare reforms.

And with that I’m going to turn the call over to David.

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