Cigna Corporation (CI)

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Q1 2011 Earnings Call

May 05, 2011 8:30 am ET


David Cordani - Chief Executive Officer, President, Director and Member of Executive Committee

Thomas McCarthy - Acting Chief Financial Officer

Edwin Detrick - Vice President of Investor Relations


Christian Rigg - Susquehanna Financial Group, LLLP

Joshua Raskin - Barclays Capital

Justin Lake - UBS Investment Bank

Carl McDonald - Citigroup Inc

Charles Boorady - Crédit Suisse AG

Scott Fidel - Deutsche Bank AG

Matthew Borsch - Goldman Sachs Group Inc.

David Windley - Jefferies & Company, Inc.

Ana Gupte - Sanford C. Bernstein & Co., Inc.

John Rex - JP Morgan Chase & Co

Kevin Fischbeck - BofA Merrill Lynch

Doug Simpson - Morgan Stanley

Christine Arnold - Cowen and Company, LLC



Ladies and gentlemen, thank you for standing by for CIGNA's First Quarter 2011 Results Review. [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 Mr. Ted Detrick. Please go ahead, Mr. Detrick.

Edwin Detrick

Good morning, everyone, and thank you for joining today's call. I am Ted Detrick, Vice President of Investor Relations, and with me this morning are David Cordani, our President and Chief Executive Officer; and Tom McCarthy, CIGNA's acting Chief Financial Officer.

In our remarks today, David will begin by briefly commenting on CIGNA's first quarter results. He will also profile CIGNA's domestic Health Service business, which will include the discussion of our consultative selling approach and our self-funded product offerings. Next, Tom will review the financial results for the first quarter and provide an update on CIGNA's financial outlook for full year 2011. We will then open the lines for your questions. And following our question and answer session, David will provide some brief closing remarks before we end the call.

Now as noted in our earnings release, CIGNA uses certain non-GAAP measures when describing its financial results. A reconciliation of these measures to the most directly comparable GAAP measure is contained in today’s earnings release, which was filed this morning on Form 8-K with the Securities and Exchange Commission and is posted in the Investor Relations section of

Now in our remarks today, we will be making some forward-looking comments. We would remind you that there are risk 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 David, I will cover a few items pertaining to our first quarter results and disclosures. Regarding our results, I note that in the quarter we recorded an after-tax gain of $24 million or $0.09 per share, related to the completion of an IRS examination, which we reported as a special item. I would remind you that special items are excluded from adjusted income from operations in today's discussion of our first quarter 2011 results and full year 2011 outlook.

Relative to our run-off operations, our first quarter shareholders net income included an after-tax non-cash gain of $13 million or $0.05 per share related to the guaranteed minimum income benefits business otherwise known as GMIB. I would remind you that the impact of Financial Accounting Standards Board fair value disclosure and measurement values on our GMIB results is for GAAP accounting purposes only.

We believe that the application of this guidance is not reflective of the underlying economics, as it does not represent management's expectations of the ultimate liability payout. Because of application of this accounting guidance, CIGNA's future results for the GMIB business will be volatile as any future change in the exit value of GMIB's assets and liabilities will be recorded in shareholders net income.

CIGNA's 2011 earnings outlook, which we will discuss in a few moments, excludes the results of the GMIB business and therefore any potential volatility related to the prospective application of this accounting guidance.

Now regarding our disclosures, beginning this quarter, we have made some reporting enhancements to our quarterly financial supplement. Specifically, we have included a new financial highlights page at the beginning of the supplement to provide investors and analysts with an Executive level view into the revenues and earnings for each of our ongoing businesses, as well as provide a more comprehensive breakdown of the 66 million customer relationships we service across our ongoing businesses. In addition, we have reorganized the supplement to give more prominence to the business segment income statement and related financial metrics.

We are making these reporting enhancements to provide investors and analysts with improved transparency into our diversified portfolio of global health service businesses. And with that, I'll turn it over to David.

David Cordani

Thanks, Ted, and good morning everyone. Before Tom reviews our results and outlook, I'm going to take a few minutes to briefly comment on our first quarter performance and then I'll spend some time profiling our U.S. business, more specifically I'll focus on how our approach to the market and how our capabilities position us for sustained, profitable growth in the future. So let's dive in.

Overall, we're pleased with the results we delivered for the first quarter. We have backdrop, we delivered strong results in 2010. We set competitively attractive targets for 2011 and for the first quarter, we have exceeded those targets. We reported consolidated adjusted income of $375 million or $1.37 per share, with earnings growth in each of our ongoing businesses and revenue growth of approximately 8%. Our results continue to reflect strong execution of our growth strategy, which as you know is to Go Deep, Go Global and Go Individual. In delivering on our strategy, we continue to demonstrate an ongoing commitment to drive value for our customers, clients and shareholders.

A common theme this quarter was growth. Focused targeted growth across each of our ongoing businesses using our Go Deep approach to drive crisp execution and deliver attractive results. I would highlight very importantly that we grew while executing on the fundamentals of our business, including maintaining pricing discipline and providing strong clinical and service excellence. I'm proud of the CIGNA team for delivering on our commitment again this quarter and we remain focused on delivering for 2011 as well.

Great value on a sustained basis at CIGNA, we put the customer front and center. We recognize that the individual is the end-user of our programs and services, regardless of how we access them. Whether it's an individual in Seoul, Korea, who has a hospital cash policy or it's the New York-based employee, who has a medical plan through his or her workplace, CIGNA's clinical programs and service standards are all created and delivered with the individual in mind.

At our Investor Day in March, we discussed the concept of enduring customer value. This business opportunity, which we seek to own will focus on the individual's customer needs and we'll rise to meet those needs, as they change throughout various life stages.

Now as I previously said, make no mistake, our intent is not to be all things to all people, rather, we will seek to meet individual's chasing needs by going deep in targeted geographies and market segments and by leveraging our growing global capabilities. I'll come back to enduring customer value in a few minutes, but let me first set the foundation by highlighting 2 major aspects of our U.S. business that allows us to win in the marketplace, provide differentiated value to our clients and that we believe will drive sustainable growth in the future.

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