Cigna Delivers Strong 2018 Results as It Completes Express Scripts Transaction, Company Positioned for Significant Growth
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- Total revenues for 2018 were
- Shareholders' net income for 2018 was
- Adjusted income from operations 2 for 2018 was
- Adjusted revenues 1,3 are expected to grow to a range of
- Adjusted income from operations 2,3,4 is projected to be in the range of
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Global health service company
"Cigna completed an exceptionally strong 2018, with revenue, customer, and earnings growth, driven by continued innovation across the business," said
Total revenues for 2018 were
Shareholders' net income for 2018 was
Cigna's adjusted income from operations2 for 2018 was
Reconciliations of shareholders' net income to adjusted income from operations2 are provided on the following page, and on Exhibit 1 of this earnings release.
CONSOLIDATED HIGHLIGHTS
The following table includes highlights of results and reconciliations of adjusted revenues1 to total revenues and adjusted income from operations2 to shareholders' net income:
Table omitted. To view table click here: (https://www.cigna.com/newsroom/news-releases/2019/cigna-delivers-strong-2018-results-as-it-completes-express-scripts-transaction-company-positioned-for-significant-growth)
In 2018, the Company repurchased 1.6 million shares of stock for
The SG&A expense ratio5 of 23.2% for full year 2018 and 21.7% for fourth quarter 2018 reflect the return of the health insurance tax, business mix changes and continued investments in strategic initiatives.
CUSTOMER RELATIONSHIPS
The following table summarizes our medical customers and overall customer relationships:
Table omitted. To view table click here: (https://www.cigna.com/newsroom/news-releases/2019/cigna-delivers-strong-2018-results-as-it-completes-express-scripts-transaction-company-positioned-for-significant-growth)
The total medical customer base6 at the end of 2018 was 17 million, an organic increase of 584,000 customers during the year, driven by strong growth across our Commercial market segments.
Pharmacy6 and Medicare Part D customer growth in the fourth quarter 2018 primarily reflects additional customers gained through the completion of the
HIGHLIGHTS OF SEGMENT RESULTS
See Exhibit 1 for a reconciliation of adjusted income (loss) from operations2 to shareholders' net income.
Integrated Medical
This segment includes Cigna's
Integrated Medical delivered strong results in 2018, led by organic growth and strong margins in our Commercial and Government businesses.
Fourth quarter 2018 adjusted revenues increased 13% relative to fourth quarter 2017, driven by Commercial customer growth and expansion of specialty relationships, as well as premium increases consistent with underlying cost trends.
Fourth quarter 2018 adjusted income from operations, pre-tax2 and adjusted margin, pre-tax8 reflect strong medical and specialty contributions, continued effective medical cost management, and seasonally higher medical costs.
Adjusted income from operations, pre-tax2 for full year 2018, fourth quarter 2018, and full year 2017 included favorable net prior year reserve development on a pre-tax basis of
The medical care ratio5 ("MCR") of 78.9% for full year 2018 and 80.9% for fourth quarter 2018 reflect strong performance and execution in our employer and government businesses, continued favorability in individual, seasonally higher fourth quarter medical costs, and the pricing effect of the resumption of the health insurance tax.
Integrated Medical net medical costs payable9 was approximately
Health Services
This segment includes a broad range of pharmacy services, including benefits management, specialty pharmacy services, clinical solutions, home delivery, and certain medical management services.
Integrated Medical delivered strong results in 2018, led by organic growth and strong margins in our Commercial and Government businesses.
Fourth quarter 2018 adjusted revenues increased 13% relative to fourth quarter 2017, driven by Commercial customer growth and expansion of specialty relationships, as well as premium increases consistent with underlying cost trends.
Fourth quarter 2018 adjusted income from operations, pre-tax2 and adjusted margin, pre-tax8 reflect strong medical and specialty contributions, continued effective medical cost management, and seasonally higher medical costs.
Adjusted income from operations, pre-tax2 for full year 2018, fourth quarter 2018, and full year 2017 included favorable net prior year reserve development on a pre-tax basis of
The medical care ratio5 ("MCR") of 78.9% for full year 2018 and 80.9% for fourth quarter 2018 reflect strong performance and execution in our employer and government businesses, continued favorability in individual, seasonally higher fourth quarter medical costs, and the pricing effect of the resumption of the health insurance tax.
Integrated Medical net medical costs payable9 was approximately
Health Services
This segment includes a broad range of pharmacy services, including benefits management, specialty pharmacy services, clinical solutions, home delivery, and certain medical management services.
International Markets delivered strong results in 2018, reflecting the value of our differentiated health and life solutions for individual consumers provided through diversified distribution channels as well as strong global health benefits contributions.
Fourth quarter 2018 adjusted revenues7 grew 7% over fourth quarter 2017, reflecting continued business growth.
Fourth quarter 2018 adjusted income from operations, pre-tax2 and adjusted margin, pre-tax8 reflect business growth, seasonally higher claims expenses, as well as strategic investments for long-term growth.
Group Disability and Other Operations
This segment includes Cigna's Group Disability and Life business which offers group long-term and short-term disability, and group life, accident, voluntary and specialty insurance products and services. Additionally, this segment includes
Fourth quarter 2018 adjusted income from operations, pre-tax2 and adjusted margin, pre-tax8 reflect strong life results offset by unfavorable disability claims.
Corporate
Corporate reflects interest expense as well as amounts not allocated to operating segments and includes intersegment eliminations.
The fourth quarter 2018 adjusted loss from operations, pre-tax2 increased as a result of higher interest expense following completion of our combination with
2019 OUTLOOK
Cigna's outlook for full year 2019 consolidated adjusted income from operations2,3,4 is in the range of
The foregoing statements represent the Company's current estimates of Cigna's 2019 consolidated and segment adjusted income from operations2,3,4 and other key metrics as of the date of this release. Actual results may differ materially depending on a number of factors. Investors are urged to read the Cautionary Note Regarding Forward-Looking Statements included in this release. Management does not assume any obligation to update these estimates.
This quarterly earnings release and the Quarterly Financial Supplement are available on Cigna's website in the Investor Relations section (http://www.cigna.com/aboutcigna/investors). Management will be hosting a conference call to review fourth quarter 2018 results and discuss full year 2019 outlook beginning today at
About Cigna
Cigna maintains sales capability in over 30 countries and jurisdictions, and has more than 160 million customer relationships throughout the world. To learn more about Cigna(R), including links to follow us on Facebook or Twitter, visit www.cigna.com.
Notes:
1. At the consolidated level, the measure "adjusted revenues" is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, "total revenues." We define adjusted revenues as total revenues excluding revenue contributions from transitioning pharmacy benefit management clients,
2. Adjusted income (loss) from operations is defined as shareholders' net income (loss) excluding the following adjustments: net realized investment results, amortization of acquired intangible assets, special items, and earnings contributions from transitioning clients. Special items are identified in Exhibit 1 of this earnings release. Adjusted income (loss) from operations is measured on an after-tax basis for consolidated results and on a pre-tax basis for segment results.
Adjusted income (loss) from operations is a measure of profitability used by Cigna's management because it presents the underlying results of operations of Cigna's businesses and permits analysis of trends in underlying revenue, expenses and shareholders' net income. This consolidated measure is not determined in accordance with accounting principles generally accepted in
Effective in the fourth quarter of 2018, Cigna updated its segments. Refer to the Form 8-K filed on
3. Management is not able to provide a reconciliation of adjusted income from operations to shareholders' net income (loss) or adjusted revenues to total revenues on a forward-looking basis because we are unable to predict, without unreasonable effort, certain components thereof including (i) future net realized investment results (from equity method investments with respect to adjusted revenues) and (ii) future special items. These items are inherently uncertain and depend on various factors, many of which are beyond our control. As such, any associated estimate and its impact on shareholders' net income could vary materially.
4. The Company's outlook excludes the potential effects of any share repurchases or business combinations that may occur after the date of this earnings release.
5. Operating ratios are defined as follows:
Medical care ratio represents medical costs as a percentage of premiums for all
SG&A expense ratio represents enterprise selling, general and administrative expenses excluding special items and expenses from transitioning clients, as a percentage of adjusted revenue at a consolidated level.
6. Customer relationships are defined as follows:
Total medical customers includes individuals in our Integrated Medical and International Markets segments who meet any one of the following criteria: are covered under a medical insurance policy, managed care arrangement, or service agreement issued by Cigna; have access to Cigna's provider network for covered services under their medical plan; or have medical claims and services that are administered by Cigna.
Pharmacy customer relationships excludes transitioning clients.
Prior period behavioral care customers have been revised to conform to current presentation.
International Markets policies exclude International Markets medical customers included in total medical customers.
Group Disability and Life estimated covered lives as of
7. Cigna owns a 50% noncontrolling interest in its
8. Adjusted margin, pre-tax, is calculated by dividing adjusted income (loss) from operations by adjusted revenues for each segment.
9. Medical costs payable within the Integrated Medical segment are presented net of reinsurance and other recoverables. The gross medical costs payable balance was
10. The measure "consolidated adjusted tax rate" is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, "consolidated effective tax rate." We define consolidated adjusted tax rate as the income tax rate applicable to the Company's pre-tax income excluding net realized investment results, amortization of acquired intangible assets, special items, and transitioning clients. Management is not able to provide a reconciliation to the consolidated effective tax rate on a forward-looking basis because we are unable to predict, without unreasonable effort, certain components thereof including (i) future net realized investment results and (ii) future special items.
11. For
12. Medical cost trend includes all
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