Cigna Reports 2016 Results, Expects Attractive Earnings Growth in 2017

• Total revenues for 2016 increased 5% to $39.7 billion
• Shareholders’ net income for 2016 was $1.9 billion, or $7.19 per share
• Adjusted income from operations¹ for 2016 was $2.1 billion, or $8.10 per share
• Global medical customer base² is projected to grow in the range of 300,000 to 500,000 lives in 2017
• Adjusted income from operations^1,3,4 is projected to grow in the range of 12% to 18%, to $2.35 billion to $2.48 billion in 2017, or $9.00 to $9.50 per share, excluding capital deployment

BLOOMFIELD, Conn.--(BUSINESS WIRE)-- Cigna Corporation (NYSE: CI) today reported 2016 results with a solid fourth quarter performance, and projecting attractive earnings growth in 2017.

“We concluded 2016 with strong momentum that positions the company for attractive earnings and customer growth in 2017,” said David M. Cordani, President and Chief Executive Officer. “We continue to deliver differentiated value for our customers and clients with innovative solutions that drive greater levels of affordability and personalization.”

Total revenues for 2016 were $39.7 billion, an increase of 5% over 2015, driven by continued growth in Cigna's targeted customer segments.

Shareholders’ net income for 2016 was $1.9 billion, or $7.19 per share, compared with $2.1 billion, or $8.04 per share in 2015. For the fourth quarter of 2016, shareholders’ net income was $382 million, or $1.47 per share, compared with $426 million, or $1.64 per share, for the fourth quarter of 2015.

Cigna's adjusted income from operations¹ for full year 2016 was $2.1 billion, or $8.10 per share, compared with $2.3 billion, or $8.66 per share, for full year 2015. For the fourth quarter of 2016, adjusted income from operations¹ was $485 million, or $1.87 per share, compared with $486 million, or $1.87 per share, for the fourth quarter of 2015. Adjusted income from operations¹ for the full year and the fourth quarter of 2016 reflect continued strong results in our Commercial Healthcare and Global Supplemental Benefits businesses, and actions we have taken to improve results in our Seniors and Disability & Life businesses.

Reconciliations of shareholders’ net income to adjusted income from operations¹ are provided on the following page, and on Exhibit 2 of this earnings release.

CONSOLIDATED HIGHLIGHTS

The following table includes highlights of results and reconciliations of consolidated operating revenues⁵ to total revenues and adjusted income from operations¹ to shareholders’ net income:

• 2016 shareholders’ net income included special item¹ charges of $252 million after-tax, or $0.97 per share, for transaction costs related to Cigna’s proposed combination with Anthem, the establishment of an allowance against risk corridor program receivables, and a litigation matter.
• Fourth quarter 2016 shareholders’ net income included special item¹ charges of $119 million after-tax, or $0.46 per share, for the establishment of an allowance against risk corridor program receivables and transaction costs related to Cigna’s proposed combination with Anthem.
• Cash and marketable investments at the parent company were $2.8 billion at December 31, 2016 and $1.4 billion at December 31, 2015.
• In 2016, the Company repurchased 785,000 shares of common stock for approximately $110 million.⁴

HIGHLIGHTS OF SEGMENT RESULTS

See Exhibit 2 for a reconciliation of adjusted income (loss) from operations¹ 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.

• Fourth quarter 2016 premiums and fees increased 2% relative to fourth quarter 2015, driven by customer growth, specialty contributions, and rate actions in our Commercial business, partially offset by, as expected, reductions in Medicare Part D and Individual customers.
• The medical customer base² at the end of 2016 totaled 15.2 million, including an increase of approximately 200,000 customers during the year, driven by organic growth in our Middle Market, Select, and International segments.
• Fourth quarter 2016 adjusted income from operations¹ and adjusted margin, after-tax⁶ reflect strong contributions from our Commercial employer and specialty businesses, partially offset by the impact of not recording $16 million, after tax of additional risk corridor receivables in fourth quarter 2016.
• Adjusted income from operations¹ included favorable prior year reserve development on an after-tax basis of $7 million for full year 2016, compared to $60 million for full year 2015.
• The Total Commercial medical care ratio⁷ (“MCR”) of 79.3% for full year 2016 reflects continued strong performance in our Commercial employer business, consistent with our expectations.
• The Commercial MCR⁷ of 83.1% for fourth quarter 2016 reflects ongoing strength in our Commercial employer business, continued high medical costs in our U.S. Individual business, expected higher seasonal medical costs and the aforementioned risk corridor impact. The Commercial MCR⁷ for fourth quarter 2016 also reflects more normalized stop loss claim experience, as expected, compared to the favorable stop loss experience reported in fourth quarter 2015.
• The Total Government MCR⁷ of 85.3% for full year 2016 reflects solid performance in Medicare Advantage. The Government MCR⁷ of 83.2% for fourth quarter 2016 reflects increased medical costs in our Medicaid business.
• Full year medical cost trend for our total U.S. Commercial book of business was modestly below the low end of our previous range of 4% to 5%, reflecting improved pharmacy trend as well as continued favorable medical costs, physician engagement and low utilization trend.
• Fourth quarter 2016 Global Health Care operating expense ratio⁷ of 22.0% reflects costs related to our CMS audit response as well as continued investments in strategic initiatives, offset by continued efficiency gains.
• Global Health Care net medical costs payable⁸ was approximately $2.26 billion at December 31, 2016 and $2.11 billion at December 31, 2015.

Global Supplemental Benefits

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

Financial Results (dollars in millions, policies in thousands):

• Global Supplemental Benefits delivered strong results again in 2016, reflecting the benefits of our differentiated solutions for individual consumers.
• Fourth quarter 2016 premiums and fees grew 10% over fourth quarter 2015 on a currency-adjusted basis, reflecting continued business growth.
• Fourth quarter 2016 adjusted income from operations¹ and adjusted margin, after-tax⁶ reflect business growth as well as the impact of strategic investments supporting long-term growth.

Group Disability and Life

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

Financial Results (dollars in millions):

• Fourth quarter 2016 premiums and fees increased 4% over fourth quarter 2015 driven by business growth across disability and life products.
• Fourth quarter 2016 adjusted income from operations¹ and adjusted margin, after-tax⁶ reflect stabilized life claim experience as well as continued improvement in disability results.

Corporate & Other Operations

Adjusted loss from operations¹ for Cigna's remaining operations is presented below:

2017 OUTLOOK

Cigna's outlook for full year 2017 consolidated adjusted income from operations^1,3 is in the range of $2.35 billion to $2.48 billion, or $9.00 to $9.50 per share. Cigna’s outlook excludes the impact of additional prior year reserve development and potential effects of any future capital deployment.⁴

The foregoing statements represent the Company’s current estimates of Cigna's 2017 consolidated and segment adjusted income from operations^1,3 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). A link to the conference call, during which management will review fourth quarter 2016 results and discuss full year 2017 outlook, is available in the Investor Relations section of Cigna's website located at http://www.cigna.com/cignadotcom/aboutcigna/investors/events/index.page

Notes:

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release, and oral statements made with respect to information contained in this release, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on Cigna's current expectations and projections about future trends, events and uncertainties. These statements are not historical facts. Forward-looking statements may include, among others, statements concerning our projected adjusted income (loss) from operations outlook for 2017, on both a consolidated and segment basis; projected total revenue growth and global medical customer growth, each over year end 2016; projected medical care and operating expense ratios and medical cost trends; future financial or operating performance, including our ability to deliver personalized and innovative solutions for our customers and clients and future growth, business strategy, strategic or operational initiatives; economic, regulatory or competitive environments, particularly with respect to the pace and extent of change in these areas; financing or capital deployment plans and amounts available for future deployment; our prospects for growth in the coming years; statements regarding the proposed merger between Cigna and Anthem, Inc. (Anthem); statements regarding the timing of resolution of the issues raised by CMS; and other statements regarding Cigna’s and Anthem’s future beliefs, expectations, plans intentions, financial condition or performance. You may identify forward-looking statements by the use of words such as “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “may,” “should,” “will” or other words or expressions of similar meaning, although not all forward-looking statements contain such terms.

Forward-looking statements are subject to risks and uncertainties, both known and unknown, that could cause actual results to differ materially from those expressed or implied in forward-looking statements. Such risks and uncertainties include, but are not limited to: our ability to achieve our financial, strategic and operational plans or initiatives; our ability to predict and manage medical costs and price effectively and develop and maintain good relationships with physicians, hospitals and other health care providers; the impact of modifications to our operations and processes, including those in our disability business; our ability to identify potential strategic acquisitions or transactions and realize the expected benefits of such transactions; the substantial level of government regulation over our business and the potential effects of new laws or regulations, or changes in existing laws or regulations; the outcome of litigation, regulatory audits, including the CMS review and sanctions, investigations and actions and/or guaranty fund assessments; uncertainties surrounding participation in government-sponsored programs such as Medicare; the effectiveness and security of our information technology and other business systems; and unfavorable industry, economic or political conditions, including foreign currency movements; the timing and likelihood of completion of the proposed merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals for the proposed merger that could reduce anticipated benefits or cause the parties to abandon the transaction; the possibility that the expected synergies and value creation from the proposed merger will not be realized or will not be realized within the expected time period; the risk that the businesses of Cigna and Anthem will not be integrated successfully; disruption from the proposed merger making it more difficult to maintain business and operational relationships; the risk that unexpected costs will be incurred; the possibility that the proposed merger does not close, including due to the failure to satisfy the closing conditions; the risk that financing for the proposed merger may not be available on favorable terms, as well as more specific risks and uncertainties discussed in our most recent report on Form 10-K and subsequent reports on Forms 10-Q and 8-K available on the Investor Relations section of www.cigna.com as well as on Anthem’s most recent report on Form 10-K and subsequent reports on Forms 10-Q and 8-K available on the Investor Relations section of www.antheminc.com. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance or results, and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Cigna undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law.

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Cigna Corporation

Will McDowell, Investor Relations

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Matt Asensio, Media Relations

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Source: Cigna Corporation