Cigna Reports Strong Third Quarter Results and Raises 2012 Outlook

BLOOMFIELD, Conn., November 01, 2012 - Cigna Corporation (NYSE: CI) today reported third quarter 2012 consolidated revenues of $7.4 billion, an increase of 31% over the third quarter of 2011. Revenues reflect growth in premiums and fees of 51% in Health Care, 22% in International and 9% in Disability and Life, primarily driven by contributions from the HealthSpring acquisition and continued organic growth in our targeted customer segments.

Cigna's adjusted income from operations1,2 for the third quarter of 2012 was $496 million, or $1.71 per share, excluding the after-tax loss of $7 million, or $0.02 per share, from results of the VADBe2 business. This result compares with $353 million, or $1.29 per share, excluding the after-tax loss of $45 million, or $0.16 per share, from results of the VADBe2 business, for the third quarter of 2011.

Cigna reported shareholders' net income1 of $466 million, or $1.61 per share, for the third quarter of 2012, compared with shareholders' net income1 of $183 million, or $0.67 per share, for the third quarter of 2011. Shareholders' net income1 included income of $0.11 per share in the third quarter of 2012 and a loss of $0.50 per share for the same period last year related to the Guaranteed Minimum Income Benefits (GMIB)2,5 business. Shareholders' net income1 also included special items4 which generated a loss of $62 million, or $0.21 per share, in the third quarter of 2012.

"Our differentiated approach to understanding and helping our global clients and customers as well as partnering with physicians continues to deliver real value. Our third quarter 2012 results were strong, driven by consistent and disciplined execution of our strategy," said David M. Cordani, President and Chief Executive Officer. "We continue to make strategic investments to position Cigna to deliver long-term value for the benefit of our customers and shareholders."

CONSOLIDATED HIGHLIGHTS

The following table includes highlights of results and a reconciliation of adjusted income from operations1 to shareholders' net income1 (dollars in millions, except per share amounts; customers in thousands):

         
        Nine Months
    Three Months Ended   Ended
    September 30,   June 30,   September 30,
    2012   2011   2012   2012
Total Revenues   $ 7,358   $ 5,610   $ 7,457   $ 21,603
                 
Consolidated Earnings                
Adjusted income from operations1   $ 489   $ 308   $ 434   $ 1,282
Net realized investment gains (losses), net of taxes     7     9     (3)     16
GMIB results, net of taxes2,5     32     (134)     (51)     22
Special items, net of taxes4     (62)     -     -     (103)
Shareholders' net income1   $ 466   $ 183   $ 380   $ 1,217
                 
Adjusted income from operations1, per share   $ 1.69   $ 1.13   $ 1.49   $ 4.42
Shareholders' net income1, per share   $ 1.61   $ 0.67   $ 1.31   $ 4.20
                 
    As of the Periods Ended
    September 30,   June 30,   December 31,
Medical Customers   2012   2011   2012   2011
U.S. Health Care     12,731     11,471     12,619     11,483
International (Global Health Benefits & Health Care)     1,240     1,196     1,224     1,197
      13,971     12,667     13,843     12,680
                         

HIGHLIGHTS OF SEGMENT RESULTS

See Exhibit 2 for a reconciliation of adjusted income (loss) from operations1 to segment earnings (loss)1.

Health Care

This segment includes medical and specialty health care products and services provided on guaranteed cost, retrospectively experience-rated and service-only funding bases. Specialty health care includes behavioral, dental, disease and medical management, stop-loss, and pharmacy-related products and services.

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

         
        Nine Months
    Three Months Ended   Ended
    September 30,   June 30,   September 30,
    2012   2011   2012   2012
Premiums and Fees   $ 4,922   $ 3,255   $ 5,008   $ 14,431
Adjusted Income from Operations1   $ 384   $ 248   $ 332   $ 978
Adjusted Margin, After-Tax7     7.0%     6.6%     6.0%     6.1%
                 
    As of the Periods Ended
    September 30,   June 30,   December 31,
Customers:   2012   2011   2012   2011
Commercial     12,290     11,427     12,182     11,439
Medicare and Medicaid     441     44     437     44
Medical     12,731     11,471     12,619     11,483
                 
Behavioral Care8     21,544     17,725     21,208     18,344
Dental     11,387     10,885     11,248     10,884
Pharmacy     6,721     6,357     6,634     6,368
Medicare Part D     1,265     538     1,264     538
                         

International

This segment includes Cigna's supplemental health, life, and accident insurance and global health expatriate benefits businesses operating in international markets as well as the U.S.

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

         
        Nine Months
    Three Months Ended   Ended
    September 30,   June 30,   September 30,
    2012   2011   2012   2012
Premiums and Fees   $ 930   $ 765   $ 898   $ 2,694
Adjusted Income from Operations1   $ 79   $ 62   $ 65   $ 224
Adjusted Margin, After-Tax7     8.2%     7.8%     7.0%     8.0%
                 
    As of the Periods Ended
    September 30,  

June 30,

  December 31,
    2012   2011   2012   2011
Medical Customers - Global Health Benefits & Health Care     1,240     1,196     1,224     1,197
Health, Life and Accident Policies (excluding China JV)8     9,438     6,450     9,354     9,106
                         

Disability and Life

This segment includes Cigna's group disability, life, and accident insurance operations that are managed separately from the Health Care business.

Financial Results (dollars in millions):

         
        Nine Months
    Three Months Ended   Ended
    September 30,   June 30,   September 30,
    2012   2011   2012   2012
Premiums and Fees   $ 758   $ 698   $ 749   $ 2,250
Adjusted Income from Operations1   $ 62   $ 62   $ 89   $ 216
Adjusted Margin, After-Tax7     7.5%     8.1%     10.9%     8.8%
                 

Other Segments

Adjusted income (loss) from operations1 for Cigna's remaining operations is presented below (dollars in millions):

           
          Nine Months
    Three Months Ended   Ended
    September 30,   June 30,   September 30,
    2012   2011   2012   2012
Run-off Reinsurance   $ (7)   $ (46)   $ (11)   $ (29)
Other Operations   $ 22   $ 25   $ 21   $ 63
Corporate   $ (51)   $ (43)   $ (62)   $ (170)
                         

OUTLOOK

       
(dollars in millions, except per share amounts)     Full-Year Ended

December 31, 2012

Adjusted income (loss) from operations1,3      
Health Care   $ 1,290 to 1,320
International     280 to 290
Disability and Life     265 to 275
Ongoing Businesses   $ 1,835 to 1,885
       
Run-off Reinsurance, Other Operations and Corporate     (180)
Consolidated   $ 1,655 to 1,705
       
Consolidated Adjusted income from operations, per share1,3,4   $ 5.70 to 5.90
       
U.S. Health Care medical customer growth, including medical customers acquired from HealthSpring    

growth of
approximately
1.25 million

       

The foregoing statements represent management's current estimate of Cigna's 2012 consolidated and segment adjusted income from operations1,3 as of the date of this release. Actual results may differ materially depending on a number of factors, and investors are urged to read the Cautionary Statement included in this release for a description of those factors. 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/aboutus/investor-relations). A link to the conference call, during which management will review third quarter 2012 results and discuss full year 2012 outlook is available in the Investor Relations section of Cigna's website (http://www.cigna.com/aboutcigna/investors/events/index.page).

Notes:

     

1.

 

Cigna measures the financial results of its segments using segment earnings (loss), which is defined as shareholders' net income (loss) before net realized investment results. Adjusted income (loss) from operations is defined as segment earnings (loss) excluding special items (which are identified and quantified in Note 4) and the results of Cigna's GMIB business. 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 measure is not determined in accordance with generally accepted accounting principles (GAAP) and should not be viewed as a substitute for the most directly comparable GAAP measures, which are segment earnings (loss) and shareholders' net income; see Exhibits 1 and 2, and Note 2 for reconciliations of the non-GAAP measure to the most directly comparable GAAP measures.

     
   

Effective January 1, 2012, Cigna retrospectively adopted required amended accounting rules for costs related to the acquisition or renewal of insurance contracts ("deferred policy acquisition costs"). Prior period amounts have been presented on a comparable basis.

     

2.

 

The Guaranteed Minimum Income Benefits (GMIB) business and Guaranteed Minimum Death Benefits business, also known as Variable Annuity Death Benefits (VADBe), are included in our Run-off Reinsurance operations. These businesses have been in run-off since 2000. A reconciliation of reported shareholders' net income1 and earnings per share to adjusted income from operations1 excluding the results of VADBe for the third quarter of 2012 and 2011 is as follows (dollars in millions, except per share amounts):

     
    Three Months Ended September 30,
                    % EPS
    2012   EPS   2011   EPS   Change
Shareholders' net income   $ 466   $ 1.61   $ 183   $ 0.67   140%
Less adjustments for:                            
Results of GMIB, after-tax     32     0.11     (134)     (0.50)    
Net realized investment gains (losses), net of taxes     7     0.02     9     0.04    
Special items, after-tax4     (62)     (0.21)     -     -    
Adjusted income from operations1     489     1.69     308     1.13   50%
Less adjustment for: Results of VADBe, after-tax     (7)     (0.02)     (45)     (0.16)    
Adjusted income from operations1, excluding VADBe   $ 496   $ 1.71   $ 353   $ 1.29   33%
                             
     

3.

 

Information is not available for management to (1) reasonably estimate future net realized investment gains (losses) or (2) reasonably estimate future GMIB business results due in part to interest rate and stock market volatility and other internal and external factors; therefore, it is not possible to provide a forward-looking reconciliation of adjusted income from operations to shareholders' income from continuing operations. We expect that special items for 2012 will include HealthSpring, Inc. ("HealthSpring") acquisition costs and may also include potential adjustments associated with litigation and assessment related items. Other than these items, information is not available for management to identify, or reasonably estimate additional 2012 special items.

 

4.

 

Special items included in shareholders' net income and segment earnings (loss), but excluded from adjusted income (loss) from operations, and the calculation of adjusted margins include:

 
   

Third Quarter 2012

   

-- After-tax loss of $50 million related to a realignment and efficiency plan.

   

-- After-tax loss of $12 million related to transaction costs for the 2012 acquisition of HealthSpring.

 
   

First Quarter 2012

   

-- After-tax loss of $28 million related to transaction costs for the 2012 acquisition of HealthSpring.

   

-- After-tax loss of $13 million related to a litigation matter.

 

5.

 

The application of the FASB's fair value disclosure and measurement guidance (ASC 820-10), which impacts reinsurance contracts covering GMIB, does not represent management's expectation of the ultimate payout. Changes in underlying contract holder account values, interest rates, stock market volatility, and other factors may result in changes to the fair value assumptions, and/or amount that will be required to ultimately settle Cigna's obligations, which could result in a material adverse or favorable impact on the Run-off Reinsurance segment and Cigna's results of operations.

 

6.

 

Share repurchases may from time to time be made pursuant to written trading plans under Rule 10b5-1, which permit shares to be repurchased when Cigna might otherwise be precluded from doing so under insider trading laws or because of self-employed trading blackout periods.

 

7.

 

Adjusted margins in this press release are calculated by dividing adjusted income from operations1 by segment revenues. For the three and nine months ended September 30, 2012, segment margins including special items were 6.3% and 5.7% for Health Care, respectively, 7.3% and 7.7% for International, respectively, and 7.3% and 8.7% for Disability and Life, respectively.

 

8.

 

The number of customers reported in prior periods has been adjusted to conform to the current basis of reporting.

 

9.

 

Health Care medical claims payable are presented net of reinsurance and other recoverables. The gross Health Care medical claims payable balance was $1,581 million as of September 30, 2012 and $1,095 million as of December 31, 2011.

     

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Cigna Corporation and its subsidiaries (the "Company") and its representatives may from time to time make written and oral forward-looking statements, including statements contained in press releases, in the Company's filings with the Securities and Exchange Commission, in its reports to shareholders and in meetings with analysts and investors. Forward-looking statements may contain information about financial prospects, economic conditions, trends and other uncertainties. These forward-looking statements are based on management's beliefs and assumptions and on information available to management at the time the statements are or were made. Forward-looking statements include, but are not limited to, the information concerning possible or assumed future business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, trends and, in particular, the Company's strategic initiatives, litigation and other legal matters, operational improvement initiatives in the Health Care operations, and the outlook for the Company's full year 2012 and beyond results. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe", "expect", "plan", "intend", "anticipate", "estimate", "predict", "potential", "may", "should" or similar expressions.

By their nature, forward-looking statements: (i) speak only as of the date they are made, (ii) are not guarantees of future performance or results and (iii) are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors. Some factors that could cause actual results to differ materially from the forward-looking statements include:

     
1.   increased medical costs that are higher than anticipated in establishing premium rates in the Company's Health Care operations, including increased use and costs of medical services;
2.   increased medical, administrative, technology or other costs resulting from new legislative and regulatory requirements imposed on the Company's businesses;
3.   challenges and risks associated with implementing operational improvement initiatives and strategic actions in the ongoing operations of the businesses, including those related to: (i) growth in targeted geographies, product lines, buying segments and distribution channels, (ii) offering products that meet emerging market needs, (iii) strengthening underwriting and pricing effectiveness, (iv) strengthening medical cost results and a growing medical customer base, (v) delivering quality service to members and health care professionals using effective technology solutions, and (vi) lowering administrative costs;
4.   adverse changes in state, federal and international laws and regulations, including health care reform legislation and regulation that could, among other items, affect the way the Company does business, increase costs, limit the ability to effectively estimate, price for and manage medical costs, and affect the Company's products, services, market segments, technology and processes;
5.   the ability to successfully complete the integration of acquired businesses, including the acquired HealthSpring businesses by, among other things, operating Medicare Advantage coordinated care plans and HealthSpring's prescription drug plan,

retaining and growing the customer base, realizing revenue, expense and other synergies, renewing contracts on competitive terms, successfully leveraging the information technology platform of the acquired businesses, and retaining key personnel;

6.   the ability of the Company to execute its growth plans by successfully leveraging its capabilities and those of the businesses

acquired in serving the Seniors market segment and the Company's other market segments, including through successful execution of the Company's physician engagement strategy;

7.   the possibility that the acquired HealthSpring business may be adversely affected by economic, business and/or competitive

factors; or by federal and/or state regulation, including health care reform, reductions in funding levels for Medicare programs, and potential changes in risk adjustment data validation audit and payment adjustment methodology;

8.   risks associated with pending and potential state and federal class action lawsuits, disputes regarding reinsurance arrangements, other litigation and regulatory actions challenging the Company's businesses, including disputes related to payments to health care professionals, government investigations and proceedings, tax audits and related litigation, and regulatory market conduct and other reviews, audits and investigations;
9.   heightened competition, particularly price competition, that could reduce product margins and constrain growth in the Company's businesses, primarily the Health Care business;
10.   risks associated with the Company's mail order pharmacy business that, among other things, includes any potential operational deficiencies or service issues as well as loss or suspension of state pharmacy licenses;
11.   significant changes in interest rates or sustained deterioration in the commercial real estate markets;
12.   downgrades in the financial strength ratings of the Company's insurance subsidiaries, that could, among other things, adversely affect new sales and retention of current business; downgrades in financial strength ratings of reinsurers, that could result in increased statutory reserves or capital requirements of the Company's insurance subsidiaries;
13.   limitations on the ability of the Company's insurance subsidiaries to dividend capital to the parent company as a result of downgrades in the subsidiaries' financial strength ratings, changes in statutory reserve or capital requirements or other financial constraints;
14.   inability of the hedge programs adopted by the Company to substantially reduce equity market and certain interest rate risks in the run-off reinsurance operations;
15.   adjustments to the reserve assumptions (including lapse, partial surrender, mortality, interest rates and volatility) used in estimating the Company's liabilities for reinsurance contracts covering guaranteed minimum death benefits under certain variable annuities;
16.   adjustments to the assumptions (including interest rates, annuity election rates and amounts collectible from reinsurers) used in estimating the Company's assets and liabilities for reinsurance contracts covering guaranteed minimum income benefits under certain variable annuities;
17.   significant stock market declines, that could, among other things, result in increased expenses for guaranteed minimum income benefit contracts, guaranteed minimum death benefit contracts and the Company's pension plans in future periods as well as the recognition of additional pension obligations;
18.   significant deterioration in economic conditions and significant market volatility, that could have an adverse effect on the Company's operations, investments, liquidity and access to capital markets;
19.   significant deterioration in economic conditions and significant market volatility, that could have an adverse effect on the businesses of our customers (including the amount and type of health care services provided to their workforce, loss in workforce and our customers' ability to pay their obligations) and our vendors (including their ability to provide services);
20.   amendments to income tax laws, that could affect the taxation of employer-provided benefits, the taxation of certain insurance products such as corporate-owned life insurance, or the financial decisions of individuals whose variable annuities are covered under reinsurance contracts issued by the Company;
21.   potential public health epidemics, pandemics, natural disasters and bio-terrorist activity, that could, among other things, cause the Company's covered medical and disability expenses, pharmacy costs and mortality experience to rise significantly, and cause operational disruption, depending on the severity of the event and number of individuals affected;
22.   risks associated with security or interruption of information systems, that could, among other things, cause operational disruption;
23.   challenges and risks associated with the successful management of the Company's outsourcing projects or key vendors; and
24.   the unique political, legal, operational, regulatory and other challenges associated with expanding our business globally.
     

This list of important factors is not intended to be exhaustive. Other sections of the Company's most recent Annual Report on Form 10-K, including the "Risk Factors" section, the Quarterly Report on Form 10-Q for the quarters ended March 31 and June 30, 2012, the Current Report on Form 8-K filed on August 8, 2012, and other documents filed with the Securities and Exchange Commission include both expanded discussion of these factors and additional risk factors and uncertainties that could preclude the Company from realizing the forward-looking statements. The Company does not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

                     
CIGNA CORPORATION    
COMPARATIVE SUMMARY OF FINANCIAL RESULTS (unaudited)       Exhibit 1
(Dollars in millions, except per share amounts)    
                     
                     
    Three Months Ended       Nine Months Ended
    September 30,       September 30,
    2012   2011       2012   2011
                     
REVENUES                    
                     
Premiums and fees   $ 6,637   $ 4,748       $ 19,464   $ 14,267
Net investment income     283     297         854     860
Mail order pharmacy revenues     401     368         1,189     1,056
Other revenues     68     51         182     193
Total operating revenues     7,389     5,464         21,689     16,376
Run-off Reinsurance hedge gain (loss) (1)     (42)     133         (106)     96
Net realized investment gains     11     13         20     56
                     
Total   $ 7,358   $ 5,610       $ 21,603   $ 16,528
                     
ADJUSTED INCOME (LOSS) FROM OPERATIONS (2)                    
                     
Health Care   $ 384   $ 248       $ 978   $ 774
International     79     62         224     180
Disability and Life     62     62         216     227
Run-off Reinsurance     (7)     (46)         (29)     (47)
Other Operations     22     25         63     64
Corporate     (51)     (43)         (170)     (130)
                     
Total   $ 489   $ 308       $ 1,282   $ 1,068
                     
SHAREHOLDERS' NET INCOME                    
                     

Segment Earnings (Loss)

                   
                     
Health Care (3)(4)(5)(6)   $ 345   $ 248       $ 919   $ 775
International (3)     70     62         215     180
Disability and Life (3)(6)     60     62         214     232
Run-off Reinsurance     25     (180)         (7)     (189)
Other Operations (6)     22     25         63     68
Corporate (4)(6)     (63)     (43)         (203)     (116)
                     
Total     459     174         1,201     950
Net realized investment gains, net of taxes     7     9         16     37
                     
Shareholders' net income   $ 466   $ 183       $ 1,217   $ 987
                     
                     
DILUTED EARNINGS PER SHARE:                    
                     
Adjusted income from operations (2)   $ 1.69   $ 1.13       $ 4.42   $ 3.91
Results of guaranteed minimum income benefits business, after-tax     0.11     (0.50)         0.07     (0.52)
Net realized investment gains, net of taxes     0.02     0.04         0.06     0.14
Special item(s), after-tax (3)(4)(5)(6)     (0.21)     -         (0.35)     0.09
Shareholders' net income   $ 1.61   $ 0.67       $ 4.20   $ 3.62
Weighted average shares (in thousands)     289,875     272,060         289,807     272,884
SHAREHOLDERS' EQUITY at September 30               $ 9,530   $ 7,430
                     
                     
SHAREHOLDERS' EQUITY PER SHARE at September 30               $ 33.24   $ 27.49
     
Effective January 1, 2012, Cigna adopted, as required, amended accounting guidance for deferred policy acquisition costs by selecting retrospective adjustment of prior periods.
     
The financial results of Great American Supplemental Benefits are included in the International segment from the date of acquisition, which was on August 31, 2012. The financial results of HealthSpring are aggregated with the Health Care segment from the date of acquisition, which was on January 31, 2012.
     

(1)

 

Includes pre-tax futures and swaps contracts entered into as part of a dynamic hedge program to manage equity and growth interest rate risks in Cigna's Run-off Reinsurance operations. Cigna recorded related offsets in Benefits and Expenses to adjust liabilities for reinsured guaranteed minimum death benefit and guaranteed minimum income benefit contracts. For more information, please refer to Cigna's Form 10-Q for the period ended September 30, 2012, which is expected to be filed on November 1, 2012.

     

(2)

 

Adjusted income (loss) from operations is segment earnings (loss) (shareholders' net income (loss) before net realized investment gains (losses)) excluding results of Cigna's guaranteed minimum income benefits business and special items. See Exhibit 2 for a detailed reconciliation of adjusted income (loss) from operations to segment earnings (loss) and shareholders' net income presented in accordance with generally accepted accounting principles.

     

(3)

 

The three months and nine months ended September 30, 2012 includes pre-tax charges of $77 million ($50 million after-tax) for a realignment and efficiency plan: $60 million pre-tax ($39 million after-tax) in Health Care; $14 million pre-tax ($9 million after-tax) in International and $3 million pre-tax ($2 million after-tax) in Disability and Life.

     

(4)

 

The three months ended September 30, 2012 includes pre-tax charges of $12 million ($12 million after-tax) in Corporate for costs associated with the 2012 acquisition of HealthSpring. The nine months ended September 30, 2012 includes pre-tax charges of $53 million ($40 million after-tax) for costs associated with the 2012 acquisition of HealthSpring: $42 million pre-tax ($33 million after-tax) in Corporate and $11 million pre-tax ($7 million after-tax) in Health Care.

     

(5)

 

The nine months ended September 30, 2012 includes pre-tax charges of $20 million ($13 million after-tax) resulting from a litigation matter in Health Care.

     

(6)

 

The nine months ended September 30, 2011 includes a net tax benefit of $24 million resulting from the completion of the 2007 and 2008 IRS examinations.

   

- After-tax benefit of $1 million in Health Care; after-tax benefit of $5 million in Disability and Life; after-tax benefit of $4 million (includes a pre-tax charge of $9 million offset by a tax benefit of $13 million) in Other Operations and an after-tax benefit of $14 million in Corporate.

                                                                                                 
CIGNA CORPORATION                                                                                    
SUPPLEMENTAL FINANCIAL INFORMATION (unaudited)                                                     Exhibit 2    
RECONCILIATION OF ADJUSTED INCOME (LOSS) FROM OPERATIONS TO SHAREHOLDERS' NET INCOME
(Dollars in millions, except per share amounts)                                                                                                
                                                                                                 
    Diluted                                                                                    
    Earnings                                       Disability   Run-off   Other            
    Per Share   Consolidated   Health Care   International   and Life   Reinsurance   Operations   Corporate
Three Months Ended,   3Q12   3Q11   2Q12   3Q12   3Q11   2Q12   3Q12   3Q11   2Q12   3Q12   3Q11   2Q12   3Q12   3Q11   2Q12   3Q12   3Q11   2Q12   3Q12   3Q11   2Q12   3Q12   3Q11   2Q12
                                                                                                 
Adjusted income (loss) from operations (1)   $ 1.69   $ 1.13   $ 1.49   $ 489   $ 308   $ 434   $ 384   $ 248   $ 332   $ 79   $ 62   $ 65   $ 62   $ 62   $ 89   $ (7)   $ (46)   $ (11)   $ 22   $ 25   $ 21   $ (51)   $ (43)   $ (62)
                                                                                                 
Results of guaranteed minimum income benefits business (2)     0.11     (0.50)     (0.17)     32     (134)     (51)     -     -     -     -     -     -     -     -     -     32     (134)     (51)     -     -     -     -     -     -
                                                                                                 
Special item(s), after-tax:                                                                                                
Charge for realignment and efficiency plan (3)     (0.17)     -     -     (50)     -     -     (39)     -     -     (9)     -     -     (2)     -     -     -     -     -     -     -     -     -     -     -
Cost associated with HealthSpring acquisition (4)     (0.04)     -     -     (12)     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     (12)     -     -
                                                                                                 
Segment earnings (loss)     1.59     0.63     1.32     459     174     383   $ 345   $ 248   $ 332   $ 70   $ 62   $ 65   $ 60   $ 62   $ 89   $ 25   $ (180)   $ (62)   $ 22   $ 25   $ 21   $ (63)   $ (43)   $ (62)
Net realized investment gains (losses), net of taxes (7)     0.02     0.04     (0.01)     7     9     (3)                                                                        
                                                                                                 
Shareholders' net income   $ 1.61   $ 0.67   $ 1.31   $ 466   $ 183   $ 380                                                                        
                                                                                                 
                                                                                                 
                                                                                                 
    Diluted                                                                                    
    Earnings                                       Disability   Run-off   Other            
    Per Share   Consolidated   Health Care   International   and Life   Reinsurance   Operations   Corporate
Nine Months Ended September 30,   2012       2011   2012       2011   2012       2011   2012       2011   2012       2011   2012       2011   2012       2011   2012       2011
                                                                                                 
Adjusted income (loss) from operations (1)   $ 4.42       $ 3.91   $ 1,282       $ 1,068   $ 978       $ 774   $ 224       $ 180   $ 216       $ 227   $ (29)       $ (47)   $ 63       $ 64   $ (170)       $ (130)
                                                                                                 
Results of guaranteed minimum income benefits business (2)     0.07         (0.52)     22         (142)     -         -     -         -     -         -     22         (142)     -         -     -         -
                                                                                                 
Special item(s), after-tax:                                                                                                
Charge for realignment and efficiency plan (3)     (0.17)         -     (50)         -     (39)         -     (9)         -     (2)         -     -         -     -         -     -         -
Cost associated with HealthSpring acquisition (4)     (0.14)         -     (40)         -     (7)         -     -         -     -         -     -         -     -         -     (33)         -
Charges associated with a litigation matter (5)     (0.04)         -     (13)         -     (13)         -     -         -     -         -     -         -     -         -     -         -
Completion of IRS examination (6)     -         0.09     -         24     -         1     -         -     -         5     -         -     -         4     -         14
                                                                                                 
Segment earnings (loss)     4.14         3.48     1,201         950   $ 919       $ 775   $ 215       $ 180   $ 214       $ 232   $ (7)       $ (189)   $ 63       $ 68   $ (203)       $ (116)
Net realized investment gains, net of taxes (7)     0.06         0.14     16         37                                                                        
                                                                                                 
Shareholders' net income   $ 4.20       $ 3.62   $ 1,217       $ 987                                                                        
     

(1)

 

Cigna measures the financial results of its segments using "segment earnings (loss)", which is defined as shareholders' net income (loss) before net realized investment gains (losses). Adjusted income (loss) from operations is defined as segment earnings excluding special items and results of Cigna's guaranteed minimum income benefits business.

     

(2)

 

Results of guaranteed minimum income benefits business on a pre-tax basis for:

   

- three months and nine months ended September 30, 2012 were gains of $50 million and $34 million, respectively;

   

- three months and nine months ended September 30, 2011 were losses of $206 million and $219 million, respectively; and

   

- three months ended June 30, 2012 were losses of $79 million.

     

(3)

 

The three months and nine months ended September 30, 2012 includes pre-tax charges of $77 million ($50 million after-tax) for a realignment and efficiency plan: $60 million pre-tax ($39 million after-tax) in Health Care; $14 million pre-tax ($9 million after-tax) in International and $3 million pre-tax ($2 million after-tax) in Disability and Life.

     

(4)

 

The three months ended September 30, 2012 includes pre-tax charges of $12 million ($12 million after-tax) in Corporate for costs associated with the 2012 acquisition of HealthSpring. The nine months ended September 30, 2012 includes pre-tax charges of $53 million ($40 million after-tax) for costs associated with the 2012 acquisition of HealthSpring: $42 million pre-tax ($33 million after-tax) in Corporate and $11 million pre-tax ($7 million after-tax) in Health Care.

     

(5)

 

The nine months ended September 30, 2012 includes pre-tax charges of $20 million ($13 million after-tax) resulting from a litigation matter in Health Care.

     

(6)

 

The nine months ended September 30, 2011 includes a net tax benefit of $24 million resulting from the completion of the 2007 and 2008 IRS examinations.

   

- After-tax benefit of $1 million in Health Care; after-tax benefit of $5 million in Disability and Life; after-tax benefit of $4 million (includes a pre-tax charge of $9 million offset by a tax benefit of $13 million) in Other Operations and an after-tax benefit of $14 million in Corporate.

     

(7)

 

Net realized investment gains (losses) on a pre-tax basis for:

   

- three months and nine months ended September 30, 2012 were gains of $11 million and $20 million, respectively;

   

- three months and nine months ended September 30, 2011 were gains of $13 million and $56 million, respectively; and

   

- three months ended June 30, 2012 were losses of $4 million.