-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NI03sJP7if9oe+910Kecdw+RcxggZxKUzHZFzfftvgQ415PFHlimDBsRj2XA5r/h 3+eHhCVliHFfbOzCTVa7Ow== 0000950159-99-000207.txt : 19990809 0000950159-99-000207.hdr.sgml : 19990809 ACCESSION NUMBER: 0000950159-99-000207 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIGNA CORP CENTRAL INDEX KEY: 0000701221 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] IRS NUMBER: 061059331 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08323 FILM NUMBER: 99679715 BUSINESS ADDRESS: STREET 1: ONE LIBERTY PLACE 48TH FLOOR STREET 2: 1601 CHESTNUT STREET CITY: PHILADELPHIA STATE: PA ZIP: 19192-1550 BUSINESS PHONE: 2157616211 MAIL ADDRESS: STREET 1: TWO LIBERTY PLACE 48TH FLOOR STREET 2: 1601 CHESTNUT STREET CITY: PHILADELPHIA STATE: PA ZIP: 19192 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 ------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _____ to _____ Commission file number 1-8323 ------ CIGNA Corporation ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 06-1059331 ------------------------------- ----------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) One Liberty Place, 1650 Market Street Philadelphia, Pennsylvania 19192 ------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (215) 761-1000 -------------- Not Applicable ------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _x_ No ___ As of June 30, 1999, 199,121,311 shares of the issuer's Common Stock were outstanding. CIGNA CORPORATION INDEX Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Income Statements 1 Consolidated Balance Sheets 2 Consolidated Statements of Comprehensive Income and Changes in Shareholders' Equity 3 Consolidated Statements of Cash Flows 4 Notes to Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 23 Item 6. Exhibits and Reports on Form 8-K 24 SIGNATURE 25 EXHIBIT INDEX 26 As used herein, "CIGNA" refers to one or more of CIGNA Corporation and its consolidated subsidiaries. Part I. FINANCIAL INFORMATION Item 1. Financial Statements - ----------------------------- CIGNA CORPORATION CONSOLIDATED INCOME STATEMENTS (In millions, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------------------------- REVENUES Premiums and fees $ 3,724 $ 3,354 $ 7,311 $ 6,570 Net investment income 734 789 1,455 1,578 Other revenues 226 168 404 635 Realized investment gains 13 39 24 79 ------- ------- ------- ------- Total revenues 4,697 4,350 9,194 8,862 ------- ------- ------- ------- BENEFITS, LOSSES AND EXPENSES Benefits, losses and settlement expenses 3,119 2,930 6,138 5,776 Policy acquisition expenses 58 43 125 90 Other operating expenses 1,051 992 2,094 1,928 ------- ------- ------- ------- Total benefits, losses and expenses 4,228 3,965 8,357 7,794 ------- ------- ------- ------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 469 385 837 1,068 ------- ------- ------- ------- Income taxes (benefits): Current 213 121 326 534 Deferred (47) 15 (28) (154) ------- ------- ------- ------- Total taxes 166 136 298 380 ------- ------- ------- ------- INCOME FROM CONTINUING OPERATIONS 303 249 539 688 Income (loss) from discontinued operations, net of taxes (71) 59 (28) 115 ------- ------- ------- ------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 232 308 511 803 Cumulative effect of accounting change, net of taxes -- -- (91) -- ------- ------- ------- ------- NET INCOME $ 232 $ 308 $ 420 $ 803 - ----------------------------------------------------------------====================================================== BASIC EARNINGS PER SHARE Income from continuing operations $ 1.50 $ 1.16 $ 2.65 $ 3.20 Income (loss) from discontinued operations, net of taxes (0.35) 0.28 (0.14) 0.54 - ---------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of accounting change 1.15 1.44 2.51 3.74 Cumulative effect of accounting change, net of taxes -- -- (0.44) -- - ---------------------------------------------------------------------------------------------------------------------- Net income $ 1.15 $ 1.44 $ 2.07 $ 3.74 - ----------------------------------------------------------------====================================================== DILUTED EARNINGS PER SHARE Income from continuing operations $ 1.48 $ 1.15 $ 2.61 $ 3.17 Income (loss) from discontinued operations, net of taxes (0.35) 0.27 (0.13) 0.53 - ---------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of accounting change 1.13 1.42 2.48 3.70 Cumulative effect of accounting change, net of taxes -- -- (0.44) -- - ---------------------------------------------------------------------------------------------------------------------- Net income $ 1.13 $ 1.42 $ 2.04 $ 3.70 - ----------------------------------------------------------------====================================================== DIVIDENDS DECLARED PER SHARE $ 0.30 $ 0.29 $ 0.60 $ 0.57 - ----------------------------------------------------------------======================================================
The Notes to Financial Statements are an integral part of these statements. 1 CIGNA CORPORATION CONSOLIDATED BALANCE SHEETS (In millions, except per share amounts)
As of As of June 30, December 31, 1999 1998 - -------------------------------------------------------------------------------------------------------------- ASSETS Investments: Fixed maturities, at fair value (amortized cost, $22,625; $22,663) $ 23,121 $ 24,270 Equity securities, at fair value (cost, $263; $249) 541 477 Mortgage loans 10,115 9,599 Policy loans 3,674 6,185 Real estate 798 733 Other long-term investments 146 170 Short-term investments 243 242 -------- -------- Total investments 38,638 41,676 Cash and cash equivalents 1,262 1,986 Accrued investment income 556 617 Premiums, accounts and notes receivable 2,589 2,481 Reinsurance recoverables 6,737 6,666 Deferred policy acquisition costs 767 730 Property and equipment 700 701 Deferred income taxes 1,269 1,034 Other assets 699 750 Goodwill and other intangibles 2,050 2,090 Separate account assets 36,179 34,808 Net assets of discontinued operations 2,000 2,351 - -------------------------------------------------------------------------------------------------------------- Total assets $ 93,446 $ 95,890 - ---------------------------------------------------------------------------------============================= LIABILITIES Contractholder deposit funds $ 27,779 $ 30,607 Unpaid claims and claim expenses 3,639 3,392 Future policy benefits 12,141 12,510 Unearned premiums 496 589 -------- -------- Total insurance and contractholder liabilities 44,055 47,098 Accounts payable, accrued expenses and other liabilities 4,631 4,358 Current income taxes -- 27 Short-term debt 307 272 Long-term debt 1,361 1,428 Separate account liabilities 35,751 34,430 - -------------------------------------------------------------------------------------------------------------- Total liabilities 86,105 87,613 - -------------------------------------------------------------------------------------------------------------- CONTINGENCIES - NOTE 9 SHAREHOLDERS' EQUITY Common stock (par value, $0.25; shares issued, 267; 265) 67 66 Additional paid-in capital 2,814 2,719 Net unrealized appreciation, fixed maturities $ 160 $ 750 Net unrealized appreciation, equity securities 278 206 Net translation of foreign currencies (223) (114) -------- -------- Accumulated other comprehensive income 215 842 Retained earnings 7,045 6,746 Less treasury stock, at cost (2,800) (2,096) - -------------------------------------------------------------------------------------------------------------- Total shareholders' equity 7,341 8,277 - -------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 93,446 $ 95,890 - ---------------------------------------------------------------------------------============================= SHAREHOLDERS' EQUITY PER SHARE $ 36.87 $ 40.25 - ---------------------------------------------------------------------------------=============================
The Notes to Financial Statements are an integral part of these statements. 2 CIGNA CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND CHANGES IN SHAREHOLDERS' EQUITY (In millions)
Three Months Ended June 30, 1999 1998 - ------------------------------------------------------------------------------------------------------------------- Compre- Share- Compre- Share- hensive holders' hensive holders' Income Equity Income Equity - ------------------------------------------------------------------------------------------------------------------- Common stock $ 67 $ 66 ------- ------- Additional paid-in capital, April 1 2,788 2,695 Issuance of common stock for employee benefits plans 26 9 ------- ------- Additional paid-in capital, June 30 2,814 2,704 ------- ------- Accumulated other comprehensive income, April 1 503 812 Net unrealized appreciation (depreciation) - fixed maturities $ (335) (335) $ 22 22 Net unrealized appreciation (depreciation) - equity securities 49 49 (2) (2) ------- ------- Net unrealized appreciation (depreciation) on securities (286) 20 Net translation of foreign currencies (2) (2) 3 3 ------- ------- Other comprehensive income (loss) (288) 23 ------- ------- Accumulated other comprehensive income, June 30 215 835 ------- ------- Retained earnings, April 1 6,873 6,129 Net income 232 232 308 308 Common dividends declared (60) (61) ------- ------- Retained earnings, June 30 7,045 6,376 ------- ------- Treasury stock, April 1 (2,362) (1,377) Repurchase of common stock (429) (260) Other treasury stock transactions, net (9) (4) ------- ------- Treasury stock, June 30 (2,800) (1,641) - ------------------------------------------------------------------------------------------------------------------- TOTAL COMPREHENSIVE INCOME (LOSS) AND SHAREHOLDERS' EQUITY $ (56) $ 7,341 $ 331 $ 8,340 - ---------------------------------------------------------------------============================================== Six Months Ended June 30, - ------------------------------------------------------------------------------------------------------------------- Common stock, January 1 $ 66 $ 66 Issuance of common stock for employee benefits plans 1 -- ------- ------- Common stock, June 30 67 66 ------- ------- Additional paid-in capital, January 1 2,719 2,655 Issuance of common stock for employee benefits plans 95 49 ------- ------- Additional paid-in capital, June 30 2,814 2,704 ------- ------- Accumulated other comprehensive income, January 1 842 758 Net unrealized depreciation, fixed maturities $ (590) (590) $ (7) (7) Net unrealized appreciation, equity securities 72 72 80 80 ------- ------- Net unrealized appreciation (depreciation) on securities (518) 73 Net translation of foreign currencies (109) (109) 4 4 ------- ------- Other comprehensive income (loss) (627) 77 ------- ------- Accumulated other comprehensive income, June 30 215 835 ------- ------- Retained earnings, January 1 6,746 5,696 Net income 420 420 803 803 Common dividends declared (121) (123) ------- ------- Retained earnings, June 30 7,045 6,376 ------- ------- Treasury stock, January 1 (2,096) (1,243) Repurchase of common stock (658) (371) Other treasury stock transactions, net (46) (27) ------- ------- Treasury stock, June 30 (2,800) (1,641) - ------------------------------------------------------------------------------------------------------------------- TOTAL COMPREHENSIVE INCOME (LOSS) AND SHAREHOLDERS' EQUITY $ (207) $ 7,341 $ 880 $ 8,340 - ---------------------------------------------------------------------==============================================
The Notes to Financial Statements are an integral part of these statements. 3 CIGNA CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
Six Months Ended June 30, 1999 1998 - ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Income from continuing operations $ 539 $ 688 Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities: Insurance liabilities 324 452 Reinsurance recoverables (72) (64) Deferred policy acquisition costs (73) (60) Premiums, accounts and notes receivable (149) (197) Accounts payable, accrued expenses, other liabilities and current income taxes 235 18 Deferred income taxes (28) (154) Realized investment gains (24) (79) Depreciation and goodwill amortization 98 108 Gain on sale of businesses (116) (367) Other, net (24) (192) ------- ------- Net cash provided by operating activities of continuing operations 710 153 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from investments sold: Fixed maturities 1,303 1,948 Equity securities 57 89 Mortgage loans 135 556 Other 779 853 Investment maturities and repayments: Fixed maturities 1,423 1,540 Mortgage loans 179 348 Investments purchased: Fixed maturities (2,800) (3,138) Equity securities (61) (193) Mortgage loans (924) (920) Other (504) (1,485) Proceeds on sale of businesses 107 1,296 Other, net (146) (152) ------- ------- Net cash provided by (used in) investing activities of continuing operations (452) 742 ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Deposits and interest credited to contractholder deposit funds 3,608 4,419 Withdrawals and benefit payments from contractholder deposit funds (3,863) (4,805) Net change in short-term debt (32) (362) Repayment of long-term debt -- (99) Repurchase of common stock (633) (366) Issuance of common stock 35 17 Common dividends paid (120) (122) ------- ------- Net cash used in financing activities of continuing operations (1,005) (1,318) ------- ------- Effect of foreign currency rate changes on cash and cash equivalents (13) (2) Net cash (to) from discontinued operations 36 (178) - --------------------------------------------------------------------------------------------------------------------- Net decrease in cash and cash equivalents (724) (603) Cash and cash equivalents, beginning of period 1,986 1,832 - --------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 1,262 $ 1,229 - -------------------------------------------------------------------------------------------------==================== Supplemental Disclosure of Cash Information: Income taxes paid, net of refunds $ 281 $ 478 Interest paid $ 61 $ 66 - ---------------------------------------------------------------------------------------------------------------------
The Notes to Financial Statements are an integral part of these statements. 4 CIGNA CORPORATION NOTES TO FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The consolidated financial statements include the accounts of CIGNA Corporation and all significant subsidiaries (CIGNA). These consolidated financial statements have been prepared in conformity with generally accepted accounting principles. Certain reclassifications have been made to conform with the 1999 presentation. The interim financial statements are unaudited but include all adjustments (consisting of normal recurring adjustments) necessary, in the opinion of management, for a fair statement of financial position and results of operations for the period reported. The preparation of interim financial statements necessarily relies heavily on estimates. This and certain other factors, such as the seasonal nature of portions of the insurance business as well as competitive and other market conditions, call for caution in estimating results for the full year based on interim results of operations. NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS CIGNA adopted Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments" as of January 1, 1999. SOP 97-3, issued by the American Institute of Certified Public Accountants (AICPA), provides guidance on the recognition and measurement of liabilities for guaranty fund and other insurance-related assessments such as workers' compensation second injury funds, medical risk pools and charges related to operating expenses of state regulatory bodies. The cumulative effect of adopting the SOP was a reduction of net income of $91 million ($140 million pre-tax), and is primarily related to the property and casualty business, which has been sold and which is reported as discontinued operations, as discussed below. In 1999, CIGNA adopted SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1, issued by the AICPA in 1998, specifies the types of costs that must be capitalized and amortized over the software's expected useful life and the types of costs which must be immediately recognized as expense. Implementation of this pronouncement did not have a material effect on results of operations, liquidity or financial condition. In 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires that derivatives be reported on the balance sheet at fair value. Changes in fair value are to be recognized in net income or, for derivatives that are hedging market risk related to future cash flows, in the accumulated other comprehensive income section of shareholders' equity. Implementation is required by the first quarter of 2001, with the cumulative effect of adoption reflected in net income and accumulated other comprehensive income, as appropriate. CIGNA has not determined the effect or timing of implementation of this pronouncement. NOTE 3 - ACQUISITIONS AND DISPOSITIONS On July 2, 1999, CIGNA sold its domestic and international property and casualty business to ACE Limited for cash proceeds of $3.45 billion. The after-tax gain on sale, which will be recognized in discontinued operations in the third quarter, was approximately $1.2 billion. In the second quarter of 1999, CIGNA began reporting the sold property and casualty business as discontinued operations and reclassified prior period financial information accordingly. 5 Summarized financial data for the discontinued operations are outlined below:
- ------------------------------------------------------------------------------------------ Three Months Six Months Ended Ended June 30, June 30, (In millions) 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------ Income Statement Data Revenues $944 $987 $1,863 $1,904 ====================================================== Income (loss) before income taxes $(110) $86 $(48) $171 Income taxes (benefits) (39) 27 (20) 56 ------------------------------------------------------ Income (loss) before cumulative effect of accounting change $(71) $59 $(28) $115 - -----------------------------------======================================================
- ------------------------------------------------------- June 30, December 31, (In millions) 1999 1998 - ------------------------------------------------------- Balance Sheet Data Invested assets $7,260 $9,031 Reinsurance recoverables 6,045 6,470 Other assets 7,082 6,240 ------------------------ Total assets 20,387 21,741 ======================== Insurance liabilities 15,990 16,494 Other liabilities 2,397 2,896 ------------------------ Total liabilities 18,387 19,390 ======================== Net assets $2,000 $2,351 - ------------------------------======================== Accumulated other comprehensive income associated with the discontinued operations was $24 million as of June 30, 1999 and $222 million as of December 31, 1998. In April 1999, CIGNA sold a 29% interest in its Japanese life insurance operations to Yasuda Fire & Marine Insurance Company Ltd., reducing CIGNA's ownership interest to 61%. Proceeds of the sale were $105 million. The after-tax gain, which CIGNA recognized in the second quarter, was $43 million and is reported in the International Life, Health and Employee Benefits segment. As of January 1, 1998, CIGNA sold its individual life insurance and annuity business for cash proceeds of $1.4 billion. The sale resulted in an after-tax gain of approximately $770 million of which $202 million was recognized upon closing of the sale. Since the principal agreement to sell this business is in the form of an indemnity reinsurance arrangement, the remaining gain was deferred and is being recognized at the rate that earnings from the business sold would have been expected to emerge, primarily over fifteen years on a declining basis. CIGNA recognized $16 million of the deferred gain in the second quarters of 1999 and 1998, and $31 million and $33 million for the six months ended June 30, 1999 and 1998, respectively. CIGNA had other acquisitions and dispositions during the six months of 1999 and 1998, the effects of which were not material to the financial statements. NOTE 4 - INVESTMENTS Realized Investment Gains and Losses Realized gains and losses on investments of continuing operations, excluding policyholder share, were as follows: - ------------------------------------------------------------------------ Three Months Six Months Ended Ended June 30, June 30, (In millions) 1999 1998 1999 1998 - ------------------------------------------------------------------------ Fixed maturities $5 $-- $10 $20 Equity securities 6 23 13 25 Mortgage loans -- (7) -- 5 Real Estate 2 6 1 7 Other -- 17 -- 22 ------------------------------------------ 13 39 24 79 Less income taxes 4 13 8 27 - ------------------------------------------------------------------------ Net realized investment gains $9 $26 $16 $52 - ------------------------------========================================== Fixed Maturities and Equity Securities Sales of available-for-sale fixed maturities and equity securities, including policyholder share, for continuing operations were as follows:
- ------------------------------------------------------------------------------------- Three Months Six Months Ended Ended June 30, June 30, (In millions) 1999 1998 1999 1998 - ------------------------------------------------------------------------------------- Proceeds from sales $979 $1,162 $1,360 $2,037 Gross gains on sales 29 70 43 97 Gross losses on sales (7) (28) (8) (41) - -------------------------------------------------------------------------------------
6 The components of net unrealized appreciation (depreciation) on securities (including securities of discontinued operations and excluding policyholder share) for the three and six months ended June 30 were as follows: - ------------------------------------------------------------------------------- (In millions) 1999 1998 - ------------------------------------------------------------------------------- Three months ended June 30, Unrealized appreciation (depreciation) on securities held, net of taxes (benefits) of $(133) and $16, respectively. $(249) $ 40 Less gains realized in net income, net of taxes of $20 and $10, respectively. 37 20 ------------------- Net unrealized appreciation (depreciation) $(286) $ 20 - ----------------------------------------------------------=================== Six months ended June 30, Unrealized appreciation (depreciation) on securities held, net of taxes (benefits) of $(244) and $109, respectively. $(454) $ 219 Less gains realized in net income, net of taxes of $34 and $78, respectively. 64 146 ------------------- Net unrealized appreciation (depreciation) $(518) $ 73 - ----------------------------------------------------------=================== NOTE 5 - EARNINGS PER SHARE
- ------------------------------------------------------------------- (Dollars in millions, Effect of except per share amounts) Basic Dilution Diluted - ------------------------------------------------------------------- Three Months Ended June 30, - ------------------------------------------------------------------- 1999 - ------------------------------------------------------------------- Net income $ 232 -- $ 232 - --------------------------------=================================== Shares (in thousands): Weighted average 201,729 -- 201,729 Options and restricted stock grants 3,354 3,354 - ------------------------------------------------------------------- Total shares 201,729 3,354 205,083 - --------------------------------=================================== Earnings per share $ 1.15 $ (0.02) $ 1.13 - --------------------------------=================================== 1998 - ------------------------------------------------------------------- Net income $ 308 -- $ 308 - --------------------------------=================================== Shares (in thousands): Weighted average 213,831 -- 213,831 Options and restricted stock grants 2,715 2,715 - ------------------------------------------------------------------- Total shares 213,831 2,715 216,546 - --------------------------------=================================== Earnings per share $ 1.44 $ (0.02) $ 1.42 - --------------------------------=================================== Six Months Ended June 30, - ------------------------------------------------------------------- 1999 - ------------------------------------------------------------------- Net income $ 420 -- $ 420 - --------------------------------=================================== Shares (in thousands): Weighted average 203,294 -- 203,294 Options and restricted stock grants 3,091 3,091 - ------------------------------------------------------------------- Total shares 203,294 3,091 206,385 - --------------------------------=================================== Earnings per share $ 2.07 $ (0.03) $ 2.04 - --------------------------------=================================== 1998 - ------------------------------------------------------------------- Net income $ 803 -- $ 803 - --------------------------------=================================== Shares (in thousands): Weighted average 214,730 -- 214,730 Options and restricted stock grants 2,415 2,415 - ------------------------------------------------------------------- Total shares 214,730 2,415 217,145 - --------------------------------=================================== Earnings per share $ 3.74 $ (0.04) $ 3.70 - --------------------------------===================================
Common shares held as Treasury shares were 67,503,466 and 52,561,178 as of June 30, 1999 and 1998, respectively. 7 NOTE 6 - REINSURANCE RECOVERABLES In the normal course of business, CIGNA's insurance subsidiaries enter into agreements to assume and cede reinsurance with other insurance companies. Reinsurance is ceded primarily to limit losses from large exposures and to permit recovery of a portion of direct losses, although ceded reinsurance does not relieve the originating insurer of liability. In connection with the sale of CIGNA's individual life insurance and annuity business (as discussed in Note 3), the reinsurance recoverable from Lincoln National Corporation at June 30, 1999 was $6.0 billion. Failure of reinsurers to indemnify CIGNA, as a result of reinsurer insolvencies and disputes, could result in losses. However, CIGNA does not expect charges for unrecoverable reinsurance to have a material effect on its results of operations, liquidity or financial condition. In CIGNA's consolidated income statements, premiums and fees were net of ceded premiums and benefits, losses and settlement expenses were net of reinsurance recoveries as follows: - ------------------------------------------------------------------------ Three Months Six Months Ended Ended June 30, June 30, (In millions) 1999 1998 1999 1998 - ------------------------------------------------------------------------ Ceded premiums: Individual life insurance and annuity business sold $101 $108 $164 $221 Other 122 105 229 214 ---------------------------------------- Total $223 $213 $393 $435 ---------------------------------------- Reinsurance recoveries: Individual life insurance and annuity business sold $ 77 $ 62 $ 99 $118 Other 66 100 154 189 ---------------------------------------- Total $143 $162 $253 $307 - -------------------------------======================================== NOTE 7 - SEGMENT INFORMATION Operating segments are based on CIGNA's internal reporting structure and generally reflect differences in products; the International Life, Health and Employee Benefits segment is based on geography. CIGNA uses operating income (net income excluding after-tax realized investment results, results of discontinued operations and, in 1999, the cumulative effect of adopting SOP 97-3) to measure the financial results of its segments. Summarized segment financial information was as follows:
- ----------------------------------------------------------------------------------------- Three Months Six Months Ended Ended June 30, June 30, (In millions) 1999 1998 1999 1998 - ----------------------------------------------------------------------------------------- Premiums and fees and other revenues: Employee Health Care, Life and Disability Benefits $ 3,219 $ 2,973 $ 6,355 $ 5,839 Employee Retirement Benefits and Investment Services 71 73 133 144 International Life, Health and Employee Benefits 482 309 865 587 Other Operations 222 189 441 684 Corporate (44) (22) (79) (49) - ----------------------------------------------------------------------------------------- Total $ 3,950 $ 3,522 $ 7,715 $ 7,205 - ----------------------------------------------------------------------------------------- Income from continuing operations: Operating income (loss): Employee Health Care, Life and Disability Benefits $ 173 $ 143 $ 330 $ 274 Employee Retirement Benefits and Investment Services 67 60 130 121 International Life, Health and Employee Benefits 44 7 47 16 Other Operations 37 29 67 262 Corporate (27) (16) (51) (37) -------------------------------------------------------- Total operating income 294 223 523 636 Realized investment gains, net of taxes 9 26 16 52 - ----------------------------------------------------------------------------------------- Income from continuing operations $ 303 $ 249 $ 539 $ 688 - ---------------------------------========================================================
8 NOTE 8 - COST REDUCTION INITIATIVES In the fourth quarter of 1997, CIGNA adopted a cost reduction plan to restructure its health care operations, which resulted in a pre-tax charge of $32 million ($22 million after-tax) in the Employee Health Care, Life and Disability Benefits segment. The charge consisted primarily of costs related to severance and vacated lease space. The cash outlays associated with these initiatives will continue through 1999 with most having occurred in 1998. As of June 30, 1999, approximately $12 million of severance was paid to approximately 1,400 employees. NOTE 9 - CONTINGENCIES AND OTHER MATTERS Financial Guarantees CIGNA, through its subsidiaries, is contingently liable for various financial guarantees provided in the ordinary course of business. For example, CIGNA guarantees the repayment of industrial revenue bonds and a minimum level of benefits for certain separate account contracts. In addition, CIGNA has entered into specialty life reinsurance contracts that guarantee payments for specified unfavorable changes in variable annuity account values based on underlying mutual fund investments if account holders expire or elect to receive periodic income payments. Although the ultimate outcome of any loss contingencies arising from CIGNA's financial guarantees may adversely affect results of operations in future periods, they are not expected to have a material adverse effect on CIGNA's liquidity or financial condition. Regulatory and Industry Developments CIGNA's businesses are subject to a changing social, economic, legal, legislative and regulatory environment that could affect them. Some of the changes include initiatives to: o increase health care regulation; o restrict insurance pricing and the application of underwriting standards; and o revise federal tax laws. Some of the more significant issues are discussed below. Efforts at the federal and state level to increase regulation of the health care industry could have an adverse effect on CIGNA's health care operations if they reduce marketplace competition and innovation, result in increased medical or administrative costs or reduce product margins. Matters under consideration that could have an adverse effect include mandated benefits or services that increase costs without improving the quality of care, loss of the Employee Retirement Income Security Act of 1974 (ERISA) preemption of state law through legislative actions and court decisions, changes in the ERISA regulations governing claim appeal procedures imposing increased administrative burdens and costs and restrictions on the use of prescription drug formularies. Due to the uncertainty associated with the timing and content of any proposals ultimately adopted, the effect on CIGNA's results of operations, liquidity or financial condition cannot be reasonably estimated at this time. In early 1999, the Administration proposed a federal budget that would eliminate the deferral of taxation of certain statutory income of life insurance companies. CIGNA has not provided for taxes on $450 million of such income. If the proposal is enacted, CIGNA will record additional income tax expense of $158 million for the resulting liability. The proposed federal budget also would limit the deduction of interest expense on the general indebtedness of corporations owning non-leveraged corporate life insurance policies covering the lives of officers, employees or directors who are not 20 percent owners of the corporation. If this latter provision is enacted as proposed, CIGNA does not anticipate that it will have a material effect on its consolidated results of operations, liquidity, or financial condition, although it could have a material adverse effect on the results of operations of the Employee Retirement Benefits and Investment Services segment. In 1996, Congress passed legislation that phased out over a three-year period the tax deductibility of policy loan interest for most leveraged corporate life insurance products. CIGNA does not expect this legislation to have a material adverse effect on its 9 consolidated results of operations, liquidity or financial condition. In 1998, the National Association of Insurance Commissioners (NAIC) adopted risk-based capital guidelines for health maintenance organizations (HMOs). CIGNA expects its HMO subsidiaries to be adequately capitalized under these guidelines as they become effective in various jurisdictions in 1999. In 1998, the NAIC adopted standardized statutory accounting principles. Since these principles have not been adopted by most of the insurance departments of various jurisdictions in which CIGNA's insurance subsidiaries are domiciled, the timing and effects of implementation have not yet been determined. The eventual effect on CIGNA of the changing environment in which it operates remains uncertain. Litigation CIGNA is continuously involved in numerous lawsuits arising, for the most part, in the ordinary course of the business of administering and insuring employee benefits programs. While the outcome of litigation cannot be determined, CIGNA does not expect that litigation currently threatened or pending will result in losses that differ from recorded reserves by amounts that would be material to results of operations, liquidity or financial condition. Brazilian Investment CIGNA is currently evaluating alternatives relative to its investment in a Brazilian health care operation. This evaluation could result in changes in this operation and a possible impairment of up to approximately $325 million, representing the carrying value of the investment as of July 31, 1999 and other costs. A decision is expected later in 1999. While CIGNA does not expect that any charges resulting from this evaluation will be material to its liquidity or financial condition, they could be material to CIGNA's future results of operations. 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION The following discussion addresses the financial condition of CIGNA Corporation (CIGNA) as of June 30, 1999, compared with December 31, 1998, and its results of operations for the quarter and six months ended June 30, 1999, compared with the same periods last year. This discussion should be read in conjunction with Management's Discussion and Analysis included in CIGNA's 1998 Annual Report to Shareholders (pages 10 through 24), to which the reader is directed for additional information. Due to the seasonality of certain aspects of CIGNA's business, caution should be used in estimating results for the full year based on interim results of operations. Acquisitions and Dispositions On July 2, 1999, CIGNA sold its domestic and international property and casualty business to ACE Limited for cash proceeds of $3.45 billion. The after-tax gain on sale, which will be recognized in discontinued operations in the third quarter, was approximately $1.2 billion. CIGNA's priorities for use of capital, including proceeds from the sale, are internal growth, acquisitions, and share repurchases. In the second quarter of 1999, CIGNA began reporting the sold property and casualty business as discontinued operations and reclassified prior period financial information accordingly. In April 1999, CIGNA sold a 29% interest in its Japanese life insurance operations to Yasuda Fire & Marine Insurance Company Ltd., reducing CIGNA's ownership interest to 61%. Proceeds of the sale were $105 million. The after-tax gain, which CIGNA recognized in the second quarter, was $43 million and is reported in the International Life, Health and Employee Benefits segment. As of January 1, 1998, CIGNA sold its individual life insurance and annuity business for cash proceeds of $1.4 billion. The sale resulted in an after-tax gain of approximately $770 million of which $202 million was recognized upon closing of the sale. Since the principal agreement to sell this business is in the form of an indemnity reinsurance arrangement, the remaining gain was deferred and is being recognized at the rate that earnings from the business sold would have been expected to emerge, primarily over fifteen years on a declining basis. CIGNA recognized $16 million of the deferred gain in the second quarters of 1999 and 1998, and $31 million and $33 million for the six months ended June 30, 1999 and 1998, respectively. CIGNA continues to conduct strategic and financial reviews of its businesses in order to deploy its capital most effectively. See page 16 for discussion regarding CIGNA's Brazilian investments and Note 3 to the Financial Statements for additional information on acquisitions and dispositions. Cost Reduction Initiatives In the fourth quarter of 1997, CIGNA adopted a cost reduction plan to restructure its health care operations, which resulted in a pre-tax charge of $32 million ($22 million after-tax) in the Employee Health Care, Life and Disability Benefits segment. The charge consisted primarily of costs related to severance and vacated lease space. The cash outlays associated with these initiatives will continue through 1999 with most having occurred in 1998. These initiatives are expected to result in annual after-tax expense savings of $50 million with approximately two-thirds of the savings having emerged in 1998 and the full amount expected in 1999. See Note 8 to the Financial Statements for additional information on cost reduction initiatives. Other Matters CIGNA's businesses are subject to a changing social, economic, legal, legislative and regulatory environment that could affect them. Some of the changes include initiatives to: o increase health care regulation; o restrict insurance pricing and the application of underwriting standards; and o revise federal tax laws. In early 1999, the Administration proposed a federal budget that would eliminate the deferral of taxation of certain statutory income of life insurance companies. As discussed in Note 9 to the 11 Financial Statements, CIGNA has not provided for taxes on $450 million of such income. If the proposal is enacted, CIGNA will record additional income tax expense of $158 million for the resulting liability. The proposed federal budget also would limit the deduction of interest expense on the general indebtedness of corporations owning non-leveraged corporate life insurance policies covering the lives of officers, employees or directors who are not 20 percent owners of the corporation. If this latter provision is enacted as proposed, CIGNA does not anticipate that it will have a material effect on its consolidated results of operations, liquidity, or financial condition, although it could have a material adverse effect on the results of operations of the Employee Retirement Benefits and Investment Services segment. The eventual effect on CIGNA of the changing environment in which it operates remains uncertain. For additional information, see Note 9 to the Financial Statements. Recent Accounting Pronouncements CIGNA adopted Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments" as of January 1, 1999. SOP 97-3, issued by the American Institute of Certified Public Accountants (AICPA), provides guidance on the recognition and measurement of liabilities for guaranty fund and other insurance-related assessments such as workers' compensation second injury funds, medical risk pools and charges related to operating expenses of state regulatory bodies. The cumulative effect of adopting the SOP was a reduction of net income of $91 million ($140 million pre-tax), and is primarily related to the property and casualty business, which has been sold and which is reported as discontinued operations, as discussed above. In 1999, CIGNA adopted SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1, issued by the AICPA in 1998, specifies the types of costs that must be capitalized and amortized over the software's expected useful life and the types of costs which must be immediately recognized as expense. Implementation of this pronouncement did not have a material effect on results of operations, liquidity or financial condition. In 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires that derivatives be reported on the balance sheet at fair value. Changes in fair value are to be recognized in net income or, for derivatives that are hedging market risk related to future cash flows, in the accumulated other comprehensive income section of shareholders' equity. Implementation is required by the first quarter of 2001, with the cumulative effect of adoption reflected in net income and accumulated other comprehensive income, as appropriate. CIGNA has not determined the effect or timing of implementation of this pronouncement. CONSOLIDATED RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- FINANCIAL SUMMARY Three Months Six Months Ended Ended June 30, June 30, (In millions) 1999 1998 1999 1998 - -------------------------------------------------------------------------------- CONTINUING OPERATIONS: Premiums and fees $3,724 $3,354 $7,311 $6,570 Net investment income 734 789 1,455 1,578 Other revenues 226 168 404 635 Realized investment gains 13 39 24 79 ------------------------------------------------- Total revenues 4,697 4,350 9,194 8,862 Benefits and expenses 4,228 3,965 8,357 7,794 ------------------------------------------------- Income before taxes 469 385 837 1,068 Income taxes 166 136 298 380 ------------------------------------------------- Income from continuing operations 303 249 539 688 Less realized investment gains, net of taxes 9 26 16 52 - ------------------------------------------------------------------------------ Operating income* $ 294 $ 223 $ 523 $ 636 - ----------------------------================================================= CIGNA's consolidated operating income (as defined in the footnote below) for the second quarter of 1999 included a $43 million after-tax gain recognized on the sale of a 29% interest in its Japanese life insurance operations. For the six months of 1998, operating income included a $202 million after-tax gain recognized on the sale of CIGNA's individual life insurance and annuity ____________________ * Operating income (loss) is defined as net income (loss) excluding after-tax realized investment results, the results of discontinued operations and, in 1999, the cumulative effect of adopting a new accounting pronouncement. 12 business. Excluding these items, operating income was $251 million and $480 million for the second quarter and six months of 1999, respectively, compared with $223 million and $434 million for the same periods last year. The increase for the second quarter and six month periods primarily reflects improved results in CIGNA's Employee Health Care, Life and Disability Benefits segment. After-tax realized investment results of the continuing operations decreased 65% and 69% in the second quarter and six months of 1999 versus the same periods last year. These decreases primarily reflect lower gains on sales of real estate partnerships and equity securities. For additional information, see Note 4 to the Financial Statements. Excluding the $43 million and $202 million after-tax gains mentioned above, full year operating income (which excludes results of discontinued operations and the gain on sale of the property and casualty business) is expected to improve in 1999 over 1998; however, such improvement could be adversely affected by the factors noted in the cautionary statement on page 22. EMPLOYEE HEALTH CARE, LIFE AND DISABILITY BENEFITS - ------------------------------------------------------------------------------ FINANCIAL SUMMARY Three Months Six Months Ended Ended June 30, June 30, (In millions) 1999 1998 1999 1998 - ------------------------------------------------------------------------------ Premiums and fees $3,064 $2,836 $6,040 $5,573 Net investment income 149 142 287 285 Other revenues 155 137 315 266 -------------------------------------------------- Segment revenues 3,368 3,115 6,642 6,124 Benefits and expenses 3,103 2,889 6,133 5,690 -------------------------------------------------- Income before taxes 265 226 509 434 Income taxes 92 83 179 160 -------------------------------------------------- Operating income $ 173 $ 143 $ 330 $ 274 - ----------------------------================================================== Realized investment gains, net of taxes $ 3 $ 18 $ 9 $ 36 - ----------------------------================================================== Operating income for the Employee Health Care, Life and Disability Benefits segment increased 21% and 20% for the second quarter and six months of 1999, compared with the same periods last year. Operating income for the Indemnity and HMO operations was as follows: - ------------------------------------------------------------------------ Three Months Six Months Ended Ended June 30, June 30, (In millions) 1999 1998 1999 1998 - ------------------------------------------------------------------------ Indemnity operations $ 78 $ 73 $141 $142 HMO operations 95 70 189 132 - ------------------------------------------------------------------------ Total $173 $143 $330 $274 ======================================================================== Indemnity operating income increased 7% for the second quarter and decreased 1% for the six months of 1999 compared with the same periods last year. These changes primarily reflect improved guaranteed cost medical claims experience and improved group life business partially offset for the second quarter and more than offset for the six months of 1999 by lower earnings on experience-rated medical business. HMO operating results for the second quarter and six months of 1999 include net favorable after-tax adjustments of $6 million and $12 million resulting from account and tax reviews. HMO results for the second quarter and six months of 1998 include net unfavorable after-tax adjustments of $6 million primarily for uncollectible receivables of a health care service business. Excluding these adjustments, HMO results were $89 million and $177 million for the second quarter and six months of 1999, respectively, compared with $76 million and $138 million for the same periods last year. These improvements reflect rate increases for guaranteed cost HMO business, improved results in health care services operations, and membership growth in HMO experience-rated and alternative funding business. Premiums and fees increased 8% for the second quarter and six months of 1999 compared to the same periods last year. These increases primarily reflect HMO and medical indemnity membership growth and rate increases. 13 Net investment income increased 5% and 1% for the second quarter and six months of 1999 compared to the same periods of 1998. For the quarter, the increase reflects growth in invested assets and higher investment yields. For the six months, the growth in assets was partially offset by lower investment yields. As of June 30, 1999, total HMO membership was approximately 6.6 million, representing an increase of 4% since June 30, 1998 and 2% since December 31, 1998. These increases primarily reflect membership growth in experience-rated and alternative funding programs, partially offset by declines in guaranteed cost HMO membership. Under alternative funding programs, the customer assumes all or a portion of the responsibility for funding claims, and CIGNA generally earns a lower margin than under traditional programs. Management believes that adding premium equivalents to premiums and fees (adjusted premiums and fees) produces a more meaningful measure of business volume. Premium equivalents generally represent paid claims under alternative funding programs, such as minimum premium and Administrative Services Only (ASO) plans. Premium equivalents for the second quarter and six months of 1999 were $3.9 billion and $7.4 billion, respectively. These amounts represent increases of 21% and 16% compared with the same periods last year. These increases primarily reflect HMO and PPO membership growth. Premium equivalents were 55% and 53% of total adjusted premiums and fees for the six months of 1999 and 1998, respectively. Premium equivalents related to ASO plans accounted for approximately 51% and 49% of total adjusted premiums and fees for the six months of 1999 and 1998. EMPLOYEE RETIREMENT BENEFITS AND INVESTMENT SERVICES - ----------------------------------------------------------------------- FINANCIAL SUMMARY Three Months Six Months Ended Ended June 30, June 30, (In millions) 1999 1998 1999 1998 - ----------------------------------------------------------------------- Premiums and fees $ 71 $ 73 $133 $144 Net investment income 403 414 790 824 ----------------------------------------- Segment revenues 474 487 923 968 Benefits and expenses 375 397 731 789 ----------------------------------------- Income before taxes 99 90 192 179 Income taxes 32 30 62 58 ----------------------------------------- Operating income $ 67 $ 60 $130 $121 - ----------------------------========================================= Realized investment gains, net of taxes $ 6 $ 7 $ 7 $ 13 - ----------------------------========================================= Operating income for the Employee Retirement Benefits and Investment Services segment includes favorable non-recurring adjustments totaling $3 million after-tax in the second quarter and six months of 1999. Excluding these items, results for the second quarter and six months of 1999, were $64 and $127, respectively, compared with $60 and $121 for the same periods last year. These increases in 1999 over 1998 reflect higher earnings from an increased asset base, partially offset by a shift to lower margin products (separate account equity funds). Premiums and fees for the second quarter and six months of 1999 decreased 3% and 8%, respectively, compared with the same periods last year, reflecting a decline in annuity sales partially offset by higher fees from separate accounts. Net investment income decreased 3% and 4% for the second quarter and six months of 1999, primarily reflecting lower investment yields and customers' continued redirection of a portion of their investments from the general account to separate accounts. 14 Assets under management are generally a key determinant of earnings for this segment. For the six months ended June 30, assets under management and related activity, including amounts attributable to separate accounts, were as follows: - -------------------------------------------------------------------- (In millions) 1999 1998 - -------------------------------------------------------------------- Balance - January 1 $ 52,929 $ 48,231 Premiums and deposits 4,063 4,079 Investment results 1,913 1,585 Increase in fair value of assets 594 2,006 Customer withdrawals (2,994) (2,271) Other, including participant withdrawals and benefit payments (2,772) (2,962) - -------------------------------------------------------------------- Balance - June 30 $ 53,733 $ 50,668 ==================================================================== For the six months of 1999 and 1998, approximately 64% and 53%, respectively, of premiums and deposits reflect recurring deposits from existing customers while the remaining amounts represent sales to new customers and new plan sales to existing customers. Investment results increased 21% in the six months of 1999, compared with the same period in 1998. This increase reflects higher realized capital gains and growth in assets, partially offset by lower investment yields. The fair value of assets increased less in 1999 than in 1998 primarily due to lower net appreciation of separate accounts and market value depreciation of general account fixed maturities. The increase in customer withdrawals is primarily due to the effect of withdrawals under defined contribution business in the first quarter of 1999. Assets under management will continue to be affected by market value fluctuations for fixed maturities and equity securities. See Other Matters on page 11 for additional information regarding corporate life insurance. INTERNATIONAL LIFE, HEALTH AND EMPLOYEE BENEFITS - ----------------------------------------------------------------------------- FINANCIAL SUMMARY Three Months Six Months Ended Ended June 30, June 30, (In millions) 1999 1998 1999 1998 - ----------------------------------------------------------------------------- Premiums and fees $ 416 $ 309 $ 794 $ 586 Net investment income 32 29 62 56 Other revenues 66 -- 71 1 ----------------------------------------------- Segment revenues 514 338 927 643 Benefits and expenses 441 327 846 618 ----------------------------------------------- Income before taxes 73 11 81 25 Income taxes 29 4 34 9 ----------------------------------------------- Operating income $ 44 $ 7 $ 47 $ 16 - ----------------------------=============================================== Realized investment losses, net of taxes $ (1) $-- $ (1) $-- - ----------------------------=============================================== Results for the International Life, Health and Employee Benefits segment for the second quarter and six months of 1999 include a pre-tax gain of $66 million ($43 million after-tax) included in Other Revenues from the April 1999 sale of a 29% interest in CIGNA's Japanese life insurance operations. Operating income associated with the 29% interest that was sold was $2 million for the first quarter of 1999; $3 million and $5 million for the second quarter and six months of 1998, respectively; and $10 million for the full year of 1998. Excluding the gain on sale noted above, operating income was $1 million and $4 million for the second quarter and six months of 1999, respectively. The declines from the same periods last year are primarily attributable to losses in the 1999 periods of $8 million and $15 million after-tax from Brazilian health care operations. CIGNA's health care operations in Brazil include a managed health care business, which is being consolidated, and an investment in another health care operation, which is being accounted for under the equity method. 15 Premiums and fees increased 35% for the second quarter and six months of 1999 compared with the same periods last year. Excluding premiums and fees from the Brazilian managed health care business (which is being consolidated and was acquired in the second half of 1998) and the effects of foreign currency changes, premiums and fees increased 24% for the second quarter and six months of 1999. These increases reflect growth in Japanese life insurance operations and, to a lesser extent, growth in life and group benefits business in Southeast Asia as well as higher health care premiums and fees for expatriate employees of multinational companies. Net investment income for the second quarter and six months of 1999 increased 10% and 11%, respectively, compared with the same periods last year. Excluding the effects of foreign currency changes, the increase was 9% and 7%, respectively. These increases reflect growth in invested assets partially offset by lower yields. CIGNA has expanded its international operations, principally in Brazil, and expects to continue to pursue international growth through acquisitions and other investments. CIGNA expects this growth to result in start-up costs and initial losses. CIGNA is continuing efforts to improve results in its Brazilian health care operations, including initiatives to improve the pricing of medical products and services and to provide for enhanced medical cost controls. In addition, CIGNA is currently evaluating alternatives relative to its investment in the Brazilian health care operation that is accounted for under the equity method. This evaluation could result in changes in this health care operation and a possible impairment of up to approximately $325 million, representing the carrying value of the investment as of July 31, 1999 and other costs. A decision is expected later in 1999. While CIGNA does not expect that any charges resulting from this evaluation will be material to its liquidity or financial condition, they could be material to CIGNA's future results of operations. OTHER OPERATIONS - -------------------------------------------------------------------------------- FINANCIAL SUMMARY Three Months Six Months Ended Ended June 30, June 30, (In millions) 1999 1998 1999 1998 - -------------------------------------------------------------------------------- Premiums and fees $ 173 $ 136 $ 344 $ 267 Net investment income 146 196 307 394 Other revenues 49 53 97 417 -------------------------------------------------- Segment revenues 368 385 748 1,078 Benefits and expenses 311 344 645 675 -------------------------------------------------- Income before taxes 57 41 103 403 Income taxes 20 12 36 141 -------------------------------------------------- Operating income $ 37 $ 29 $ 67 $ 262 - ---------------------------================================================== Realized investment gains, net of taxes $ 1 $ 1 $ 1 $ 3 - ---------------------------================================================== Other Operations consist of: o gain recognition related to the sale of the individual life insurance and annuity business; o corporate life insurance on which policy loans are outstanding (leveraged corporate life insurance); o life, accident and health reinsurance operations; o settlement annuity business; and o certain new business initiatives. Operating income for the six months of 1998 includes an after-tax gain of $202 million recognized on the sale of the individual life insurance and annuity business. The gain was $316 million on a pre-tax basis and is reported in Other Revenues. Excluding this amount, operating income for the second quarter and six months of 1999 was $37 million and $67 million, respectively, compared with operating income of $29 million and $60 million for the second quarter and six months of 1998. The 1999 increases reflect growth in accident and specialty life reinsurance products. For the second quarter and six months of 1999, premiums and fees increased 27% and 29% from the same periods of 1998. These increases also reflect growth in accident and specialty life reinsurance products partially offset by declining health reinsurance premiums. Net investment income decreased 26% and 22% for the second quarter and six months of 1999 compared with the same periods of 1998. These decreases primarily reflect lower assets from leveraged corporate life insurance, and, to a lesser extent, lower yields. 16 In 1996, Congress passed legislation that phased out over a three-year period the tax deductibility of policy loan interest for most leveraged corporate life insurance products. For the second quarter and six months of 1999, revenues of $82 million and $190 million, and operating income of $9 million and $19 million were from products that are affected by this legislation. CIGNA does not expect this legislation to have a material adverse effect on its consolidated results of operations, liquidity or financial condition. The specialty life reinsurance products of this segment include contracts that guarantee payments for specified unfavorable changes in variable annuity account values based on underlying mutual fund investments if account holders expire or elect to receive periodic income payments. Although these guarantees may adversely affect CIGNA's consolidated results of operations in future periods, they are not expected to have a material adverse effect on CIGNA's liquidity or financial condition. The personal accident reinsurance business of this segment includes participation in a workers' compensation program managed by Unicover Managers, Inc. where disputes have arisen regarding retrocessional coverage. Resolution of these disputes is likely to take several years. CIGNA does not expect to incur losses material to its consolidated results of operations, liquidity or financial condition related to this program. CORPORATE - -------------------------------------------------------------------------- FINANCIAL SUMMARY Three Months Six Months Ended Ended June 30, June 30, (In millions) 1999 1998 1999 1998 - -------------------------------------------------------------------------- Operating loss $ (27) $ (16) $ (51) $ (37) - ----------------------==================================================== Corporate is used to report amounts not allocated to segments, such as interest expense and intersegment eliminations. The increases in the operating loss in the second quarter and six months of 1999 primarily reflect higher unallocated expenses and lower net investment income due to a reduction in investment assets. Results for all periods include certain corporate overhead expenses which previously had been allocated to the property and casualty operations. PROPERTY AND CASUALTY DISCONTINUED OPERATIONS
- ----------------------------------------------------------------------------------------- FINANCIAL SUMMARY Three Months Six Months Ended Ended June 30, June 30, (In millions) 1999 1998 1999 1998 - ----------------------------------------------------------------------------------------- Premiums and fees $ 735 $ 761 $ 1,411 $ 1,446 Net investment income 131 153 268 301 Other revenues 61 65 136 130 Realized investment gains 17 8 48 27 ------------------------------------------------------- Total revenues 944 987 1,863 1,904 Benefits and expenses 1,054 901 1,911 1,733 ------------------------------------------------------- Income (loss) before taxes (110) 86 (48) 171 Income taxes (benefits) (39) 27 (20) 56 - ---------------------------------------------------------------------------------------- Income (loss) from discontinued operations $ (71) $ 59 $ (28) $ 115 - --------------------------------========================================================
On July 2, 1999, CIGNA sold its property and casualty business. See Acquisitions and Dispositions on page 11 for additional information. Amounts in the table above are excluded from CIGNA's results of continuing operations. The decline in results of the discontinued operations for the second quarter of 1999 compared with the prior year is primarily attributable to a charge of $67 million after-tax resulting from account and other financial reviews of an insurance-related service business. The decline also reflects unfavorable claim experience, lower results from insurance-related service business, and the effects of continued competitive conditions in the property and casualty insurance markets. For the six months of 1999, the decline also reflects unfavorable prior year loss development in the international property and casualty operations primarily related to catastrophe losses. The adverse pre-tax effects of prior year development on the results of the discontinued operations were $64 million and $50 million for the second quarter of 1999 and 1998 (including asbestos and environmental losses of $40 million and $27 million for the same periods). For the six months of 1999 and 1998, the adverse pre-tax effects were $131 million and $98 million (including asbestos and environmental losses of $81 million and $52 million for the same periods). 17 LIQUIDITY AND CAPITAL RESOURCES Liquidity for CIGNA and its insurance subsidiaries has remained strong as evidenced by significant amounts of short-term investments and cash and cash equivalents in the aggregate. Generally, CIGNA has met its operating requirements by maintaining appropriate levels of liquidity in its investment portfolio and through utilization of overall positive cash flows. For the six months of 1999, cash and cash equivalents of continuing operations decreased approximately $700 million from $2.0 billion as of December 31, 1998. This decrease primarily reflects payments of dividends on and repurchases of CIGNA common stock ($753 million), cash used for investing activities ($452 million), and net withdrawals from contractholder deposit funds ($255 million), partially offset by cash provided by operating activities ($710 million) reflecting earnings and the timing of operating cash receipts and disbursements. On July 2, 1999, CIGNA received $3.45 billion in cash upon closing of the sale of its property and casualty business. CIGNA's capital resources represent funds available for long-term business commitments. They primarily consist of retained earnings and proceeds from the issuance of long-term debt and equity securities. CIGNA's financial strength provides the capacity and flexibility to enable it to raise funds in the capital markets through the issuance of such securities. CIGNA continues to be well capitalized, with sufficient borrowing capacity to meet the anticipated needs of its businesses. CIGNA had $1.4 billion of long-term debt outstanding at June 30, 1999, and December 31, 1998. As of June 30, 1999, CIGNA had approximately $1 billion remaining under effective shelf registration statements filed with the Securities and Exchange Commission that may be issued as debt securities, equity securities or both, depending upon market conditions and CIGNA's capital requirements. At June 30, 1999, CIGNA's short-term debt amounted to $307 million, an increase of $35 million from December 31, 1998. CIGNA has repurchased approximately 8,766,000 shares of its common stock for $770 million during 1999, including 1,237,500 shares repurchased for $112 million from July 1 through July 31, 1999. On July 28, 1999, CIGNA's Board of Directors authorized an additional $1 billion of share repurchases. The total remaining authorization as of July 31, 1999 was $1.02 billion. INVESTMENT ASSETS - CONTINUING OPERATIONS - ------------------------------------------------------------ June 30, December 31, (In millions) 1999 1998 - ------------------------------------------------------------ Fixed maturities $23,121 $24,270 Equity securities 541 477 Mortgage loans 10,115 9,599 Real estate 798 733 Other, primarily policy loans 4,063 6,597 - ------------------------------------------------------------ Total investment assets $38,638 $41,676 ============================================================ Additional information regarding CIGNA's investment assets is included in Note 4 to the second quarter 1999 Financial Statements and Notes 2, 4 and 5 to the 1998 Financial Statements as well as the 1998 Form 10-K. Investment assets as of June 30, 1999 decreased 7% from December 31, 1998. This decrease primarily reflects a decline of approximately $2.4 billion in policy loans due to surrenders of leveraged corporate life insurance policies and a reduction in the fair value of fixed maturities of approximately $1.1 billion due to increases in interest rates. Significant amounts of CIGNA's investment assets are attributable to experience-rated contracts with policyholders (policyholder contracts). Approximate percentages of investments attributable to policyholder contracts were as follows: - -------------------------------------------- June 30, December 31, 1999 1998 - -------------------------------------------- Fixed maturities 40% 39% Mortgage loans 58% 57% Real estate 65% 63% - -------------------------------------------- 18 Fixed Maturities Investments in fixed maturities (bonds) include publicly traded and private placement debt securities; asset-backed securities, including collateralized mortgage obligations (CMOs); and redeemable preferred stocks. As of June 30, 1999, the fair value of fixed maturities, including policyholder share, was greater than amortized cost by $496 million, compared with $1.6 billion as of December 31, 1998. The decrease is primarily attributable to an increase in interest rates during the six months of 1999. Potential Problem and Problem Bonds Potential problem bonds are fully current but judged by management to have certain characteristics that increase the likelihood of problem classification. CIGNA had $54 million of potential problem bonds, including amounts attributable to policyholder contracts, as of June 30, 1999, compared with $58 million as of December 31, 1998. These amounts are net of cumulative write-downs of $5 million as of both dates. CIGNA considers bonds that are delinquent or restructured as to terms, typically interest rate and in certain cases maturity date, problem bonds. As of June 30, 1999 and December 31, 1998, CIGNA had problem bonds, including amounts attributable to policyholder contracts, of $165 million and $108 million, net of related cumulative write-downs of $27 million and $19 million, respectively. Problem bonds included $14 million and $3 million, respectively, related to emerging market investments as of June 30, 1999 and December 31, 1998. CIGNA recognizes interest income on problem bonds only when payment is received. Mortgage Loans - -------------------------------------------------------------- June 30, December 31, 1999 1998 - -------------------------------------------------------------- Mortgage loans (in millions) $10,115 $ 9,599 Property type: Office buildings 39% 37% Retail facilities 33 34 Apartment buildings 14 15 Industrial 6 7 Hotels 6 5 Other 2 2 Total 100% 100% - -------------------------------------------------------------- CIGNA's investment strategy requires diversification of the mortgage loan portfolio. This strategy includes guidelines relative to property type, location and borrower to reduce its exposure to potential losses. Potential Problem and Problem Mortgage Loans Potential problem mortgage loans include: o fully current loans that are judged by management to have certain characteristics that increase the likelihood of problem classification; o fully current loans for which the borrower has requested restructuring; and o loans that are 30 to 59 days delinquent with respect to interest or principal payments. CIGNA had potential problem mortgage loans, including amounts attributable to policyholder contracts, of $54 million as of June 30, 1999, and $55 million as of December 31, 1998. There were no valuation reserves related to these amounts in either period. CIGNA's problem mortgage loans include delinquent and restructured mortgage loans. Delinquent mortgage loans include those on which payment is overdue by 60 days or more. Restructured mortgage loans are those whose basic financial terms have been modified, typically to reduce the interest rate or extend the maturity date. 19 CIGNA had problem mortgage loans, including amounts attributable to policyholder contracts, of $96 million and $98 million, as of June 30, 1999 and December 31, 1998, net of valuation reserves of $6 million as of both dates. CIGNA recognizes interest income on problem mortgage loans only when payment is received. Real Estate As of June 30, 1999 and December 31, 1998, investment real estate, net of reserves and write-downs, included: 1) $449 million and $390 million, respectively, of real estate held for the production of income, and 2) $349 million and $343 million, respectively, of real estate held for sale, primarily properties acquired as a result of foreclosure of mortgage loans. Summary The effects of write-downs, changes in valuation reserves and non-accruals related to investment assets for the second quarter and six months ended June 30, 1999 and 1998 were not material to CIGNA's policyholder contracts, results of operations, liquidity or financial position. Additional losses from problem investments are expected to occur for specific investments in the normal course of business. Assuming no significant deterioration in economic conditions, including further significant deterioration in Latin American and Asian economies, CIGNA does not expect additional non-accruals, write-downs and reserves to materially affect future results of operations, liquidity or financial condition, or to result in a significant decline in the aggregate carrying value of its assets. YEAR 2000 CIGNA is highly dependent on automated systems and systems applications in conducting its operations. These systems include information technology (IT) systems that are used for, among other things, processing claims, billing, collecting premiums from customers, managing investment activities and maintaining management information systems. If these systems were unable to function because of failing to be Year 2000 ready, CIGNA's business operations would be interrupted, which could have a material adverse effect on CIGNA's results of operations. CIGNA's Year 2000 efforts include: 1) identifying systems requiring remediation; 2) assessing what is required to remediate those systems; 3) remediating systems to be ready for the Year 2000 (by either modifying or replacing them); and 4) testing systems for Year 2000 readiness, including that they properly interface with systems of external parties, such as customers and third-party administrators. CIGNA has completed the identification and assessment phases with respect to its IT systems that are critical to maintaining operations or where the failure of those systems would result in significant costs or disruption of operations ("mission critical systems"). As of June 30, 1999, CIGNA has substantially completed the remediation and testing of its mission critical systems. CIGNA's systems also include non-IT systems, such as telephone, facility management and other systems using embedded chips. These non-IT systems were substantially Year 2000 ready as of June 30, 1999. CIGNA is using both internal and external resources to meet the timetable established for completion of its Year 2000 efforts. The after-tax costs of Year 2000 efforts (including amounts related to discontinued operations) were approximately $100 million in 1998 and are expected to be approximately $45 million in 1999. Year 2000 after-tax costs for the second quarter and six months of 1999 were approximately $10 million and $20 million, respectively. Approximately 60% of total Year 2000 costs are attributable to existing systems resources which have been redirected to the Year 2000 efforts. The remaining amounts represent incremental costs for Year 2000 efforts. Although certain systems development efforts have been deferred in order to address Year 2000 issues, CIGNA does not expect that this deferral will have a significant adverse effect on its results of operations or financial condition. CIGNA has relationships with various third-party entities in the ordinary course of business. For example, CIGNA receives data from clients; depends on others, such as third-party administrators and banks, for services; and bears credit risk on others, such as entities in which it 20 invests. CIGNA has identified third-party entities critical to its operations, and it is assessing and attempting to mitigate its risks with respect to the potential failure of these entities to be Year 2000 ready by, among other things, reviewing, where possible, their formal Year 2000 plans and obtaining Year 2000 readiness affirmations from certain third-party entities. The effect, if any, on CIGNA's results of operations from the failure of these entities (including entities on which CIGNA bears credit risk) to be Year 2000 ready is not reasonably estimable. While CIGNA expects that its Year 2000 efforts will be successful, it has completed a comprehensive analysis of the operational problems that would be reasonably likely to result from the failure by CIGNA and certain third parties to complete efforts necessary to achieve Year 2000 compliance on a timely basis. CIGNA has historically had security and backup policies and procedures for safeguarding critical corporate data. It is supplementing these policies by developing Year 2000 contingency plans to provide for the continuity of operations in the event of Year 2000 systems failures or the failure of third-party entities to be Year 2000 ready. These plans are expected to be completed and tested prior to the end of 1999. The costs of CIGNA's Year 2000 efforts and the dates on which CIGNA believes it will complete such efforts are based on management's best estimates, which were derived using numerous assumptions regarding future events, including the continued availability of certain resources, third-party remediation plans, and other factors. There can be no assurance that these estimates will prove to be accurate, and actual results could differ materially from those currently anticipated. Specific factors that could cause such material differences include, but are not limited to, the availability and costs of personnel trained in Year 2000 issues, the ability to identify, assess, remediate and test all relevant computer codes and embedded technology, the risk that reasonable testing will not uncover all Year 2000 problems, and similar uncertainties. 21 CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Except for historical information provided in this Management's Discussion and Analysis of Financial Condition and Results of Operations, statements made throughout this document are forward-looking and contain information about financial results, economic conditions, trends and known uncertainties. CIGNA cautions the reader that actual results could differ materially from those expected by CIGNA, depending on the outcome of certain factors (some of which are described with the forward-looking statements) including: 1) an increase in medical costs in CIGNA's health care operations, including increases in utilization and costs of medical services; 2) heightened competition, particularly price competition, reducing product margins and constraining growth in CIGNA's businesses; 3) significant changes in interest rates; 4) significant stock market declines resulting in payments contingent on certain variable annuity account values; 5) the effect on CIGNA's international operations and investments from further significant deterioration in Latin American and Asian economies; 6) the results of the evaluation described on page 16 of alternatives related to an investment in Brazilian health care operations; and 7) proposals to change federal corporate income taxes. 22 Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. The Annual Meeting of Shareholders of CIGNA Corporation was held on April 28, 1999. At the meeting, 174,379,373 shares of Common Stock were represented and entitled to vote as of March 1, 1999, the record date; 204,865,115 shares of Common Stock were outstanding and entitled to vote as of March 1, 1999, the record date. CIGNA shareholders elected nominees to the Board of Directors and ratified the appointment of PricewaterhouseCoopers LLP as independent accountants for 1999.
Votes Votes For Withheld --------- -------- Election of nominee to Board of Directors for term expiring in April, 2000 H. Edward Hanway 173,585,696 793,677 Election of nominees to Board of Directors for terms expiring in April, 2002 Peter N. Larson 173,617,899 761,474 Joseph Neubauer 173,517,736 861,637 Carol Cox Wait 173,578,954 800,419 Marilyn Ware 173,602,102 777,271 ----------------------------- Votes For Votes Against Abstentions --------- ------------- ----------- Ratification of Pricewaterhouse- Coopers as Independent Accountants 173,908,589 94,963 375,821
23 Item 6. Exhibits and Reports on Form 8-K. (a) See Exhibit Index. (b) During the quarterly period ended June 30, 1999, and as of the filing date, CIGNA filed the following Reports on Form 8-K: o dated August 2, 1999, Item 5 - containing a news release regarding its second quarter 1999 results. o dated July 2, 1999, Item 2 - containing a news release regarding the sale of its P&C businesses to ACE. o dated May 3, 1999, Item 5 - containing a news release regarding its first quarter 1999 results. 24 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned duly authorized officer, on its behalf and in the capacity indicated. CIGNA CORPORATION By: /s/ James A. Sears ------------------------- James A. Sears Vice President and Chief Accounting Officer Date: August 6, 1999 25 Exhibit Index ------------- Method of Number Description Filing - ------ ----------- ------ 10 Description of Stock Compensation Filed herewith Plan for Non-Employee Directors of CIGNA Corporation (as amended and restated, effective July 1, 1999) 12 Computation of Ratio of Filed herewith Earnings to Fixed Charges 27.1 Financial Data Schedule Included only in the EDGAR version of the Form 10-Q 27.2 Restated Financial Data Schedule Included only in the EDGAR version of the Form 10-Q 27.3 Restated Financial Data Schedule Included only in the EDGAR version of the Form 10-Q 27.4 Restated Financial Data Schedule Included only in the EDGAR version of the Form 10-Q 26 EX-10 2 Exhibit 10 Description of Stock Compensation Plan for Non-Employee Directors of CIGNA Corporation (as amended and restated, effective July 1, 1999) The Stock Compensation Plan for Non-Employee Directors of CIGNA Corporation, as amended (the "Plan"), provides certain stock compensation arrangements to members of CIGNA Corporation's Board of Directors (the "Board") who are not in the employ of the company. The Plan provides that the annual retainer paid to the Directors for their services as Directors shall be $40,000 of which at least $20,000 must be taken either in shares of CIGNA Corporation Common Stock or deferred pursuant to the terms of the Deferred Compensation Plan for Directors of CIGNA Corporation. If payment is made in shares of Common Stock, the shares are issued in four equal installments within 30 days of the end of each calendar quarter. The number of shares in each payment is determined by the closing price at which the Common Stock trades on the last trade date for Common Stock in the quarter for which payment is being made. In addition, the Plan provides that Directors may, with respect to any other retainers or fees paid to them for services as Directors, defer receipt of all or any portion thereof or elect to receive all or any portion thereof in either cash or an equivalent amount of Common Stock (provided that no fractional shares may be issued). EX-12 3
CIGNA CORPORATION EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions) Six Months Ended June 30, 1999 1998 ======================================================================================================================== Income from continuing operations before income taxes $ 837 $ 1,068 ------------- ---------------- Fixed charges included in income: Interest expense 61 65 Interest portion of rental expense 32 40 ------------- ---------------- Total fixed charges included in income 93 105 ------------- ---------------- Income available for fixed charges $ 930 $ 1,173 - -------------------------------------------------------------------------------------================================== RATIO OF EARNINGS TO FIXED CHARGES 10.0 11.2 - -------------------------------------------------------------------------------------==================================
EX-27.1 4 ARTICLE 7 FDS FOR CIGNA'S 2ND QUARTER FORM 10-Q
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS INCLUDED IN ITEM 1 OF PART I TO CIGNA'S REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 23,121 0 0 541 10,115 798 38,638 1,262 6,737 767 93,446 12,141 496 3,639 27,779 1,668 0 0 67 7,274 93,446 7,311 1,455 24 404 6,138 125 2,094 837 298 539 (28) 0 (91) 420 2.07 2.04 0 0 0 0 0 0 0 AMOUNT INCLUDES RECOVERABLES ON PAID AND UNPAID LOSSES. AMOUNT RELATES TO THE PROPERTY AND CASUALTY BUSINESS, WHICH WAS SOLD ON JULY 2, 1999. REFLECTS THE CUMULATIVE EFFECT OF ADOPTING A NEW ACCOUNTING PRONOUNCEMENT FOR INSURANCE-RELATED ASSESSMENTS.
EX-27.2 5 RESTATED ARTICLE 7 FDS FOR CIGNA
7 This schedule contains summary financial information extracted from the financial statements contained on Form 10-K for the fiscal year ended December 31, 1998 and Form 10-Q for the periods ended March 31, 1999, September 30, 1998 and June 30, 1998 for CIGNA Corporation and is qualified in its entirety by reference to such financial statements. However, certain information noted below has been restated to reflect the reporting of CIGNA's property and casualty business (which was sold on July 2, 1999) as discontinued operations. Amounts that have been restated for discontinued operations have been specifically identified. 0000701221 CIGNA CORPORATION 1,000,000 3-MOS YEAR 9-MOS 6-MOS DEC-31-1999 DEC-31-1998 DEC-31-1998 DEC-31-1998 JAN-01-1999 JAN-01-1998 JAN-01-1998 JAN-01-1998 MAR-31-1999 DEC-31-1998 SEP-30-1998 JUN-30-1998 23,926 24,270 33,339 32,920 0 0 0 0 0 0 0 0 489 477 862 1,089 9,847 9,599 9,556 9,503 807 733 755 766 39,833 41,676 51,912 51,407 1,468 1,986 1,162 1,903 6,752 6,666 12,567 12,400 736 730 967 951 94,229 95,890 109,296 110,927 12,290 12,510 12,205 12,093 477 589 1,897 1,839 3,567 3,392 17,895 17,841 28,589 30,607 30,877 30,524 1,694 1,700 1,685 1,694 0 0 0 0 0 0 0 0 67 66 66 66 7,802 8,211 8,090 8,274 94,229 95,890 109,296 110,927 3,587 13,456 9,914 6,570 721 3,115 2,344 1,578 11 134 121 79 178 946 785 635 3,019 11,614 8,655 5,776 67 201 148 90 1,043 3,978 2,881 1,928 368 1,858 1,480 1,068 132 672 528 380 236 1,186 952 688 43 106 102 115 0 0 0 0 (91) 0 0 0 188 1,292 1,054 803 0.92 6.12 4.95 3.74 0.91 6.05 4.90 3.70 0 9,762 0 0 0 2,049 0 0 0 177 0 0 0 910 0 0 0 1,745 0 0 0 9,333 0 0 0 177 0 0 This information has been restated to reflect CIGNA's property and casualty business, which was sold on July 2, 1999, as discontinued operations. Amount includes recoverables on paid and unpaid losses. Amount relates to the property and casualty business, which was sold on July 2, 1999. These reserves are not included in the restated amounts for Policy-Other. Amount is net of reinsurance recoverables. Reflects the cumulative effect of adopting a new accounting pronouncement for insurance-related assessments.
EX-27.3 6 RESTATED ARTICLE 7 FDS FOR CIGNA
7 This schedule contains summary financial information extracted from the financial statements contained on Form 10-K for the fiscal year ended December 31, 1997 and Form 10-Q for the periods ended March 31, 1998, September 30, 1997 and June 30, 1997 for CIGNA Corporation and is qualified in its entirety by reference to such financial statements. However, certain information noted below has been restated to reflect the reporting of CIGNA's property and casualty business (which was sold on July 2, 1999) as discontinued operations. Amounts that have been restated for discontinued operations have been specifically identified. 0000701221 CIGNA CORPORATION 1,000,000 3-MOS YEAR 9-MOS 6-MOS DEC-31-1998 DEC-31-1997 DEC-31-1997 DEC-31-1997 JAN-01-1998 JAN-01-1997 JAN-01-1997 JAN-01-1997 MAR-31-1998 DEC-31-1997 SEP-30-1997 JUN-30-1997 33,190 36,358 35,630 34,470 0 0 0 0 0 0 0 0 1,030 854 937 799 9,401 10,859 10,813 10,973 755 769 1,023 1,040 51,617 56,578 56,645 55,438 2,322 2,625 1,598 1,944 12,433 6,753 6,938 6,926 918 1,542 1,291 1,298 111,219 108,199 106,428 103,662 11,937 11,976 11,896 11,617 1,864 1,774 1,852 1,853 17,702 17,906 18,434 18,527 30,714 30,682 30,271 30,046 1,729 2,155 1,943 2,235 0 0 0 0 0 0 0 0 66 66 66 66 8,259 7,866 7,925 7,482 111,219 108,199 106,428 103,662 3,216 11,781 8,445 5,312 789 3,598 2,682 1,787 40 93 24 33 467 483 362 236 2,846 10,809 7,779 4,974 47 257 195 131 936 3,661 2,575 1,602 683 1,228 964 661 244 416 330 224 439 812 634 437 56 274 212 130 0 0 0 0 0 0 0 0 495 1,086 846 567 2.30 4.93 3.83 2.57 2.27 4.88 3.79 2.55 0 10,647 0 0 0 2,120 0 0 0 218 0 0 0 901 0 0 0 2,117 0 0 0 9,967 0 0 0 218 0 0 This information has been restated to reflect CIGNA's property and casualty business, which was sold on July 2, 1999, as discontinued operations. Amount includes recoverables on paid and unpaid losses. Amount relates to the property and casualty business, which was sold on July 2, 1999. Amount is net of reinsurance recoverables. Restated to reflect the three-for-one stock split approved by CIGNA's shareholders on April 22, 1998.
EX-27.4 7 RESTATED ARTICLE 7 FDS FOR CIGNA
7 This schedule contains summary financial information extracted from the financial statements contained on Form 10-K for the fiscal year ended December 31, 1996 and Form 10-Q for the period ended March 31, 1997 for CIGNA Corporation and is qualified in its entirety by reference to such financial statements. However, certain information noted below has been restated to reflect the reporting of CIGNA's property and casualty business (which was sold on July 2, 1999) as discontinued operations. Amounts that have been restated for discontinued operations have been specifically identified. 0000701221 CIGNA CORPORATION 1,000,000 3-MOS YEAR DEC-31-1997 DEC-31-1996 JAN-01-1997 JAN-01-1996 MAR-31-1997 DEC-31-1996 34,320 34,933 0 0 0 0 683 701 11,066 10,927 1,087 1,102 55,237 56,061 1,955 1,760 6,859 7,287 1,303 1,230 98,752 98,932 11,587 11,784 1,946 1,940 18,400 18,841 29,800 29,878 1,343 1,310 0 0 0 0 66 66 7,051 7,142 98,752 98,932 2,627 10,499 886 3,645 32 52 114 464 2,466 10,006 69 278 785 3,148 339 1,228 116 427 223 801 65 255 0 0 0 0 288 1,056 1.31 4.68 1.30 4.64 0 11,159 0 2,348 0 177 0 823 0 2,214 0 10,647 0 177 This information has been restated to reflect CIGNA's property and casualty business, which was sold on July 2, 1999, as discontinued operations. Amount includes recoverables on paid and unpaid losses. Amount relates to the property and casualty business, which was sold on July 2, 1999. Amount is net of reinsurance recoverables. Restated to reflect the three-for-one stock split approved by CIGNA's shareholders on April 22, 1998.
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