Q1 2010 Earnings Call
May 06, 2010 8:30 am ET
David Cordani - Chief Executive Officer, President, and Director
Annmarie Hagan - Chief Financial Officer and Executive Vice President
Edwin Detrick - Vice President of Investor Relations
Ana Gupte - Sanford C. Bernstein & Co., Inc.
Doug Simpson - Morgan Stanley
Joshua Raskin - Barclays Capital
Justin Lake - UBS Investment Bank
Carl McDonald - Oppenheimer & Co. Inc.
John Rex - JP Morgan Chase & Co
Matthew Borsch - Goldman Sachs Group Inc.
Christine Arnold - Cowen and Company, LLC
Kevin Fischbeck - BofA Merrill Lynch
Previous Statements by CI
» CIGNA Corporation Q4 2009 Earnings Call Transcript
» CIGNA Corporation Q3 2009 Earnings Call Transcript
» CIGNA Corporation Q2 2009 Earnings Call Transcript
Ladies and gentlemen, thank you for standing by for CIGNA's First Quarter 2010 Results Review. [Operator Instructions] We'll begin by turning the conference over to Mr. Ted Detrick. Please go ahead, Mr. Detrick.
Good morning, everyone, and thank you for joining today's call. I'm Ted Detrick, Vice President of Investor Relations. And with me this morning are David Cordani, our President and CEO; and Annmarie Hagan, CIGNA's Chief Financial Officer.
In our remarks today, David will begin by briefly commenting on CIGNA's first quarter results and discussing the progress we have made to date with our growth strategy. He will also provide his perspective on health care reform and the opportunities we expect to pursue in the post-reform environment. Annmarie will provide a detailed review of the financial results for the quarter and will discuss the full year 2010 financial outlook. She will also provide an update on our achievements and expectations related to our expense reduction and capital management goals, as well as our growth strategy. We will then open up the lines for your questions.
Now as noted in our earnings release, CIGNA uses certain non-GAAP financial measures when describing its financial results. A reconciliation of these measures to the most directly comparable GAAP measure is contained in today’s earnings release, which was filed this morning on Form 8-K with the Securities and Exchange Commission and is posted in the Investor Relations section of cigna.com. Now in our remarks today, we will be making some forward-looking comments. We would remind you that there are risk factors that could cause actual results to differ materially from our current expectations, and those risk factors are discussed in today’s earnings release.
Now before turning the call over to David, I will cover a few items pertaining to our first quarter results and disclosures. Relative to our Run-off Reinsurance operations, our first quarter shareholders net income included after-tax income of $5 million or $0.02 per share related to the Guaranteed Minimum Income Benefits business, otherwise known as GMIB. I would remind you that both the impact of the Financial Accounting Standards Board's fair value disclosure and measurement guidance on our GMIB results is for GAAP accounting purposes only. We believe that the application of this guidance does not represent management's expectation of the ultimate liability payout.
Because of application of this accounting guidance, CIGNA's future results for the GMIB business will be volatile as any future change in the exit value of GMIB's assets and liabilities will be recorded in shareholders' net income. CIGNA's 2010 earnings outlook, which we will discuss in a few moments, exclude the results of the GMIB business and therefore, any potential volatility related to the prospective application of this accounting guidance.
Now regarding our disclosures, beginning with the first quarter of 2010, we have expanded our quarterly statistical supplement to provide additional information in two important areas. That is the Medical operating expenses for our Health Care segment and premium and membership detail for our International segment. The Medical operating expenses, we now provide a breakdown of the expenses by major functional category that is consistent with how our management team and Board of Directors analyze our expenses and measure our progress in executing on our cost reduction strategy.
For the International segment, we now provide a breakdown of premium revenue by line of business, as well as an announcement of premiums by geographic concentration for our Health, Life and Accident operations. We also now disclose Medical membership for our Expatriate and International Health Care businesses by funding type. We believe these expanded disclosures are beneficial in providing investors and analysts with enhanced transparency into our diversified portfolio of Global Health Service businesses. And with that, I'll turn it over to David.
Thanks, Ted, and good morning, everyone. Before Annmarie reviews our first quarter results and full year outlook, I'll briefly comment on our progress to date with our growth strategy supported by our strong first quarter results, and I'll provide our perspective on reform and the opportunities we expect to pursue. So let's get started.
As I reflect on the strategy worked that our management team undertook last year, I could say today that, overall, I'm pleased with the progress we have made in a short period of time. I asked our business leaders to take a hard look in each of our businesses, and we made some tough fundamental choices, all with a goal of creating a portfolio of strategically aligned businesses that have the potential to deliver meaningful earnings growth on a sustained basis.
As a reminder, our enterprise strategy has three major components. They are: To reposition our portfolio, to improve strategic and financial flexibility and to pursue additional growth opportunities. The how part of the equation is to drive profitable growth by doing deep, going global and going individual. We will do this with a laser-focus on those geographies, market segments and products that play to our strengths and have meaningful growth prospects over the long term.
These segments are: The Middle Market segment, this is our largest segment with over 6.5 million Medical members today; the Select segment, as we build momentum, post the successful integration of the Great-West acquisition; our Disability product line, where our return-to-work program leads the industry and improves employee productivity; the National segment, where we retain a very sharp focus on clients who are seeking incentive-based programs, as well as integrated programs, both focused on improving health and productivity; outside the U.S., our Health, Life and Accident products, particularly in Asia; and finally, our Expatriate business for both U.S. domiciled corporations and non-US domiciled corporations. I view our first quarter results as a first step towards successful execution of our long-term strategy.