CIGNA (CI)

Q2 2010 Earnings Call

August 05, 2010 8:30 am ET

Executives

TST Recommends

Annmarie Hagan - Chief Financial Officer and Executive Vice President

Edwin Detrick - Vice President of Investor Relations

David Cordani - Chief Executive Officer, President, and Director

Analysts

Ana Gupte - Bernstein Research

Joshua Raskin - Barclays Capital

Justin Lake - UBS Investment Bank

Peter Costa - Wells Fargo Securities, LLC

Scott Fidel - Deutsche Bank AG

Carl McDonald - Citigroup Inc

Matthew Borsch - Goldman Sachs Group Inc.

John Rex - JP Morgan Chase & Co

Doug Simpson - Morgan Stanley

Christine Arnold - Cowen and Company, LLC

Presentation

Operator

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Previous Statements by CI
» CIGNA Q1 2010 Earnings Call Transcript
» CIGNA Corporation Q4 2009 Earnings Call Transcript
» CIGNA Corporation Q3 2009 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by for CIGNA's Second Quarter 2010 Results Review. [Operator Instructions] We'll begin by turning the conference over to Mr. Ted Detrick. Please go ahead, sir.

Edwin Detrick

Good morning, everyone, and thank you for joining today's call. I am 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 second quarter results and discussing the progress we have made to date with our growth strategy. He will also provide an update on the company’s actions regarding health care reform, and he will conclude his remarks by providing an overview of our international operations which is a key component of our global portfolio of businesses.

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 expense reduction activities and capital management goals as well as our growth strategy. We will then open the lines for your questions. And following our question-and-answer session, David will provide some brief closing remarks before we end the call.

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 www.cigna.com. In our remarks today, we will be making some forward-looking comments. We would remind you that there 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 one item pertaining to our second quarter results. Relative to our run-off reinsurance operations, our second quarter shareholders net income included an after-tax non-cash loss of $104 million or $0.37 per share related to the Guaranteed Minimum Income Benefits business, otherwise known as GMIB. I would remind you that the impact of the Financial Accounting Standards Board's fair value disclosure and measuring (sic) [measurement] guidance on our GMIB results is for GAAP accounting purposes only. We believe that the application to this guidance is not reflective of the underlying economics as it does not represent management's expectations of the ultimate liability payout. Because of the 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, excludes the results of the GMIB business and, therefore, any potential volatility related to the prospective application of this accounting guidance.

And with that, I'll turn it over to David.

David Cordani

Thanks, Ted, and good morning, everyone. Before Annemarie reviews our second quarter results and full year outlook, I'll take a few minutes to cover three topics. First, I'll put our results in the context of our growth strategy. I'll also highlight key points of differentiation and priorities to further enhance our effectiveness. Second, I'll provide our perspective on U.S. health care reform and what you can expect from CIGNA. And third, I'll provide a profile of our rapidly growing international operations. So let's get started.

Relative to our second quarter, I'm pleased with our earnings of $1.38 per share because it affirms the strength of our diversified global portfolio businesses. We delivered strong results from each of our ongoing businesses, International, Group Disability and Life and Health Care. Our second quarter results validate how we are delivering on our strategy. I’ll briefly revisit the three components of the how.

First, let’s go deep. It's all about focus: Targeted market leadership and expansion via geographic, product or targeted buying segments. This is evidenced by strong membership growth in our Middle Market and Select segments as well as in double-digit premium growth from our Health Life & Accident business and our very attractive Expatriate and Disability business growth.

Second is go global. Here we capitalized on and leveraged our established global footprint and capabilities in order to expand into geographies with product lines and distribution channels that position us for additional profitable growth over the next three to five years. And third is go individual. This is a buyer segment and also a way we run our business by focusing on the individuals we serve. We're leveraging and learning from outside the U.S. where we currently have approximately 5.5 million individual policies in force and we're positioning for growth in the U.S. individual market.

Across our businesses, we’re providing differentiated value to our customers. That's best supported by our strong retention rates, our multi-program relationships and clinical quality results. Take for example, our U.S. health care business. We have a sharp focus on delivering high levels of service and choice for our customers, for example, providing a diverse suite of offerings from funding options to clinical and productivity management, lifestyle management and wellness programs. We also provide a high level of transparency into the medical costs through extensive reporting for our self-funded and experience-rated customers.

In order to continue to meet our objectives as a leading health service company, we’re building on our two key enablers, people and information. I'll comment briefly on people. We've been building a strong team from our sales organization, our award-winning customer service team, our caring clinicians, our support functions and our leadership team. On a targeted basis, we've continued to add to our leadership team both in the U.S. and abroad. Our recent additions underscore the diverse and deep experience required to continue our momentum.

Let me preface this by something I’ve discussed with many of you in the past. This is a continuous process to add leaders on a targeted basis when and where we need to drive our business.

Said otherwise, we're never completely finished, and we'll continue our journey of expanding roles and adding key leaders on a targeted basis. I'll highlight a key addition in the U.S., and then in a few minutes, I'll highlight some key adds on the international side. We recently announced the addition of Bert Scott, in the new position of U.S. Commercial President. The creation of this role was enabled by our deep and highly tenured team of health care business leaders. Bert brings over 30 years of success driving growth for health and financial services companies with particular focus on customer experience. Obviously, this is a fit for how we focus our business and where we're headed. So to sum up our year-to-date 2010 results, they represent meaningful progress toward achieving our full year and long-term strategic operating and financial objectives.

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