CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 10, 1998
CIGNA Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-8323 06-1059331
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Liberty Place, 1650 Market Street, P.O. Box 7716
Philadelphia, Pennsylvania 19192-1550
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(215) 761-1000
Not Applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events.
On February 10, 1998, the registrant issued a news release, a copy of
which is filed as Exhibit 20 hereto and is incorporated herein by reference.
CAUTIONARY STATEMENT FOR PURPOSES OF THE 'SAFE HARBOR' PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements not dealing with historical results are forward-looking and
are based on estimates, assumptions and projections. CIGNA cautions that actual
results could differ materially from those expected by CIGNA, depending on the
outcome of certain factors including: 1) adverse catastrophe experience in
CIGNA's property and casualty businesses; 2) adverse property and casualty loss
development for events that CIGNA insured in prior years; 3) an increase in
medical costs in CIGNA's health care operations, including increases in
utilization and costs of medical services; 4) heightened competition,
particularly price competition, reducing product margins and constraining growth
in CIGNA's businesses; 5) significant changes in interest rates; and 6) the
effect on CIGNA's international operations and investments from further
significant deterioration in Asian economies.
Item 7. Financial Statements and Exhibits.
(c) The exhibit accompanying this report is listed in the Index to
Exhibits below.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CIGNA CORPORATION
Date: February 11, 1998 By:/s/ Gary A. Swords
Gary A. Swords
Vice President and
Chief Accounting Officer
Index to Exhibits
Number Description Method of Filing
20 CIGNA Corporation Filed herewith
news release dated
February 10, 1998
[CIGNA LOGO]
NEWS RELEASE
Immediate
Albert D. Ciavardelli, Investor Relations - (215) 761-6128
Michael J. Monroe, Media Relations - (215) 761-6133
CIGNA REPORTS FOURTH QUARTER AND FULL YEAR 1997 RESULTS
EPS IN LINE WITH FIRST CALL CONSENSUS ESTIMATES
PHILADELPHIA, February 10, 1998 -- CIGNA Corporation (NYSE:CI) today reported
fourth quarter 1997 operating income of $260 million, or $3.53 per share,
excluding after-tax charges of $81 million primarily for integration costs
associated with the June 1997 acquisition of Healthsource and health care cost
reduction activities. Including the charges, fourth quarter operating income was
$179 million, or $2.43 per share. Operating income in the fourth quarter of 1996
was $261 million, or $3.48 per share.
Full year 1997 operating income was $1.1 billion, or $14.18 per share, before
the charges ($971 million, or $13.09 per share, after the charges) versus $1.0
billion, or $13.20 per share, for 1996.
"We are pleased with the continued growth in underlying earnings and with the
structural changes that have strengthened our health care operations and added
significantly to our capital position," said Wilson H. Taylor, CIGNA's Chief
Executive Officer.
_________________________________
Operating income (loss) is defined as net income (loss) excluding after-tax
realized investment results.
In the fourth quarter of 1997, CIGNA implemented the new accounting rules for
earnings per share. All earnings per share amounts are on a diluted basis and
prior periods have been restated.
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The following discussions of segment operating results exclude the specific
adjustments noted in the attached exhibit.
SEGMENT RESULTS:
Employee Life and Health Benefits
This segment includes CIGNA's HMO and indemnity operations as well as
Healthsource results since the acquisition date of June 25, 1997. The segment
had operating income of $139 million in the fourth quarter of 1997, compared
with $137 million for the same period last year. Full year 1997 operating income
was $510 million, compared with $497 million for 1996.
HMO medical membership, including the addition of 1.2 million Healthsource
members, is now at 5.9 million members, up 9 percent over year-end 1996 on a
comparable basis.
Employee Retirement and Savings Benefits
This segment, which operates in the defined contribution and defined benefit
markets, had operating income of $56 million in the fourth quarter of 1997. This
compares with operating income of $54 million for the same period last year.
Full year 1997 operating income was $216 million, compared with $201 million for
full year 1996.
Assets under management at December 31, 1997 were $46.3 billion, an increase of
14 percent from $40.6 billion as of December 31, 1996.
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Individual Financial Services
This segment, which in 1997 included individual and corporate-owned life
insurance; life, accident and health reinsurance; and annuity businesses, had
operating income of $52 million in the fourth quarter of 1997. This compares
with operating income of $40 million for the same period last year. Full year
1997 operating income was $198 million, compared with $161 million in 1996.
The individual life insurance and annuity businesses, which were sold to Lincoln
National Corporation effective January 1, 1998, represented $28 million and $98
million of this segment's operating income for the fourth quarter and full year
of 1997, respectively. The corporate-owned life insurance and reinsurance
businesses, with operating income of $24 million and $100 million for the fourth
quarter and full year of 1997, respectively, have been retained by CIGNA. Upon
closing the transaction, CIGNA received $1.4 billion in cash and retained
approximately $200 million of capital previously committed to the businesses
that were sold. The sale resulted in an after-tax gain of approximately $800
million, of which approximately $225 million will be immediately recognized and
the remainder deferred and recognized as earnings in future periods beginning in
1998.
Property and Casualty
The property and casualty (P&C) segment includes the Ongoing operations
(International and Domestic) and Run-off.
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- 4 -
Ongoing operations had operating income of $55 million and a GAAP combined ratio
after policyholders' dividends ("combined ratio") of 99 for the fourth quarter
of 1997. This compares with operating income of $57 million and a combined ratio
of 100 for the same period last year. Full year 1997 operating income was $229
million and the combined ratio was 100, compared with operating income of $211
million and a combined ratio of 102 for 1996.
Within the Ongoing operations, International had operating income of $23 million
and a combined ratio of 97 for the fourth quarter of 1997. This compares with
operating income of $33 million and a combined ratio of 93 for the fourth
quarter of 1996. Full year 1997 operating income was $125 million and the
combined ratio was 95, compared with operating income of $135 million and a
combined ratio of 93 for 1996.
Domestic had operating income of $32 million and a combined ratio of 102 for the
fourth quarter of 1997. This compares with operating income of $24 million and a
combined ratio of 109 for the fourth quarter of 1996. Full year 1997 operating
income was $104 million and the combined ratio was 105, compared with operating
income of $76 million and a combined ratio of 110 for 1996.
Run-off operations were breakeven in the fourth quarter of 1997, compared with
an operating loss of $3 million for the same period in 1996. Full year 1997
operating income was $1 million, compared with $2 million for 1996.
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Other
Other Operations includes unallocated investment income, expenses (including
debt service) and taxes, and the results of CIGNA's settlement annuity business,
investment and real estate subsidiaries and certain new business initiatives.
Other Operations had an operating loss of $42 million in the fourth quarter of
1997, compared with an operating loss of $24 million for the same period last
year. For full year 1997, the operating loss was $102 million, compared with a
loss of $70 million in 1996.
NET INCOME
Consolidated net income for the fourth quarter and full year of 1997, including
specific adjustments of $81 million after-tax, was $240 million, or $3.26 per
share, and $1.1 billion, or $14.64 per share, respectively. Consolidated net
income for the same periods last year was $306 million, or $4.08 per share, and
$1.1 billion, or $13.91 per share, respectively.
REVENUES
Consolidated revenues for the fourth quarter and full year of 1997 were $5.5
billion and $20.0 billion, respectively, compared with $4.9 billion and $19.0
billion for the same periods last year.
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ASSETS/SHAREHOLDERS' EQUITY
Assets at December 31, 1997 were $108.2 billion, compared with $98.9 billion at
year-end 1996. Shareholders' equity was $7.9 billion ($109.66 per share) at
December 31, 1997, compared with $7.2 billion ($97.15 per share) at December 31,
1996.
SHARE REPURCHASE
In the fourth quarter of 1997, CIGNA repurchased 1.8 million shares of its
common stock for $292 million, bringing share repurchase activity for full year
1997 to 2.1 million shares at a cost of $340 million. As of February 10, 1998,
CIGNA had repurchased an additional 230,000 shares for $40 million, leaving $321
million of remaining share repurchase authority.
Quarterly earnings are available on CIGNA's home page on the Internet
(http://www.cigna.com).
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CIGNA CORPORATION
COMPARATIVE SUMMARY OF FINANCIAL RESULTS
(Dollars in millions, except per share amounts) [CIGNA LOGO]
<TABLE>
<CAPTION>
==================================================================================================================================
Three Months Ended Year Ended
December 31, December 31,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
REVENUES
Premiums and fees $ 4,140 $ 3,583 $ 14,935 $ 13,916
Net investment income 1,073 1,070 4,245 4,333
Other revenues 193 162 691 610
Realized investment gains 86 74 167 91
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Total $ 5,492 $ 4,889 $ 20,038 $ 18,950
- -----------------------------------------------------------=======================================================================
OPERATING INCOME (LOSS) BY SEGMENT
Employee Life and Health Benefits:
Indemnity operations $ 94 $ 88 $ 296 $ 286
HMO operations (41) 49 128 211
----------- ----------- ---------- -----------
Total Employee Life and Health Benefits 53 137 424 497
Employee Retirement and Savings Benefits 61 54 221 201
Individual Financial Services 54 40 200 161
Property and Casualty:
International 25 33 127 135
Domestic 26 24 98 76
----------- ----------- ---------- -----------
Ongoing operations 51 57 225 211
Run-off operations - (3) 1 2
----------- ----------- ---------- -----------
Total Property and Casualty 51 54 226 213
Other Operations (40) (24) (100) (70)
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Total $ 179 $ 261 $ 971 $ 1,002
- -----------------------------------------------------------=======================================================================
NET INCOME (LOSS) BY SEGMENT
Employee Life and Health Benefits:
Indemnity operations $ 109 $ 94 $ 313 $ 289
HMO operations (41) 49 128 211
----------- ----------- ---------- -----------
Total Employee Life and Health Benefits 68 143 441 500
Employee Retirement and Savings Benefits 66 64 233 222
Individual Financial Services 57 47 208 168
Property and Casualty:
International 37 42 164 156
Domestic 26 31 112 84
----------- ----------- ---------- -----------
Ongoing operations 63 73 276 240
Run-off operations (1) 7 (1) -
----------- ----------- ---------- -----------
Total Property and Casualty 62 80 275 240
Other Operations (13) (28) (71) (74)
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Total $ 240 $ 306 $ 1,086 $ 1,056
- -----------------------------------------------------------=======================================================================
BASIC EARNINGS PER SHARE:
Operating income $ 2.45 $ 3.52 $ 13.23 $ 13.33
After-tax realized investment gains 0.84 0.60 1.56 0.72
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Net income $ 3.29 $ 4.12 $ 14.79 $ 14.05
- -----------------------------------------------------------=======================================================================
Weighted average shares (in thousands) 72,916 74,244 73,421 75,165
- -----------------------------------------------------------=======================================================================
DILUTED EARNINGS PER SHARE:
Operating income $ 2.43 $ 3.48 $ 13.09 $ 13.20
After-tax realized investment gains 0.83 0.60 1.55 0.71
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 3.26 $ 4.08 $ 14.64 $ 13.91
- -----------------------------------------------------------=======================================================================
Weighted average shares (in thousands) 73,621 74,935 74,171 75,918
- -----------------------------------------------------------=======================================================================
SHAREHOLDERS' EQUITY at December 31 $ 7,932 $ 7,208
- ------------------------------------------------------------------------------------------------------============================
SHAREHOLDERS' EQUITY PER SHARE at December 31 $ 109.66 $ 97.15
- ------------------------------------------------------------------------------------------------------============================
</TABLE>
Operating income (loss) is defined as net income (loss) excluding after-tax
realized investment results.
In the fourth quarter of 1997, CIGNA implemented SFAS No. 128, "Earnings Per
Share" by replacing primary EPS with basic EPS and fully diluted EPS with
diluted EPS. The effect on CIGNA's EPS was not material. Prior year data has
been restated in conformity with the new requirements.
<PAGE>
CIGNA Corporation
Supplemental Financial Information
Financial Data Excluding Specific Fourth Quarter 1997
Adjustments - Results of Operations
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Employee Life & Health Benefits Employee Individual
Retirement & Financial
Indemnity HMOs Total Savings Benefits Services
Three months ended December 31, 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income (loss) before adjustments $97 $88 $42 $49 $139 $137 $56 $54 $52 $40
Adjustments: increase (decrease)
Healthcare restructuring and integration charge (5) - (75) - (80) - - - - -
Tax and other account reviews 2 - (8) - (6) - 5 - 2 -
-----------------------------------------------------------------------------------
Operating income (loss) as published 94 88 (41) 49 53 137 61 54 54 40
-----------------------------------------------------------------------------------
After-tax realized investment gains (losses) 15 6 - - 15 6 5 10 3 7
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $109 $94 ($41) $49 $68 $143 $66 $64 $57 $47
===================================================================================================================================
Diluted
Property & Earnings
Casualty Other Consolidated Per Share
Three months ended December 31, 1997 1996 1997 1996 1997 1996 1997 1996
-----------------------------------------------------------------------
Operating income (loss) before adjustments $55 $54 ($42) ($24) $260 $261 $3.53 $3.48
Adjustments: increase (decrease)
Healthcare restructuring and integration charge - - - - (80) - (1.09) -
Tax and other account reviews (4) - 2 - (1) - (0.01) -
-------------------------------------------------------------------------
Operating income (loss) as published 51 54 (40) (24) 179 261 2.43 3.48
-------------------------------------------------------------------------
After-tax realized investment gains (losses) 11 26 27 (4) 61 45 0.83 0.60
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $62 $80 ($13) ($28) $240 $306 $3.26 $4.08
=============================================================================================================================
Employee Life & Health Benefits Employee Individual
Retirement & Financial
Indemnity HMOs Total Savings Benefits Services
Year ended December 31, 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
--------------------------------------------------------------------------------
Operating income (loss) before adjustments $299 $286 $211 $211 $510 $497 $216 $201 $198 $161
Adjustments: increase (decrease)
Healthcare restructuring and integration charge (5) - (75) - (80) - - - - -
Tax and other account reviews 2 - (8) - (6) - 5 - 2 -
--------------------------------------------------------------------------------
Operating income (loss) as published 296 286 128 211 424 497 221 201 200 161
--------------------------------------------------------------------------------
After-tax realized investment gains (losses) 17 3 - - 17 3 12 21 8 7
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $313 $289 $128 $211 $441 $500 $233 $222 $208 $168
===================================================================================================================================
Diluted
Property & Earnings
Casualty Other Consolidated Per Share
Year ended December 31, 1997 1996 1997 1996 1997 1996 1997 1996
-----------------------------------------------------------------------
Operating income (loss) before adjustments $230 $213 ($102) ($70) $1,052 $1,002 $14.18 $13.20
Adjustments: increase (decrease)
Healthcare restructuring and integration charge - - - - (80) - (1.08) -
Tax and other account reviews (4) - 2 - (1) - (0.01) -
-------------------------------------------------------------------------
Operating income (loss) as published 226 213 (100) (70) 971 1,002 13.09 13.20
-------------------------------------------------------------------------
After-tax realized investment gains (losses) 49 27 29 (4) 115 54 1.55 0.71
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $275 $240 ($71) ($74) $1,086 $1,056 $14.64 $13.91
=============================================================================================================================
</TABLE>
