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 August 2, 1999
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CIGNA Corporation
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(Exact name of registrant as specified in its charter)
Delaware 1-8323 06-1059331
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Liberty Place, 1650 Market Street
Philadelphia, Pennsylvania 19192-1550
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(215) 761-1000
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Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
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On August 2, 1999, 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
Oral statements made by individuals authorized to speak on behalf of
CIGNA Corporation ("CIGNA") that do not deal 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) 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 of alternatives related to certain
of CIGNA's investments in Brazilian health care operations; and 7) proposals to
change federal corporate income taxes.
Item 7. Financial Statements and Exhibits.
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(c) The exhibit accompanying this report is listed in the Index to
Exhibits.
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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: August 3, 1999 By: /s/James A. Sears
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James A. Sears
Vice President and
Chief Accounting Officer
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Index to Exhibits
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Number Description Method of Filing
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20 CIGNA Corporation Filed herewith
news release dated
August 2, 1999
NEWS RELEASE Exhibit 20 [CIGNA Logo]
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For Release: Immediate
Contact: Edwin J. Detrick, Investor Relations - (215) 761-6130
Wendell Potter, Media Relations - (215) 761-6133
CIGNA REPORTS SECOND QUARTER RESULTS
PHILADELPHIA, August 2, 1999 -- CIGNA Corporation (NYSE:CI) today reported
second quarter operating income* from continuing operations of $251 million, or
$1.22 per share, excluding an after-tax gain of $43 million associated with the
sale of a partial interest in a business. This compares with operating income
from continuing operations of $223 million ($1.03 per share) for the second
quarter of 1998. For the first half of 1999, operating income from continuing
operations was $480 million ($2.33 per share), excluding the gain noted above,
compared with $434 million ($2.00 per share) for the same period a year ago,
excluding an after-tax gain of $202 million associated with the sale of CIGNA's
individual life insurance and annuity business that was reported in the first
quarter of 1998.
On July 2, 1999, CIGNA sold its property and casualty business to ACE Limited
for $3.45 billion in cash. In the third quarter of 1999, CIGNA will record an
after-tax gain from the sale of approximately $1.2 billion. CIGNA began in the
second quarter to report the sold business as discontinued operations.**
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* Operating income (loss) is defined as net income (loss) excluding after-tax
realized investment results and the cumulative effect of an accounting change.
** See page 4 for definition and financial details.
All earnings per share amounts are on a diluted basis.
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-2-
"Our employee benefits businesses continued to perform well in the second
quarter," stated Wilson H. Taylor, CIGNA's chief executive. "The sale of the
property and casualty business to ACE has been successfully completed and we
will use the proceeds to strengthen shareholder value," Taylor added.
SEGMENT RESULTS:
Employee Health Care, Life and Disability Benefits
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This segment includes CIGNA's HMO and indemnity operations. The segment had
operating income of $173 million in the second quarter of 1999, compared with
$143 million for the same period last year. For the first half of 1999,
operating income was $330 million, compared with $274 million for the same
period in 1998.
Revenues for the second quarter were $3.4 billion, compared with $3.1 billion
for the same period last year.
Total covered lives were 13.1 million at June 30, 1999. HMO medical membership
was 6.6 million members, up 4% from June 30, 1998. Medical indemnity lives were
6.5 million, up 8% from June 30, 1998.
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Employee Retirement Benefits and Investment Services
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This segment, which operates in the defined contribution, defined benefit and
corporate life insurance markets, had operating income of $67 million in the
second quarter of 1999, compared with operating income of $60 million for the
same period last year. For the first half of 1999 and of 1998, operating income
was $130 million and $121 million, respectively.
Assets under management at June 30, 1999 were $54 billion, an increase of 6
percent from $51 billion as of June 30, 1998.
International Life, Health and Employee Benefits
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This segment, which includes CIGNA's life insurance and employee benefits
businesses operating in international markets, had second quarter operating
income of $1 million, excluding an after-tax gain of $43 million associated with
the sale of a partial interest in CIGNA's Japanese life insurance business. This
compares with operating income of $7 million for the same period last year. The
segment's operating income for the first half of 1999 was $4 million, including
$15 million of losses from Brazilian health care operations. Operating income
for the segment was $16 million in the first half of 1998. CIGNA is currently
evaluating alternatives relative to certain of its investments in Brazil. This
evaluation could result in changes in certain of the operations in Brazil and a
possible impairment of the related investment of approximately $325 million.
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Other Operations
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Other Operations includes gain recognition related to the sale of the individual
life insurance and annuity business, the leveraged corporate life insurance
operation, the life and health reinsurance business and certain new business
initiatives, as well as the results of the settlement annuity business and
investment and real estate subsidiaries. Other Operations had operating income
of $37 million in the second quarter of 1999, compared with operating income of
$29 million for the same period last year. For the six months ended June 30,
1999, Other Operations had operating income of $67 million, compared with $60
million reported for the six months ended June 30, 1998, excluding the $202
million after-tax gain from the sale of the individual life insurance and
annuity business.
Corporate
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Corporate includes unallocated investment income and parent company expenses,
primarily debt service. The Corporate segment reported a loss of $27 million in
the second quarter of 1999, compared with a loss of $16 million for the same
period last year. The operating loss for the first half of 1999 was $51 million,
compared with a loss of $37 million for the same period last year.
Discontinued Operations - Property and Casualty (P&C)
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"Discontinued operations" consist of the property and casualty business that was
sold to ACE Limited. Results of the discontinued operations, including after-tax
realized investment results, for the second quarter of 1999, were a loss of $71
million ($0.35 per share), compared with income of $59 million ($0.27 per share)
for the same period in 1998. For the first half of 1999, the results were
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-5-
a loss of $28 million ($0.13 per share), compared with income of $115 million
($0.53 per share) for the same period last year.
NET INCOME
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Consolidated net income, which includes the results of discontinued operations,
was $232 million, or $1.13 per share for the second quarter of 1999, including
the after-tax gain of $43 million from the sale of a partial interest in CIGNA's
Japanese life insurance business. Consolidated net income for the second quarter
of 1998 was $308 million, or $1.42 per share. For the first half of 1999,
consolidated net income was $420 million, or $2.04 per share, including the $43
million after-tax gain and a $91 million after-tax charge in the first quarter
for the cumulative effect of adopting a new accounting standard for guaranty
fund and other insurance-related assessments, primarily related to the
discontinued operations. Consolidated net income for the first half of 1998 was
$803 million, or $3.70 per share, including the after-tax gain of $202 million,
recognized in the first quarter, from the sale of CIGNA's individual life
insurance and annuity business.
REVENUES
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Excluding the results of discontinued operations, consolidated revenues for the
second quarter and first half of 1999 were $4.7 billion and $9.2 billion,
respectively, compared with $4.4 billion and $8.5 billion for the second quarter
and first half of 1998, excluding the effects of the sale of the individual life
insurance and annuity business.
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ASSETS/SHAREHOLDERS' EQUITY
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Assets at June 30, 1999 were $93.4 billion, compared with $95.9 billion at
December 31, 1998. Assets for both periods have been adjusted to reflect the P&C
business as discontinued operations. Shareholders' equity was $7.3 billion
($36.87 per share) at June 30, 1999, compared with $8.3 billion ($40.25 per
share) at December 31, 1998.
SHARE REPURCHASE
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During the second quarter of 1999, CIGNA repurchased 4.7 million shares of its
common stock for $429 million. In July, CIGNA repurchased 1.2 million shares for
$112 million. CIGNA's share repurchase authority was increased by $1 billion at
the July 1999 Board of Directors meeting.
Quarterly earnings are available on CIGNA's home page on the Internet
(http://www.cigna.com).
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<TABLE>
<CAPTION>
CIGNA CORPORATION
COMPARATIVE SUMMARY OF FINANCIAL RESULTS [CIGNA LOGO]
(Dollars in millions, except per share amounts)
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Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
REVENUES (Excluding discontinued operations)
Premiums and fees $ 3,724 $ 3,354 $ 7,311 $ 6,570
Net investment income 734 789 1,455 1,578
Other revenues 160 168 338 319
Gain on sale of businesses (1) 66 - 66 316
Realized investment gains 13 39 24 79
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Total $ 4,697 $ 4,350 $ 9,194 $ 8,862
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OPERATING INCOME (LOSS) BY SEGMENT (1)(2) (Excluding
discontinued operations)
Employee Health Care, Life and Disability Benefits:
Indemnity operations $ 78 $ 73 $ 141 $ 142
HMO operations 95 70 189 132
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Total 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)
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Total $ 294 $ 223 $ 523 $ 636
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INCOME (LOSS) FROM CONTINUING OPERATIONS
Employee Health Care, Life and Disability Benefits:
Indemnity operations $ 81 $ 91 $ 150 $ 178
HMO operations 95 70 189 132
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Total Employee Health Care, Life and Disability Benefits 176 161 339 310
Employee Retirement Benefits and Investment Services 73 67 137 134
International Life, Health and Employee Benefits 43 7 46 16
Other Operations 38 30 68 265
Corporate (27) (16) (51) (37)
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Total $ 303 $ 249 $ 539 $ 688
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DILUTED EARNINGS PER SHARE:
Operating income (Excluding discontinued operations) $ 1.43 $ 1.03 $ 2.53 $ 2.93
After-tax realized investment gains (Excluding
discontinued operations) 0.05 0.12 0.08 0.24
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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
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Income before cumulative effect of accounting change 1.13 1.42 2.48 3.70
Cumulative effect of accounting change, net of tax - - (0.44) -
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Net income $ 1.13 $ 1.42 $ 2.04 $ 3.70
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Weighted average shares (in thousands) 205,083 216,546 206,385 217,145
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SHAREHOLDERS' EQUITY at June 30: $ 7,341 $ 8,340
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SHAREHOLDERS' EQUITY PER SHARE at June 30: $ 36.87 $ 39.29
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</TABLE>
(1) Reflects the second quarter 1999 pre-tax gain of $66 million ($43 million
after-tax) recognized upon the sale of a partial interest in CIGNA's Japanese
life insurance operations and the first quarter 1998 pre-tax gain of $316
million ($202 million after-tax) recognized as of January 1, 1998 in connection
with the sale of the individual life insurance and annuity business.
(2) Operating income (loss) is defined as net income (loss) excluding after-tax
realized investment results. Operating income in 1999 also excludes the
cumulative effect of adopting a new accounting pronouncement.
