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) January 12, 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)
<PAGE>
Item 5. Other Events.
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A. On January 12, 1999, CIGNA Corporation announced that it had entered
into a definitive agreement dated as of January 11, 1999, to sell its domestic
and international property and casualty businesses to ACE Limited for $3.45
billion in cash. The sale has been approved by both companies' boards of
directors and is expected to be completed by the end of the second quarter of
calendar 1999, subject to certain U.S. and international regulatory approvals
and other customary closing conditions. A copy of the press release announcing
this sale is attached hereto as Exhibit 99.1, which exhibit is incorporated
herein by reference.
B. On January 12, 1999, CIGNA Corporation issued a news release
regarding fourth quarter earnings, a copy of which is filed as Exhibit 99.2
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) 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 and Latin American economies.
Item 7. Financial Statements and Exhibits.
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(c) The exhibits accompanying this report are 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: January 12, 1999 By: /s/ James A. Sears
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James A. Sears,
Vice President and
Chief Accounting Officer
<PAGE>
Index to Exhibits
Number Description Method of Filing
99.1 CIGNA Corporation Filed herewith
news release dated
January 12, 1999
99.2 CIGNA Corporation Filed herewith
news release dated
January 12, 1999
Exhibit 99.1
[ACE Limited LOGO] [CIGNA LOGO]
FOR IMMEDIATE RELEASE
ACE Limited: CIGNA Corporation:
Investor Contact: Helen M. Wilson Edwin J. Detrick
441-299-9283 215-761-6130
Media Contact: Wendy Davis Johnson Michael J. Monroe
441-299-9347 215-761-6133
ACE TO BUY CIGNA'S INTERNATIONAL AND DOMESTIC
PROPERTY & CASUALTY OPERATIONS FOR $3.45 BILLION
HAMILTON, Bermuda, and PHILADELPHIA, PA, January 12, 1999 - ACE Limited (NYSE:
ACL) has agreed to acquire the international and domestic property and casualty
insurance businesses of CIGNA Corporation (NYSE: CI) for $3.45 billion in cash,
under an agreement announced today by both companies.
The transaction, which is subject to receipt of necessary regulatory approvals
and other customary closing conditions, is expected to be completed by the end
of the second quarter of calendar 1999.
"The acquisition of one of the very few truly global franchises in our core
business of property and casualty insurance represents a quantum leap for ACE,"
said Brian Duperreault, chairman, president and chief executive officer of ACE.
"This transaction significantly strengthens ACE's position as a premier player
in each of the world's major insurance markets, including the U.S., with a
business that is diversified by industry, market and client type. This is an
historic event, one that transforms ACE into one of only a handful of truly
international property and casualty insurance concerns, and provides a
tremendous platform for future growth," he added.
<PAGE>
Under the agreement, ACE will acquire CIGNA's domestic property and casualty
insurance operations, including its run-off business. ACE will also purchase
CIGNA's international property and casualty insurance companies and branches,
including most of the accident and health business written through those
companies.
"This transaction further positions CIGNA to capitalize on its strengths in the
global employee benefits business. Over the past several years we have been
reshaping our company to achieve our strategic goal of becoming the premier, and
consistently most profitable, employee benefits company in the United States and
internationally," said Wilson H. Taylor, chief executive officer of CIGNA.
"We currently expect that there will be in place at the closing of the
acquisition significant third-party protection against adverse development with
respect to the loss and loss adjustment expense reserves of the run-off
operations to be acquired, as well as certain other asbestos and environmental
exposures," Mr. Duperreault said.
ACE expects that the transaction will be financed with a combination of
available cash and newly issued equity, debt, preferred and mandatorily
convertible securities.
Gross written premiums of the businesses being acquired were $4.3 billion in
1997 with operating income for the same period of $198 million. Upon completion
of the transaction, ACE will be a company with approximately $30 billion in
assets and will employ more than 9,000 people in 47 countries worldwide.
"There are significant benefits and efficiencies to be derived from being a
global organization whose primary focus is property and casualty insurance. As
we assume CIGNA's business operations, we will seek to capitalize on ACE's
strength and focus in property and casualty underwriting to enhance our
profitability and growth potential," said Mr. Duperreault.
ACE's financial advisor in this transaction is Merrill Lynch & Co.
2
<PAGE>
The ACE Group of Companies provides insurance and reinsurance for a diverse
group of international clients. Operating subsidiaries are based in Bermuda, the
United States, the United Kingdom (Lloyd's), and the Republic of Ireland. At
September 30, 1998, ACE Limited had approximately $8.8 billion in assets and
approximately $3.7 billion in shareholders' equity.
CIGNA's businesses rank among the largest employee benefits organizations in the
United States and include a full range of health care, life, disability and
retirement and investment services, both in the U.S. and internationally.
Revenues for the first nine months of 1998 (includes all businesses) were $16
billion and operating income was $772 million (excludes $202 million of gains
from the sale of life and annuity businesses). As of September 30, 1998 CIGNA
had consolidated assets of $109 billion and shareholders' equity of
approximately $8.2 billion.
Editor's Note: ACE Limited's press releases are available at no charge through
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News on Demand Plus by dialing 888-329-8941.
(tables to follow)
3
<PAGE>
Supplemental Financial Information
----------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Net Written Premiums by Product Line
(in $ millions)
- ------------------------------------------------------------------------------------------------------------
Year ended Year ended
Sept. 30, 1998 Dec. 31, 1997
-----------------------------------------------
CIGNA's P&C ops. ACE & CIGNA's P&C ops.
---------------- ----------------------
ACE Domestic Int'l Combined Combined %
----- ---------- ------- ---------- ------------
Property $181 $ 354 $ 471 $1,006 25.4%
Casualty 147 308 279 734 18.6%
Accident & Health - - 482 482 12.2%
Marine & Aviation
(including satellite) 77 271 123 471 11.9%
Workers' Compensation - 342 - 342 8.7%
Lloyd's Syndicates 314 - - 314 7.9%
Automobile - - 194 194 4.9%
Commercial Packages - 161 - 161 4.1%
Financial Lines 142 - - 142 3.6%
Other 22 60 27 109 2.7%
---- ------ ------ ------ -----
Total $883 $1,496 $1,576 $3,955 100.0%
==== ====== ====== ====== =====
- ------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Net Written Premiums by Geographic Region
(in $ millions)
- -------------------------------------------------------------------------------------------------------------
Year ended Year ended
Sept. 30, 1998 Dec. 31, 1997
-------------------------------------------------
CIGNA's P&C ops. ACE & CIGNA's P&C ops.
---------------- ----------------------
ACE Domestic Int'l Combined Combined %
----- ---------- ------- ---------- ------------
North America $ 503 $1,496 $ - $1,999 50.6%
UK & Europe 129 - 644 773 19.5%
Japan 21 - 420 441 11.2%
Other Pacific 16 - 213 229 5.8%
Latin America 5 - 171 176 4.4%
Other 209 - 128 337 8.5%
------ ------ ------ ------ -----
Total $ 883 $1,496 $1,576 $3,955 100.0%
====== ====== ====== ====== =====
- -------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Supplemental Financial Information
----------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Balance Sheet Information
(in $ millions)
- -------------------------------------------------------------------------------------------------------------
CIGNA's P&C
Operations to be Acquired
--------------------------------------
Dec. 31, 1997 Dec. 31, 1997 Sept. 30, 1998
------------- ------------- --------------
As reported
by CIGNA (Unaudited) (Unaudited)
<S> <C> <C> <C>
Investments & cash $12,457 $10,051 $ 9,907
Premium accounts and notes receivable 2,735 2,423 2,690
Reinsurance recoverables 6,211 6,181 6,013
Goodwill 411 392 378
Other assets 2,881 2,384 2,418
------- ------- -------
Total assets $24,695 $21,431 $21,406
======= ======= =======
Unpaid claims and claim expenses 15,252 14,929 14,738
Future policy benefits 1,889 - -
Unearned premiums 1,543 1,318 1,389
Accounts payable 3,050 2,396 2,333
Other liabilities 419 438 495
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Total liabilities 22,153 19,081 18,955
------- ------- -------
Net Assets $ 2,542 $ 2,350 $ 2,451
======= ======= =======
- -------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Supplemental Financial Information
- ---------------------------------------------------------------------------------------------------------------------
Income Statement Information
(in $ millions)
- ---------------------------------------------------------------------------------------------------------------------
Year ended Nine months ended
December 31, 1997 September 30, 1998
--------------------------------------- -----------------------------------
Operations
As reported Operations As reported to be
by CIGNA to be acquired by CIGNA acquired
----------- -------------- ----------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Domestic Ongoing
- ----------------
<S> <C> <C> <C> <C>
Gross premiums written $2,301 $2,301 $1,901 $1,901
Net premiums written 1,496 1,496 1,149 1,149
Net premiums earned 1,593 1,593 1,133 1,133
Losses and loss
adjustment expenses (1,165) (1,165) (826) (826)
Policy acquisition expenses (367) (367) (274) (274)
Operating expenses (141) (154) (101) (101)
-------- -------- --------- --------
Underwriting gain (loss) (80) (93) (68) (68)
Net investment income 239 239 172 172
Other revenues and expenses, net (16) (6) (8) (9)
-------- -------- --------- --------
Operating income before tax 143 140 96 95
Income taxes (45) (44) (24) (25)
-------- -------- --------- --------
Net operating income $ 98 $ 96 $ 72 $ 70
======== ======== ========= ========
Loss & LAE ratio 73.1% 73.1% 72.9% 72.9%
Expense ratio 31.9% 32.7% 33.1% 33.1%
-------- -------- --------- --------
Combined ratio 105.0% 105.8% 106.0% 106.0%
======== ======== ========= ========
International Ongoing
- ---------------------
Gross premiums written 2,265 1,999 1,690 1,418
Net premiums written 1,834 1,576 1,348 1,104
Net premiums earned 1,784 1,539 1,294 1,062
Losses and loss
adjustment expenses (953) (823) (780) (649)
Policy acquisition expenses (453) (410) (323) (291)
Operating expenses (289) (269) (205) (177)
-------- -------- --------- --------
Underwriting gain (loss) 89 37 (14) (55)
Net investment income 126 121 83 79
Other revenues and expenses, net (14) 13 8 9
-------- -------- --------- --------
Operating income before tax 201 171 77 33
Income taxes (74) (62) (31) (14)
-------- -------- --------- --------
Net operating income $ 127 $ 109 $ 46 $ 19
======== ======== ========= ========
Loss & LAE ratio 53.4% 53.5% 60.3% 61.1%
Expense ratio 41.6% 44.1% 40.8% 44.1%
-------- -------- --------- --------
Combined ratio 95.0% 97.6% 101.1% 105.2%
======== ======== ========= ========
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Supplemental Financial Information
- ---------------------------------------------------------------------------------------------------------------------
Income Statement Information
(in $ millions)
- ---------------------------------------------------------------------------------------------------------------------
Year ended Nine months ended
December 31, 1997 September 30, 1998
-------------------------------------- -------------------------------------
Operations
As reported Operations As reported to be
by CIGNA to be acquired by CIGNA acquired
----------- -------------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Total Ongoing
- -------------
<S> <C> <C> <C> <C>
Gross premiums written $4,566 $4,300 $3,591 $3,319
Net premiums written 3,330 3,072 2,497 2,253
Net premiums earned 3,377 3,132 2,427 2,195
Losses and loss
adjustment expenses (2,118) (1,988) (1,606) (1,475)
Policy acquisition expenses (820) (777) (597) (565)
Operating expenses (430) (423) (306) (278)
------- -------- ------- -------
Underwriting gain (loss) 9 (56) (82) (123)
Net investment income 365 360 255 251
Other revenues and expenses, net (30) 7 - -
------- -------- ------- -------
Operating income before tax 344 311 173 128
Income taxes (119) (106) (55) (39)
------- -------- ------- -------
Net operating income $ 225 $ 205 $ 118 $ 89
======= ======== ======= =======
Loss & LAE ratio 62.7% 63.5% 66.2% 67.2%
Expense ratio 37.0% 38.3% 37.2% 38.4%
------- -------- ------- -------
Combined ratio 99.7% 101.8% 103.4% 105.6%
======= ======== ======= =======
Net catastrophe losses, pre-tax $17 $97
% of net earned premiums 0.5% 4.0%
Run-off
- -------
Gross premiums written 19 19 2 2
Net premiums written 11 11 (2) (2)
Net premiums earned 22 22 (1) (1)
Losses and loss
adjustment expenses (232) (232) (143) (143)
Policy acquisition expenses (14) (14) (6) (6)
Operating expenses (81) (82) (61) (61)
------- -------- ------- -------
Underwriting gain (loss) (305) (306) (211) (211)
Net investment income 282 282 191 191
Other revenues and expenses, net 20 5 15 6
------- -------- ------- -------
Operating income (loss) before tax (3) (19) (5) (14)
Income tax recovery 5 12 5 8
------- -------- ------- -------
Net operating income (loss) $ 2 $ (7) $ - $ (6)
======= ======== ======= =======
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
# # #
7
Exhibit 99.2
NEWS RELEASE
[CIGNA LOGO]
For Release: Immediate One Liberty Place
1650 Market Street
P.O. Box 7716
Philadelphia, PA 19192-1520
(215) 761-1000
Concact: Ted Detrick, Financial Relations - (215) 761-6130
Michael J. Monroe, Media Relations - (215) 761-6133
CIGNA TO RECORD FOURTH QUARTER CHARGES FOR
PROPERTY AND CASUALTY BUSINESSES
PHILADELPHIA, January 12, 1999 -- CIGNA Corporation (NYSE: CI) today announced
that its fourth quarter earnings would include approximately $60 million
after-tax for weather-related losses, restructuring charges and additional large
loss and reserve strengthening affecting its domestic and international property
and casualty businesses. The weather-related losses are for $14 million
(after-tax) of claims associated with Hurricane Mitch and an additional $10
million (after-tax) of claims for Hurricane Georges. The businesses also will
incur charges of $16 million after-tax to restructure their operations. The
international P&C results also will include $20 million of after-tax charges for
large loss activity and reserve strengthening reflecting continued soft market
conditions.
