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 9, 1999
----------------
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
Philadelphia, Pennsylvania 19192-1550
-------------------------------------
(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 February 9, 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) 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 Latin American and Asian economies.
Item 7. Financial Statements and Exhibits.
----------------------------------
(c) The exhibit accompanying this report is listed in the Index to
Exhibits.
<PAGE>
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 10, 1999 By: /s/ James A. Sears
------------------
James A. Sears,
Vice President and
Chief Accounting Officer
<PAGE>
Index to Exhibits
Number Description Method of Filing
- ------ ----------- ----------------
20 CIGNA Corporation Filed herewith
news release dated
February 9, 1999
[CIGNA LOGO]
NEWS RELEASE
For Release: Immediate
Contact: Edwin J. Detrick, Investor Relations - (215) 761-6130
Michael J. Monroe, Media Relations - (215) 761-6133
CIGNA REPORTS FOURTH QUARTER AND FULL YEAR 1998 RESULTS
PHILADELPHIA, February 9, 1999 -- CIGNA Corporation (NYSE:CI) today reported
fourth quarter 1998 operating income of $216 million, or $1.04 per share,
compared with operating income of $179 million, or $0.81 per share for the
fourth quarter of 1997. Excluding after-tax charges of $19 million in 1998 for
restructuring activities and $81 million in 1997 primarily for Healthsource
integration and health care cost reduction activities, operating income was $235
million, or $1.13 per share for 1998, compared with $260 million, or $1.18 per
share for 1997.
Full year 1998 operating income was $988 million, or $4.63 per share, excluding
an after-tax gain of $202 million from the first quarter sale of CIGNA's
individual life insurance and annuity business. Including the gain on the sale,
operating income was $1.2 billion, or $5.58 per share. For 1997, operating
income was $971 million, or $4.36 per share.
"Operating results for our employee benefits businesses were strong in 1998. We
also made several significant further steps in positioning the company to focus
on our employee benefits strategy, including the successful integration of the
Healthsource acquisition, the sale of our individual life and annuity business
and the recent agreement to sell our property and casualty businesses," said
Wilson H. Taylor, CIGNA's CEO.
- --------------------------------
Operating income (loss) is defined as net income (loss) excluding after-tax
realized investment results. All earnings per share amounts are on a diluted
basis.
<PAGE>
-2-
CIGNA adopted a new accounting standard for segment reporting in the fourth
quarter of 1998, which resulted in changes to CIGNA's operating segments. The
following segment discussion reflects these changes. See attached exhibits 2 and
3 for analysis of the changes. In addition, the following discussion of segment
operating results excludes the specific adjustments noted in the attached
exhibit 1.
SEGMENT RESULTS:
Employee Health Care, Life and Disability Benefits
- --------------------------------------------------
This segment includes CIGNA's HMO and indemnity operations. The segment had
operating income of $184 million in the fourth quarter of 1998, compared with
$139 million for the same period last year. Full year 1998 operating income was
$617 million, compared with $511 million for 1997.
Revenues for the fourth quarter and full year of 1998 were $3.3 billion and
$12.6 billion, respectively, compared with $3.0 billion and $10.6 billion for
the same periods last year.
HMO medical membership was 6.5 million members, up 11 percent over year-end
1997.
Employee Retirement Benefits and Investment Services
- ----------------------------------------------------
This segment, which operates in the defined contribution, defined benefit and
corporate life insurance markets, had operating income of $64 million in the
fourth quarter of 1998. This compares with
<PAGE>
-3-
operating income of $59 million for the same period last year. Full year 1998
operating income was $248 million, compared with $225 million for full year
1997.
Assets under management at December 31, 1998 were $52.9 billion, an increase of
10 percent from $48.2 billion as of December 31, 1997.
International Life, Health and Employee Benefits
- ------------------------------------------------
This segment, which includes CIGNA's individual life insurance and employee
benefits businesses operating in international markets, had an operating loss of
$12 million in the fourth quarter of 1998. This compares with operating income
of $6 million for the same period last year. Full year 1998 operating income was
$18 million, compared with $21 million in 1997.
Property and Casualty
- ---------------------
The property and casualty (P&C) segment includes the domestic and international
P&C business (collectively known as "ongoing P&C operations") as well as the
run-off operations. CIGNA has agreed to sell these businesses to ACE Limited for
$3.45 billion (see release dated January 12, 1999 for details). Completion of
the sale is subject to receipt of regulatory approvals and other conditions to
closing.
Ongoing P&C operations had breakeven results for the fourth quarter of 1998. The
quarter was impacted by after-tax catastrophe losses of $29 million. This
compares with operating income of $49
<PAGE>
-4-
million for the same period last year, which included $1 million of after-tax
catastrophe losses. Full year 1998 P&C operating income was $88 million,
compared with operating income of $209 million for 1997. The 1998 results
include $92 million of after-tax catastrophe losses, primarily for Hurricanes
Georges and Mitch, as compared to $12 million of after-tax catastrophe losses in
1997.
Other Operations
- ----------------
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 $21 million in the fourth quarter of 1998, compared with operating income of
$42 million for the same period last year. For full year 1998, operating income
was $111 million, compared with $173 million in 1997.
Corporate
- ---------
Corporate primarily includes unallocated investment income and parent company
expenses, including debt service. Corporate had a loss of $22 million in the
fourth quarter of 1998, compared with a loss of $35 million for the same period
last year. For full year 1998, the loss was $75 million, compared with a loss of
$87 million in 1997.
<PAGE>
-5-
NET INCOME
- ----------
Consolidated net income for the fourth quarter and full year of 1998 was $238
million, or $1.14 per share, and $1.3 billion, or $6.05 per share, respectively.
Consolidated net income for the same periods last year was $240 million, or
$1.09 per share, and $1.1 billion, or $4.88 per share, respectively.
REVENUES
- --------
Consolidated revenues for the fourth quarter and full year of 1998 were $5.5
billion and $21.4 billion, respectively, compared with $5.5 billion and $20.0
billion for the same periods last year.
ASSETS/SHAREHOLDERS' EQUITY
- ---------------------------
Assets at December 31, 1998 were $114.6 billion, compared with $108.2 billion at
year-end 1997. Shareholders' equity was $8.3 billion ($40.25 per share) at
December 31, 1998, compared with $7.9 billion ($36.55 per share) at December 31,
1997.
SHARE REPURCHASE
- ----------------
In the fourth quarter of 1998, CIGNA repurchased 1.0 million shares of its
common stock for $65 million, bringing share repurchase activity for full year
1998 to 12.4 million shares at a cost of $822 million.
<PAGE>
-6-
CIGNA's board of directors recently approved a $500 million increase in share
repurchase authority, which brings the total current authority to approximately
$800 million.
Quarterly earnings are available on CIGNA's home page on the Internet
(http://www.cigna.com).
<PAGE>
<TABLE>
<CAPTION>
CIGNA CORPORATION
COMPARATIVE SUMMARY OF FINANCIAL RESULTS [CIGNA LOGO]
(Dollars in millions, except per share amounts)
- ----------------------------------------------------------------------------------------------------------------------------
Three Months Ended Year Ended
December 31, December 31,
1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Premiums and fees $ 4,304 $ 4,140 $ 16,413 $ 14,935
Net investment income 915 1,073 3,705 4,245
Other revenues 227 193 847 691
Gain on sale of business (1) - - 316 -
Realized investment gains 33 86 156 167
- ----------------------------------------------------------------------------------------------------------------------------
Total $ 5,479 $ 5,492 $ 21,437 $ 20,038
- -----------------------------------------------------------================================================================
OPERATING INCOME (LOSS) BY SEGMENT (1)(2)(3)
Employee Health Care, Life and Disability Benefits:
Indemnity operations $ 95 $ 94 $ 314 $ 297
HMO operations 89 (41) 303 128
----------- ---------- ----------- ------------
Total Employee Health Care, Life and
Disability Benefits 184 53 617 425
Employee Retirement Benefits and Investment Services 64 64 248 230
International Life, Health and Employee Benefits (13) 6 17 21
Property and Casualty:
International (29) 19 (13) 106
Domestic 13 26 85 98
----------- ---------- ----------- ------------
Ongoing operations (16) 45 72 204
Run-off operations (2) 0 (2) 1
----------- ---------- ----------- ------------
Total Property and Casualty (18) 45 70 205
Other Operations 21 49 313 180
Corporate (22) (38) (75) (90)
- ----------------------------------------------------------------------------------------------------------------------------
Total $ 216 $ 179 $ 1,190 $ 971
- -----------------------------------------------------------================================================================
NET INCOME (LOSS) BY SEGMENT (1)(3)
Employee Health Care, Life and Disability Benefits:
Indemnity operations $ 94 $ 109 $ 368 $ 314
HMO operations 89 (41) 303 128
----------- ---------- ----------- ------------
Total Employee Health Care, Life and
Disability Benefits 183 68 671 442
Employee Retirement Benefits and Investment Services 70 71 273 245
International Life, Health and Employee Benefits (11) 7 17 23
Property and Casualty:
International (21) 30 (23) 141
Domestic 18 26 94 112
----------- ---------- ----------- ------------
Ongoing operations (3) 56 71 253
Run-off operations (2) (1) 10 (1)
----------- ---------- ----------- ------------
Total Property and Casualty (5) 55 81 252
Other Operations 23 78 322 215
Corporate (22) (39) (72) (91)
- ----------------------------------------------------------------------------------------------------------------------------
Total $ 238 $ 240 $ 1,292 $ 1,086
- -----------------------------------------------------------================================================================
DILUTED EARNINGS PER SHARE:
Operating income $ 1.04 $ 0.81 $ 5.58 $ 4.36
After-tax realized investment gains 0.10 0.28 0.47 0.52
- ----------------------------------------------------------------------------------------------------------------------------
Net income $ 1.14 $ 1.09 $ 6.05 $ 4.88
- -----------------------------------------------------------================================================================
Weighted average shares (in thousands) 208,072 220,863 213,447 222,513
- -----------------------------------------------------------================================================================
SHAREHOLDERS' EQUITY at December 31: $ 8,277 $ 7,932
- -----------------------------------------------------------------------------------------------============================
SHAREHOLDERS' EQUITY PER SHARE at December 31: $ 40.25 $ 36.55
- -----------------------------------------------------------------------------------------------============================
<FN>
(1) Reflects the 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.
(3) Segment results reflect the adoption of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". The key changes are that: 1)
CIGNA's international life, health and employee benefits operations are reported
as a separate segment and 2) most businesses previously reported in the
Individual Financial Services segment have been reclassified to Other Operations
as a result of the January 1998 sale of the individual life insurance and
annuity business. In addition, unallocated corporate income and expenses
(primarily interest), which were previously included in Other Operations, are
now presented as Corporate.
</FN>
</TABLE>
<PAGE>
CIGNA Corporation Exhibit 1
Supplemental Financial Information
Financial Data Excluding Specific Adjustments - Results of Operations
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Employee
Retirement International
Employee Health Care, Life & Benefits & Life, Health
Disability Benefits Investment & Emp.
Indemnity HMOs Total Svcs. Benefits
Three months ended December 31, 1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income (loss) before adjustments (1) $95 $97 $89 $42 $184 $139 $64 $59 ($12) $6
Adjustments: increase (decrease)
Restructuring charge - - - - - - - - (1) -
Healthcare restructuring and integration charge - (5) - (75) - (80) - - - -
Tax and other account reviews - 2 - (8) - (6) - 5 - -
--------------------------------------------------------------------------------
Operating income (loss) as published 95 94 89 (41) 184 53 64 64 (13) 6
--------------------------------------------------------------------------------
After-tax realized investment gains (losses) (1) 15 - - (1) 15 6 7 2 1
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $94 $109 $89 ($41) $183 $68 $70 $71 ($11) $7
===================================================================================================================================
Diluted
Property & Other Earnings
Casualty Operations Corporate Consolidated Per Share
Three months ended December 31, 1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
-------------------------------------------------------------------------------
Operating income (loss) before adjustments (1) $0 $49 $21 $42 ($22) ($35) $235 $260 $1.13 $1.18
Adjustments: increase (decrease)
Restructuring charge (18) - - - - - (19) - (0.09) -
Healthcare restructuring and integration charge - - - - - - - (80) - (0.37)
Tax and other account reviews - (4) - 7 - (3) - (1) - -
--------------------------------------------------------------------------------
Operating income (loss) as published (18) 45 21 49 (22) (38) 216 179 1.04 0.81
--------------------------------------------------------------------------------
After-tax realized investment gains (losses) 13 10 2 29 - (1) 22 61 0.10 0.28
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) ($5) $55 $23 $78 ($22) ($39) $238 $240 $1.14 $1.09
===================================================================================================================================
Employee
Retirement International
Employee Health Care, Life & Benefits & Life, Health
Disability Benefits Investment & Emp.
Indemnity HMOs Total Svcs. Benefits
Year ended December 31, 1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
--------------------------------------------------------------------------------
Operating income (loss) before adjustments (1) $314 $300 $303 $211 $617 $511 $248 $225 $18 $21
Adjustments: increase (decrease)
Gain on sale of business - - - - - - - - - -
Restructuring charge - - - - - - - - (1) -
Healthcare restructuring and integration charge - (5) - (75) - (80) - - - -
Tax and other account reviews - 2 - (8) - (6) - 5 - -
--------------------------------------------------------------------------------
Operating income (loss) as published 314 297 303 128 617 425 248 230 17 21
--------------------------------------------------------------------------------
After-tax realized investment gains (losses) 54 17 - - 54 17 25 15 - 2
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $368 $314 $303 $128 $671 $442 $273 $245 $17 $23
===================================================================================================================================
Diluted
Property & Other Earnings
Casualty Operations Corporate Consolidated Per Share
Year ended December 31, 1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
-------------------------------------------------------------------------------
Operating income (loss) before adjustments (1) $88 $209 $111 $173 ($75) ($87) $1,007 $1,052 $4.72 $4.73
Adjustments: increase (decrease)
Gain on sale of business - - 202 - - - 202 - 0.95 -
Restructuring charge (18) - - - - - (19) - (0.09) -
Healthcare restructuring and integration charge - - - - - - - (80) - (0.37)
Tax and other account reviews - (4) - 7 - (3) - (1) - -
--------------------------------------------------------------------------------
Operating income (loss) as published 70 205 313 180 (75) (90) 1,190 971 5.58 4.36
--------------------------------------------------------------------------------
After-tax realized investment gains (losses) 11 47 9 35 3 (1) 102 115 0.47 0.52
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $81 $252 $322 $215 ($72) ($91) $1,292 $1,086 $6.05 $4.88
===================================================================================================================================
<FN>
(1) Operating income by segment (before adjustments) using the previous segment
presentation is as follows (see Exhibit 3):
</FN>
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31, December 31,
======================= =======================
1998 1997 1998 1997
======= ======= ======= =======
<S> <C> <C> <C> <C>
Employee Life and Health Benefits $ 184 $ 139 $ 616 $ 510
Employee Retirement and Savings Benefits 59 56 230 216
Individual Financial Services 33 52 151 198
Property and Casualty (12) 55 106 230
Other Operations (29) (42) (96) (102)
- -------------------------------------------------------------------------------------------------------
Total $ 235 $ 260 $ 1,007 $ 1,052
=======================================================================================================
</TABLE>
<PAGE>
Exhibit 2
CIGNA Corporation
-----------------
Guide to New Segment Presentation
---------------------------------
Previous Presentation
- ---------------------
Employee Life and Health Benefits (EL&HB)
o Managed medical and dental care products
o Group indemnity health insurance and related services
o Group life, accident and disability insurance
Employee Retirement and Savings Benefits (ER&SB)
o Retirement and investment products and services
Individual Financial Services
o Individual life insurance and annuity business, including gains related to the
sale of this business
o Corporate life insurance (leveraged and non-leveraged) business
o Life, accident and health reinsurance operations
Property and Casualty
o Commercial property-casualty, accident and health, and risk management
services, including domestic (ongoing and run-off) and international
operations
o International life, health and employee benefits services
Other Operations
o Settlement annuity business
o Certain new business initiatives
o Unallocated corporate income and expenses
New Presentation Effective for December 31, 1998
- ------------------------------------------------
Employee Health Care, Life and Disability Benefits
o No significant change from previous presentation for EL&HB
Employee Retirement Benefits and Investment Services
o New presentation for ER&SB also includes non-leveraged corporate life
insurance business (previously reported in the Individual Financial Services
segment)
Individual Financial Services
o Sale of individual life insurance and annuity business eliminates this segment
International Life, Health and Employee Benefits
o International life, health, and employee benefits services (previously
included in the Property and Casualty segment)
Property and Casualty
o Commercial property-casualty, accident and health, and risk management
services, including domestic (ongoing and run-off) and international
operations
o In January 1999, CIGNA entered into an agreement to sell the businesses which
comprise this segment
Other Operations
o Individual life insurance and annuity business, including gains related to the
sale of this business
o Leveraged corporate life insurance business
o Life, accident and health reinsurance operations
o Settlement annuity business
o Certain new business initiatives
Corporate
o Unallocated corporate income and expenses
<PAGE>
<TABLE>
<CAPTION>
Exhibit 3
CIGNA Corporation
Guide to New Segment Presentation (Excluding Specific Adjustments Noted on Exhibit 1)
======================================================================================
Three Months Ended Year Ended
December 31, December 31,
================== =================
1998 1997 1998 1997
==== ==== ==== ====
<S> <C> <C> <C> <C>
OPERATING INCOME (LOSS) AFTER INCOME TAXES
Employee Health Care, Life and Disability Benefits (EHL&DB)
- -----------------------------------------------------------
Previous segment presentation $184 $139 $616 $510
add: Business previously reported in IFS - - 1 1
------ ------ ------ ------
Total EHL&DB 184 139 617 511
------ ------ ------ ------
Employee Retirement Benefits and Investment Services (ERB&IS)
- -------------------------------------------------------------
Previous segment presentation 59 56 230 216
add: non-leveraged corporate life ins. (previously reported in IFS) 5 3 18 9 (A)
------ ------ ------ ------
Total ERB&IS 64 59 248 225
------ ------ ------ ------
Individual Financial Services (IFS) (no longer a segment)
- ----------------------------------------------------------
Previous segment presentation 33 52 151 198
less: IFS business now reported in EHL&DB - - (1) (1)
less: non-leveraged corporate life ins. (now reported in ERB&IS) (5) (3) (18) (9)(A)
less: business sold (including gains in 1998; now reported in Other) (17) (26) (68) (96)(B)
less: Reinsurance and leveraged corporate life ins. (now reported in Other) (11) (23) (64) (92)(C)
------ ------ ------ ------
Total IFS - - - -
------ ------ ------ ------
International Life, Health and Employee Benefits (new segment) (12) 6 18 21 (D)
- -------------------------------------------------------------- ------ ------ ------ ------
Property and Casualty (P&C)
- ---------------------------
Previous segment presentation (12) 55 106 230
less: International life, health and EB businesses (reported in new segment) 12 (6) (18) (21)(D)
------ ------ ------ ------
Total Property and Casualty 0 49 88 209
------ ------ ------ ------
Other Operations
- ----------------
Previous segment presentation (29) (42) (96) (102)
add: IFS business sold (including gains in 1998; previously reported in IFS) 17 26 68 96 (B)
add: Reinsurance and leveraged corporate life ins. (previously reported in IFS) 11 23 64 92 (C)
less: unallocated corporate income and expenses (reported separately) 22 35 75 87 (E)
------ ------ ------ ------
Total Other Operations 21 42 111 173
------ ------ ------ ------
Corporate (unalloc. corp. income and expenses; previously in Other) (22) (35) (75) (87)(E)
- ------------------------------------------------------------------- ------ ------ ------ ------
Total $235 $260 $1,007 $1,052
===============================================================================================================================
<FN>
Note: The alphabetical references in the far right column demonstrate the
changes in segment presentation, i.e. (A) to (A), (B) to (B), etc.
</FN>
</TABLE>
