EXHIBIT 20
NEWS RELEASE [CIGNA Logo]
----------------------------------------------------------------------
For Release: Immediate
Contact: Edwin J. Detrick, Investor Relations - (215) 761-6130
Wendell Potter, Media Relations - (215) 761-4450
CIGNA REPORTS SECOND QUARTER RESULTS
PHILADELPHIA, August 1, 2000 -- CIGNA Corporation (NYSE:CI) today reported
second quarter 2000 operating income* from continuing operations of $279
million, or $1.71 per share, excluding the after-tax charges of $127 million
noted below. On this basis, earnings per share for the second quarter of 2000
increased 40% over earnings per share of $1.22 for the second quarter of 1999,
excluding an after-tax gain of $43 million associated with the sale of a partial
interest in a business.
During the second quarter of 2000, CIGNA sold a portion of its reinsurance
business for approximately $170 million and placed its retained reinsurance
business in run-off. The sale resulted in an after-tax gain of approximately $85
million that will be recognized over the next 10 to 15 years.
Operating income for the second quarter, as described above, excludes
non-recurring after-tax charges of $127 million associated with the run-off
reinsurance business principally for reserve strengthening for certain lines of
business.
For the first half of 2000, operating income from continuing operations was $544
million ($3.27 per share), excluding the $127 million in non-recurring charges
noted above, compared with $480 million ($2.33 per share) in the first half of
1999, excluding the $43 million gain noted above.
"Our health care operation continued to experience good profitability and good
growth in business volume as measured by the addition of nearly one million
medical members over the last 12 months," said H. Edward Hanway, CIGNA's chief
executive officer. "Additionally, the recent sale of a portion of our
reinsurance business has further sharpened the focus and commitment we have on
our employee benefits strategy".
HIGHLIGHTS OF CONSOLIDATED SECOND QUARTER 2000 RESULTS:
o Consolidated revenues of $5.0 billion increased 6% over the second quarter
of 1999, excluding the results of discontinued operations* in 1999.
Consolidated revenues for the first half of 2000 were $9.9 billion, up 7%,
compared with $9.2 billion for the same period last year, excluding the
results of discontinued operations.
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2
o Consolidated premiums and fees increased 9% and 10% for the second quarter
and first half of 2000, respectively, compared with the same periods in the
prior year. The increases were primarily due to business growth in the
Employee Health Care, Life and Disability Benefits segment.
o The company repurchased 5.6 million shares of its common stock for $479
million during the second quarter and 1.1 million shares for $106 million
in July 2000. Repurchases through July resulted in an 8% decrease in shares
outstanding since December 31, 1999. Total available repurchase authority
was approximately $630 million at August 1, 2000.
o Assets at June 30, 2000 increased to $96.5 billion from $95.3 billion at
December 31, 1999.
HIGHLIGHTS OF SEGMENT RESULTS:
Employee Health Care, Life and Disability Benefits
--------------------------------------------------
o This segment includes CIGNA's HMO and Indemnity operations. HMO includes
medical and dental managed care and specialty health care operations.
Indemnity includes medical and dental indemnity, disability, and group life
insurance operations.
After-Tax Operating Income ($ millions):
<TABLE>
<CAPTION>
Pro forma*
Second Qtr. Second Qtr. Second Qtr.
2000 1999 Change 1999 Change
---- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
HMO $125 $105 19% $102 23%
Indemnity 71 79 (10)% 76 (7)%
Goodwill (15) (16) (6)% (16) (6)%
---- ---- ----
Total Segment $181 $168 8% $162 12%
==== ==== ====
</TABLE>
o Operating income for the segment increased by 12% in the quarter, compared
with pro forma operating income* for the same period last year.
o For the first half of 2000, operating income was $356 million, compared
with $321 million (pro forma of $309 million) for the same period last
year.
o HMO operating income increased 23% over pro forma HMO operating income for
the same quarter of 1999. This increase was largely attributable to
membership growth and rate increases in the medical managed care business
and higher earnings in the specialty health care operations.
o The HMO results included net favorable after-tax adjustments from account
and tax reviews of $6 million and $11 million, respectively, in the second
quarter and first half of 2000 and $6 million and $12 million in the same
periods of 1999.
o Indemnity operating income decreased 7% from pro forma Indemnity operating
income for the second quarter of 1999. The results reflect lower earnings
on long-term disability business, primarily due to unfavorable
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3
claims experience, partially offset by higher earnings from alternative
funding health care products (Administrative Services Only (ASO)) and
experience-rated business.
o The after-tax operating margin* for the segment was 5.1%, which was stable
with the second quarter of 1999.
Premiums and Premium Equivalents ($ millions):
Second Qtr. Second Qtr.
2000 1999 Change
------ ----- ------
HMO $3,353 $3,039 10%
Indemnity 4,369 3,938 11%
------ -----
Total Segment $7,722 $6,977 11%
====== ======
o Due to CIGNA's business mix, which has a large concentration of
experience-rated and ASO business with self-insured customers, rather than
fully insured business, management believes that business volume is best
measured by premiums and fees plus premium equivalents. Premium equivalents
generally equal paid claims under alternative funding programs, where
CIGNA's customers assume all or a portion of the responsibility for funding
claims. CIGNA would have recorded the amount of these paid claims as
additional premiums if these programs had been written as guaranteed cost
(full risk) business.
o Premiums and premium equivalents increased by 11% in the quarter, compared
with the second quarter of 1999, primarily due to membership growth, rate
increases and the effect of higher medical costs under alternative funding
programs.
Membership (thousands):
<TABLE>
<CAPTION>
June 30, June 30, Dec. 31,
2000 1999 Change 1999 Change
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
HMO 7,108 6,637 7% 6,740 5%
Indemnity (est.) 6,956 6,452 8% 6,617 5%
------ ------ ------
Total Medical Lives 14,064 13,089 7% 13,357 5%
====== ====== ======
</TABLE>
o Total medical membership increased by nearly one million lives, compared
with the same period last year, about evenly split between HMO and
Indemnity coverages.
o At June 30, 2000, approximately 20% of CIGNA's 14.1 million covered medical
lives were covered by guaranteed cost indemnity and managed care
arrangements (Commercial HMO, Medicare, Medicaid) where CIGNA assumes the
risk for medical cost inflation.
Other Statistics:
<TABLE>
<CAPTION>
Second Qtr. Second Qtr. First Qtr.
2000 1999 2000
----- ----- -----
<S> <C> <C> <C>
Commercial HMO Medical Risk Loss Ratio 84.6% 84.8% 84.0%
HMO Administrative Expense Ratio 10.3% 10.6% 10.2%
</TABLE>
<PAGE>
4
o The Commercial HMO medical risk loss ratio remained relatively stable,
compared with the same period last year and the first quarter of 2000.
o Average net premium yields (i.e., rate increases net of reductions in
benefits) for the Commercial HMO business were increasing at 8% in the
quarter compared with the second quarter of 1999.
o The rate of commercial medical cost inflation is approximately 8%,
unchanged from the first quarter of 2000. Outpatient and pharmacy
(utilization and unit cost increases) continue to be the primary factors
that are driving medical cost inflation.
o The expense ratio for HMO remained relatively stable compared with the
second quarter of 1999 and the first quarter of 2000.
Employee Retirement Benefits and Investment Services
----------------------------------------------------
o This segment, which operates in the defined contribution, defined benefit
and corporate life insurance markets, had operating income of $64 million
in the second quarter of 2000, compared with $67 million for the same
period last year, which included a favorable non-recurring $3 million
after-tax adjustment in 1999. The flat underlying results in the quarter
reflect higher earnings from an increased asset base, offset by increased
operating expenses and a shift of assets to lower margin products (separate
account equity funds). For the first half of 2000 and 1999, operating
income was $129 million and $130 million, respectively.
o Assets under management at June 30, 2000 were $57 billion, an increase of
5% compared with $54 billion as of June 30, 1999 and an increase of 2%
compared with $56 billion as of December 31, 1999.
o The ratio of annualized underlying segment operating income to average
assets under management was approximately 45 basis points for the quarter,
compared with 47 basis points for full year 1999.
International Life, Health and Employee Benefits
------------------------------------------------
o This segment, which includes CIGNA's life insurance and employee benefits
businesses operating in select international markets, had operating income
of $10 million in the second quarter of 2000, compared with $1 million for
the same period last year, excluding an after-tax gain of $43 million in
1999 associated with the sale of a partial interest in CIGNA's Japanese
life insurance business. The segment's operating income for the first half
of 2000 was $18 million, compared with $4 million in the first half of
1999, excluding the gain mentioned above.
o The improvement in operating income for 2000 primarily reflects the absence
of losses from a Brazilian health care operation that CIGNA exited in 1999
(1999 results included losses of approximately $9 million in the second
quarter and $15 million in the six months).
o Premiums and fees of $537 million increased 29% in the quarter, compared
with $416 million in the second quarter of 1999, primarily reflecting
growth in the Japanese life insurance operation, growth in life and group
benefits business in other Asian operations, and higher premiums and fees
for products related to expatriate employees of multinational companies.
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5
Other Operations
----------------
o Other Operations includes gain recognition related to the sale of the
individual life insurance and annuity business and the sale of a portion of
the reinsurance business. It also includes the results of the leveraged
corporate life insurance operation, the reinsurance business (including the
sold reinsurance operations prior to the date of sale), and the settlement
annuity business.
o Other Operations reported operating income of $31 million in the second
quarter of 2000, excluding the $127 million of after-tax charges associated
with the run-off reinsurance business noted above. These operating results
compared with $42 million for the same period last year. The decrease in
the quarter reflects lower results from the reinsurance business (excluding
the special charges). For the six months ended June 30, 2000, Other
Operations reported operating income of $59 million, excluding the $127
million in after-tax charges noted above, compared with $76 million
reported for the six months ended June 30, 1999.
Corporate
---------
o Corporate includes unallocated investment income and parent company
expenses, primarily debt service. For 1999, Corporate also includes certain
overhead expenses previously allocated to the sold property and casualty
businesses that are allocated to the remaining business segments beginning
in 2000.
o Corporate had a loss of $7 million in the second quarter of 2000, compared
with a loss of $27 million for the same period last year. The reduced
operating loss in the quarter primarily reflects higher net investment
income on unallocated corporate investments (attributable to the sale of
the property and casualty business) and reduced overhead expenses, as noted
above. The operating loss for the first half of 2000 was $18 million,
compared with a loss of $51 million for the same period last year.
NET INCOME
o Consolidated net income* for the quarter was $161 million, or $0.99 per
share, compared with $232 million, or $1.13 per share, for the same period
last year. For the first half of 2000, consolidated net income was $432
million, or $2.60 per share, compared with $420 million, or $2.04 per
share, for the same period last year.
Quarterly earnings and conference call information are available on CIGNA's web
site (http://www.cigna.com) in the Investor Relations section.
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6
* Notes:
1. Operating income (loss) is defined as net income (loss) excluding after-tax
realized investment results and the cumulative effect of an accounting
change in 1999.
2. All earnings per share amounts are on a diluted basis.
3. On July 2, 1999, CIGNA sold its domestic and international Property and
Casualty business to ACE Limited. In 1999, CIGNA began reporting this
business as discontinued operations.
4. Pro forma 1999 operating income for the Employee Health Care, Life and
Disability Benefits segment includes overhead expenses that were reported
in the Corporate segment until 2000, when these expenses were allocated to
the operating segments. Pro forma Indemnity and HMO results each include
expenses of $3 million after-tax and $6 million after-tax for the second
quarter and first half of 1999, respectively.
5. Operating margin is defined as operating income divided by revenue,
excluding realized investment gains.
6. Consolidated net income includes the charges and gains, noted above,
recognized during 2000 and 1999, and the $91 million after-tax charge in
1999 for the cumulative effect of adopting a new accounting standard,
primarily related to the sold property and casualty business.
7. CIGNA made certain segment reclassifications, effective 1/1/2000. See
Exhibit 1 for additional information.
<PAGE>
<TABLE>
<CAPTION>
CIGNA CORPORATION Exhibit 1
COMPARATIVE SUMMARY OF FINANCIAL RESULTS [LOGO]
(Dollars in millions, except per share amounts)
------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES (Excluding discontinued operations)
Premiums and fees $ 4,056 $ 3,720 $ 8,045 $ 7,320
Net investment income 734 734 1,450 1,455
Other revenues 168 157 345 335
Gain on sale of business (1) -- 66 -- 66
Realized investment gains 13 13 22 24
------------------------------------------------------------------------------------------------------------------------------------
Total $ 4,971 $ 4,690 $ 9,862 $ 9,200
-----------------------------------------------------------------------------=======================================================
OPERATING INCOME (LOSS) BY SEGMENT (2) (3) (Excluding
discontinued operations)
Employee Health Care, Life and Disability Benefits:
Indemnity operations (4) $ 65 $ 73 $ 126 $ 132
HMO operations 116 95 230 189
--------- --------- --------- ---------
Total Employee Health Care, Life and Disability Benefits 181 168 356 321
Employee Retirement Benefits and Investment Services 64 67 129 130
International Life, Health and Employee Benefits 10 44 18 47
Other Operations (4) (5) (96) 42 (68) 76
Corporate (7) (27) (18) (51)
------------------------------------------------------------------------------------------------------------------------------------
Total $ 152 $ 294 $ 417 $ 523
-----------------------------------------------------------------------------=======================================================
INCOME (LOSS) FROM CONTINUING OPERATIONS (3)
Employee Health Care, Life and Disability Benefits:
Indemnity operations (4) $ 73 $ 76 $ 142 $ 141
HMO operations 112 95 225 189
--------- --------- --------- ---------
Total Employee Health Care, Life and Disability Benefits 185 171 367 330
Employee Retirement Benefits and Investment Services 72 73 135 137
International Life, Health and Employee Benefits 9 43 17 46
Other Operations (4) (5) (98) 43 (69) 77
Corporate (7) (27) (18) (51)
------------------------------------------------------------------------------------------------------------------------------------
Total $ 161 $ 303 $ 432 $ 539
-----------------------------------------------------------------------------=======================================================
DILUTED EARNINGS PER SHARE:
Operating income (Excluding discontinued operations) $ 0.93 $ 1.43 $ 2.51 $ 2.53
After-tax realized investment gains (Excluding discontinued operations) 0.06 0.05 0.09 0.08
------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 0.99 1.48 2.60 2.61
Loss from discontinued operations -- (0.35) -- (0.13)
------------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting change 0.99 1.13 2.60 2.48
Cumulative effect of accounting change, net of taxes -- -- -- (0.44)
------------------------------------------------------------------------------------------------------------------------------------
Net income $ 0.99 $ 1.13 $ 2.60 $ 2.04
-----------------------------------------------------------------------------=======================================================
Weighted average shares (in thousands) 163,177 205,083 166,250 206,385
-----------------------------------------------------------------------------=======================================================
SHAREHOLDERS' EQUITY at June 30: $ 5,466 $ 7,341
-----------------------------------------------------------------------------------------------------------=========================
SHAREHOLDERS' EQUITY PER SHARE at June 30: $ 34.68 $ 36.87
-----------------------------------------------------------------------------------------------------------=========================
<FN>
(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 operation.
(2) Operating income (loss) is defined as net income (loss) excluding after-tax realized investment results, and, in 1999, the
cumulative effect of adopting a new accounting pronouncement.
(3) In 1999, corporate overhead which would have been allocated to the P&C segment had the sale to ACE Limited not occurred was
reported in Corporate (other operating expenses). Effective January 1, 2000, this overhead was allocated to the operating segments.
See Exhibit 2 for additional information.
(4) Effective January 1, 2000, CIGNA combined the operations of one of its new business initiatives (Integrated Care, the results of
which had been previously reported in Other Operations) with a business reported in the Employee Health Care, Life and Disability
Benefits segment. Integrated Care's after-tax operating loss of $5 million for the three months ended June 30, 1999 and $9 million
for the six months ended June 30, 1999 was reclassified to conform with this new presentation. See Exhibit 2 for additional
information.
(5) In the second quarter of 2000, CIGNA recognized an after-tax charge of $127 million for the retained reinsurance business
relating to reserve strengthening and certain restructuring costs.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CIGNA Corporation Exhibit 2
Supplemental Financial Information
Financial Data Excluding Specific Adjustments - Results of Operations
(Dollars in millions, except per share amounts)
Employee Health Care, Life & Disability Benefits Employee
Retirement Benefits
Indemnity HMOs Total & Investment Svcs.
Three months ended June 30, 2000 1999 2000 1999 2000 1999 2000 1999
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income (loss) prior to reclassification $ 65 $ 78 $ 116 $ 95 $ 181 $ 173 $ 64 $ 67
Reclassification for Integrated Care -- (5) -- -- -- (5) -- --
---------------------------------------------------------------------------
Operating income (loss) as published 65 73 116 95 181 168 64 67
Charges for the retained reinsurance business -- -- -- -- -- -- -- --
Gain on sale of Japanese life insurance operation -- -- -- -- -- -- -- --
Pro forma overhead costs previously
allocated to Corporate* -- (3) -- (3) -- (6) -- (1)
---------------------------------------------------------------------------
Operating income (loss) as adjusted $ 65 $ 70 $ 116 $ 92 $ 181 $ 162 $ 64 $ 66
===========================================================================
<CAPTION>
Employee Health Care, Life & Disability Benefits Employee
Retirement Benefits
Indemnity HMOs Total & Investment Svcs.
Six months ended June 30, 2000 1999 2000 1999 2000 1999 2000 1999
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income (loss) prior to reclassification $ 126 $ 141 $ 230 $ 189 $ 356 $ 330 $ 129 $ 130
Reclassification for Integrated Care -- (9) -- -- -- (9) -- --
---------------------------------------------------------------------------
Operating income (loss) as published 126 132 230 189 356 321 129 130
Charges for the retained reinsurance business -- -- -- -- -- -- -- --
Gain on sale of Japanese life insurance operation -- -- -- -- -- -- -- --
Pro forma overhead costs previously
allocated to Corporate* -- (6) -- (6) -- (12) -- (1)
---------------------------------------------------------------------------
Operating income (loss) as adjusted $ 126 $ 126 $ 230 $ 183 $ 356 $ 309 $ 129 $ 129
===========================================================================
<CAPTION>
International
Life, Health & Other
Emp. Benefits Operations Corporate
Three months ended June 30, 2000 1999 2000 1999 2000 1999
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating income (loss) prior to reclassification $ 10 $ 44 $ (96) $ 37 $ (7) $ (27)
Reclassification for Integrated Care -- -- -- 5 -- --
----------------------------------------------------------
Operating income (loss) as published 10 44 (96) 42 (7) (27)
Charges for the retained reinsurance business -- -- 127 -- -- --
Gain on sale of Japanese life insurance operation -- (43) -- -- -- --
Pro forma overhead costs previously
allocated to Corporate* -- -- -- (1) -- 8
----------------------------------------------------------
Operating income (loss) as adjusted $ 10 $ 1 $ 31 $ 41 $ (7) $ (19)
==========================================================
<CAPTION>
International
Life, Health & Other
Emp. Benefits Operations Corporate
Six months ended June 30, 2000 1999 2000 1999 2000 1999
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating income (loss) prior to reclassification $ 18 $ 47 $ (68) $ 67 $ (18) $ (51)
Reclassification for Integrated Care -- -- -- 9 -- --
----------------------------------------------------------
Operating income (loss) as published 18 47 (68) 76 (18) (51)
Charges for the retained reinsurance business -- -- 127 -- -- --
Gain on sale of Japanese life insurance operation -- (43) -- -- -- --
Pro forma overhead costs previously
allocated to Corporate* -- (1) -- (1) -- 15
----------------------------------------------------------
Operating income (loss) as adjusted $ 18 $ 3 $ 59 $ 75 $ (18) $ (36)
==========================================================
<CAPTION>
Diluted
Earnings
Consolidated Per Share
Three months ended June 30, 2000 1999 2000 1999
--------------------------------------
<S> <C> <C> <C> <C>
Operating income (loss) prior to reclassification $ 152 $ 294 $ 0.93 $ 1.43
Reclassification for Integrated Care -- -- -- --
--------------------------------------
Operating income (loss) as published 152 294 0.93 1.43
Charges for the retained reinsurance business 127 -- 0.78 --
Gain on sale of Japanese life insurance operation -- (43) -- (0.21)
Pro forma overhead costs previously
allocated to Corporate* -- -- -- --
--------------------------------------
Operating income (loss) as adjusted $ 279 $ 251 $ 1.71 $ 1.22
======================================
<CAPTION>
Diluted
Earnings
Consolidated Per Share
Six months ended June 30, 2000 1999 2000 1999
--------------------------------------
<S> <C> <C> <C> <C>
Operating income (loss) prior to reclassification $ 417 $ 523 $ 2.51 $ 2.53
Reclassification for Integrated Care -- -- -- --
--------------------------------------
Operating income (loss) as published 417 523 2.51 2.53
Charges for the retained reinsurance business 127 -- 0.76 --
Gain on sale of Japanese life insurance operation -- (43) -- (0.20)
Pro forma overhead costs previously
allocated to Corporate* -- -- -- --
--------------------------------------
Operating income (loss) as adjusted $ 544 $ 480 $ 3.27 $ 2.33
======================================
<FN>
* In 1999, corporate overhead which would have been allocated to the P&C
segment had the sale to ACE Limited not occurred was reported in Corporate
(other operating expenses). Effective January 1, 2000, this overhead was
allocated to the operating segments. Prior period amounts have not been
restated to reflect this change but are illustrated above on a pro forma
basis.
</FN>
</TABLE>
