Delaware |
06-1059331 |
(State
or other jurisdiction |
(I.R.S.
Employer |
of
incorporation or organization) |
Identification
No.) |
Page
No | ||
PART
I. |
FINANCIAL
INFORMATION |
|
Item
1. Financial Statements |
4 | |
Consolidated
Income Statements |
5 | |
Consolidated
Balance Sheets |
6 | |
Consolidated
Statements of Comprehensive |
||
Income and Changes in Shareholders' Equity |
7 | |
Consolidated
Statements of Cash Flows |
8 | |
Notes
to the Financial Statements |
9 | |
Item
2. Management's Discussion and Analysis |
||
of Financial Condition and Results of Operations |
26 | |
Item
4. Controls and Procedures |
58 | |
PART
II. |
OTHER
INFORMATION |
58 |
Item
6. Exhibits and Reports on Form 8-K |
58 | |
SIGNATURE |
59 | |
EXHIBIT
INDEX |
E-1 |
CIGNA
CORPORATION |
|||||||
CONSOLIDATED
STATEMENTS OF INCOME |
|||||||
(In
millions, except per share amounts) |
|||||||
Three
Months Ended |
|||||||
March
31, |
|||||||
|
2004 |
2003 |
|||||
(As
Restated, See Note 3) |
|||||||
REVENUES |
|||||||
Premiums
and fees |
$ |
3,624 |
$ |
3,915 |
|||
Net
investment income |
603
|
658
|
|||||
Other
revenues |
474
|
358
|
|||||
Realized
investment gains (losses) |
21
|
(31 |
) | ||||
Total
revenues |
4,722
|
4,900
|
|||||
BENEFITS,
LOSSES AND EXPENSES |
|||||||
Benefits,
losses and settlement expenses |
2,964
|
3,249
|
|||||
Policy
acquisition expenses |
64
|
59
|
|||||
Other
operating expenses |
1,375
|
1,311
|
|||||
Total
benefits, losses and expenses |
4,403
|
4,619
|
|||||
INCOME
FROM CONTINUING OPERATIONS |
|||||||
BEFORE
INCOME TAXES |
319
|
281
|
|||||
Income
taxes (benefits): |
|||||||
Current |
142
|
(71 |
) | ||||
Deferred |
(35 |
) |
165
|
||||
Total
taxes |
107
|
94
|
|||||
INCOME
FROM CONTINUING OPERATIONS |
212
|
187
|
|||||
INCOME
FROM DISCONTINUED OPERATIONS |
-
|
48
|
|||||
INCOME
BEFORE CUMULATIVE EFFECT |
|||||||
OF
ACCOUNTING CHANGE |
212
|
235
|
|||||
CUMULATIVE
EFFECT OF ACCOUNTING CHANGE, |
|||||||
NET
OF TAXES |
(139 |
) |
-
|
||||
NET
INCOME |
$ |
73 |
$ |
235 |
|||
EARNINGS
PER SHARE - BASIC |
|||||||
INCOME
FROM CONTINUING OPERATIONS |
$ |
1.51 |
$ |
1.34 |
|||
INCOME
FROM DISCONTINUED OPERATIONS |
-
|
0.34
|
|||||
INCOME
BEFORE CUMULATIVE EFFECT |
|||||||
OF
ACCOUNTING CHANGE |
1.51
|
1.68
|
|||||
CUMULATIVE
EFFECT OF ACCOUNTING CHANGE, |
|||||||
NET
OF TAXES |
(0.99 |
) |
-
|
||||
NET
INCOME |
$ |
0.52 |
$ |
1.68 |
|||
EARNINGS
PER SHARE - DILUTED |
|||||||
INCOME
FROM CONTINUING OPERATIONS |
$ |
1.50 |
$ |
1.34 |
|||
INCOME
FROM DISCONTINUED OPERATIONS |
-
|
0.34
|
|||||
INCOME
BEFORE CUMULATIVE EFFECT |
|||||||
OF
ACCOUNTING CHANGE |
1.50
|
1.68
|
|||||
CUMULATIVE
EFFECT OF ACCOUNTING CHANGE, |
|||||||
NET
OF TAXES |
(0.98 |
) |
-
|
||||
NET
INCOME |
$ |
0.52 |
$ |
1.68 |
|||
DIVIDENDS
DECLARED PER SHARE |
$ |
0.33 |
$ |
0.33 |
|||
The
accompanying Notes to the Financial Statements are an integral part of
these statements. |
CIGNA
CORPORATION |
|||||||||||||
CONSOLIDATED
BALANCE SHEETS |
|||||||||||||
(In
millions, except per share amounts) |
|||||||||||||
As
of |
As
of |
||||||||||||
March
31, |
December
31, |
||||||||||||
2004 |
2003 |
||||||||||||
(As Restated, See Note 3) | |||||||||||||
ASSETS |
|||||||||||||
Investments: |
|||||||||||||
Fixed maturities, at fair value (amortized cost, $16,754;
$15,772) |
$ |
18,249 |
$ |
17,121 |
|||||||||
Securities supporting experience-rated pension
policyholder |
|||||||||||||
contracts, at fair value (cost, $9,810 and $10,558) |
10,582
|
11,222
|
|||||||||||
Equity securities, at fair value (cost, $121; $47) |
164
|
78
|
|||||||||||
Mortgage loans |
8,563
|
8,655
|
|||||||||||
Policy loans |
1,555
|
1,572
|
|||||||||||
Real estate |
245
|
146
|
|||||||||||
Other long-term investments |
453
|
717
|
|||||||||||
Short-term investments |
116
|
147
|
|||||||||||
Total investments |
39,927
|
39,658
|
|||||||||||
Cash
and cash equivalents |
1,491
|
1,392
|
|||||||||||
Accrued
investment income |
507
|
468
|
|||||||||||
Premiums,
accounts and notes receivable |
2,710
|
3,026
|
|||||||||||
Reinsurance
recoverables |
6,289
|
6,395
|
|||||||||||
Deferred
policy acquisition costs |
612
|
580
|
|||||||||||
Property
and equipment |
936
|
973
|
|||||||||||
Deferred
income taxes |
1,119
|
1,040
|
|||||||||||
Goodwill
|
1,620
|
1,620
|
|||||||||||
Other
assets, including other intangibles |
427
|
447
|
|||||||||||
Separate
account assets |
37,194
|
35,393
|
|||||||||||
Total assets |
$ |
92,832 |
$ |
90,992 |
|||||||||
LIABILITIES |
|||||||||||||
Contractholder
deposit funds |
$ |
26,837 |
$ |
26,979 |
|||||||||
Unpaid
claims and claim expenses |
4,461
|
4,708
|
|||||||||||
Future
policy benefits |
11,550
|
11,545
|
|||||||||||
Unearned
premiums |
327
|
326
|
|||||||||||
Total insurance and contractholder liabilities |
43,175
|
43,558
|
|||||||||||
Accounts
payable, accrued expenses and other liabilities |
6,181
|
5,960
|
|||||||||||
Long-term
debt |
1,513
|
1,500
|
|||||||||||
Nonrecourse
obligations |
101
|
23
|
|||||||||||
Separate
account liabilities |
37,194
|
35,393
|
|||||||||||
Total liabilities |
88,164
|
86,434
|
|||||||||||
CONTINGENCIES
- NOTE 13 |
|||||||||||||
SHAREHOLDERS'
EQUITY |
|||||||||||||
Common
stock (par value per share, $0.25; shares issued, 276;
275) |
69
|
69
|
|||||||||||
Additional
paid-in capital |
3,646
|
3,597
|
|||||||||||
Net
unrealized appreciation, fixed maturities |
$ |
763 |
$ |
610 |
|||||||||
Net
unrealized appreciation, equity securities |
28
|
29
|
|||||||||||
Net
unrealized depreciation, derivatives |
(5 |
) |
(12 |
) |
|||||||||
Net
translation of foreign currencies |
(5 |
) |
(14 |
) |
|||||||||
Minimum
pension liability adjustment |
(780 |
) |
(667 |
) |
|||||||||
Accumulated other comprehensive income (loss) |
1
|
(54 |
) | ||||||||||
Retained
earnings |
9,529
|
9,503
|
|||||||||||
Less
treasury stock, at cost |
(8,577 |
) |
(8,557 |
) | |||||||||
Total shareholders' equity |
4,668
|
4,558
|
|||||||||||
Total liabilities and shareholders' equity |
$ |
92,832 |
$ |
90,992 |
|||||||||
SHAREHOLDERS'
EQUITY PER SHARE |
$ |
33.01 |
$ |
32.42 |
|||||||||
The
accompanying Notes to the Financial Statements are an integral part of
these statements. |
CIGNA
CORPORATION |
|||||||||||||||||||
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME AND CHANGES IN |
|||||||||||||||||||
SHAREHOLDERS' EQUITY |
|||||||||||||||||||
(In
millions) |
|||||||||||||||||||
Three
Months Ended March 31, |
2004
|
2003
|
|||||||||||||||||
Compre-
hensive
Income |
Share-
holders'
Equity |
Compre-
hensive
Income |
Share-
holders'
Equity |
||||||||||||||||
(As Restated, See Note 3) | (As Restated, See Note 3) | ||||||||||||||||||
Common
stock |
$ |
69 |
$ |
68 |
|||||||||||||||
Additional
paid-in capital, January 1 |
3,597
|
3,503
|
|||||||||||||||||
Issuance of common stock for employee benefits plans |
49
|
30
|
|||||||||||||||||
Additional
paid-in capital, March 31 |
3,646
|
3,533
|
|||||||||||||||||
Accumulated
other comprehensive loss, January 1 |
(54 |
) |
(202 |
) | |||||||||||||||
Net unrealized appreciation, fixed maturities |
$ |
153 |
153
|
$ |
68 |
68
|
|||||||||||||
Net unrealized depreciation, equity securities |
(1 |
) |
(1 |
) |
(3 |
) |
(3 |
) | |||||||||||
Net unrealized appreciation on securities |
152
|
65
|
|||||||||||||||||
Net
unrealized appreciation (depreciation), derivatives |
7
|
7
|
(2 |
) |
(2 |
) | |||||||||||||
Net
translation of foreign currencies |
9
|
9
|
14
|
14
|
|||||||||||||||
Minimum
pension liability adjustment |
(113 |
) |
(113 |
) |
-
|
-
|
|||||||||||||
Other comprehensive income |
55
|
77
|
|||||||||||||||||
Accumulated
other comprehensive income (loss), March 31 |
1
|
(125 |
) | ||||||||||||||||
Retained
earnings, January 1 |
9,503
|
9,038
|
|||||||||||||||||
Net income |
73
|
73
|
235
|
235
|
|||||||||||||||
Common dividends declared |
(47 |
) |
(46 |
) | |||||||||||||||
Retained
earnings, March 31 |
9,529
|
9,227
|
|||||||||||||||||
Treasury
stock, January 1 |
(8,557 |
) |
(8,510 |
) | |||||||||||||||
Other treasury stock transactions, net |
(20 |
) |
(28 |
) | |||||||||||||||
Treasury
stock, March 31 |
(8,577 |
) |
(8,538 |
) | |||||||||||||||
TOTAL
COMPREHENSIVE INCOME AND SHAREHOLDERS' EQUITY |
$ |
128 |
$ |
4,668 |
$ |
312 |
$ |
4,165 |
|||||||||||
The
accompanying Notes to the Financial Statements are an integral part of
these statements. |
CIGNA
CORPORATION |
||||||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
||||||||||
(In
millions) |
||||||||||
Three
Months Ended March 31, |
||||||||||
2004 |
2003 |
|||||||||
(As
Restated, See Note 3) |
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES |
||||||||||
Income
from continuing operations |
$ |
212 |
$ |
187 |
||||||
Adjustments
to reconcile income from continuing operations |
||||||||||
to net cash provided by operating activities: |
||||||||||
Insurance
liabilities |
(380 |
) |
(63 |
) | ||||||
Reinsurance
recoverables |
95
|
59
|
||||||||
Deferred
policy acquisition costs |
(27 |
) |
(19 |
) | ||||||
Premiums,
accounts and notes receivable |
294
|
(16 |
) | |||||||
Accounts
payable, accrued expenses and other liabilities |
(78 |
) |
(6 |
) | ||||||
Current
income taxes |
174
|
227
|
||||||||
Deferred
income taxes |
(35 |
) |
165
|
|||||||
Realized
investment (gains) losses |
(21 |
) |
31
|
|||||||
Depreciation
and amortization |
62
|
63
|
||||||||
Gains
on sales of businesses (excluding discontinued operations)
|
(14 |
) |
(17 |
) | ||||||
Proceeds
from sales and maturities of securities supporting |
||||||||||
experience-rated pension policyholder contracts, |
||||||||||
net of purchases |
782
|
-
|
||||||||
Other,
net |
9
|
(59 |
) | |||||||
Net cash provided by operating activities of continuing operations
|
1,073
|
552
|
||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES |
||||||||||
Proceeds
from investments sold: |
||||||||||
Fixed maturities |
650
|
1,616
|
||||||||
Equity securities |
3
|
7
|
||||||||
Mortgage loans |
64
|
319
|
||||||||
Other (primarily short-term investments) |
1,338
|
1,198
|
||||||||
Investment
maturities and repayments: |
||||||||||
Fixed maturities |
187
|
683
|
||||||||
Mortgage loans |
361
|
217
|
||||||||
Investments
purchased: |
||||||||||
Fixed maturities |
(1,482 |
) |
(2,258 |
) | ||||||
Equity securities |
(6 |
) |
(26 |
) | ||||||
Mortgage loans |
(331 |
) |
(498 |
) | ||||||
Other (primarily short-term investments) |
(1,277 |
) |
(1,027 |
) | ||||||
Proceeds
on sales of businesses |
-
|
209
|
||||||||
Property
and equipment, net |
(18 |
) |
(26 |
) | ||||||
Other,
net |
(4 |
) |
-
|
|||||||
Net cash provided by (used in) investing activities of |
||||||||||
continuing operations |
(515 |
) |
414
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES |
||||||||||
Deposits and interest credited to contractholder deposit
funds |
1,677
|
1,679
|
||||||||
Withdrawals and benefit payments from contractholder deposit
funds |
(2,108 |
) |
(1,993 |
) | ||||||
Net change in short-term debt |
-
|
(3 |
) | |||||||
Repayment of long-term debt |
-
|
(117 |
) | |||||||
Issuance of common stock |
19
|
-
|
||||||||
Common dividends paid |
(47 |
) |
(46 |
) | ||||||
Net cash used in financing activities of continuing operations
|
(459 |
) |
(480 |
) | ||||||
Net
increase in cash and cash equivalents |
99
|
486
|
||||||||
Cash
and cash equivalents, beginning of period |
1,392
|
1,575
|
||||||||
Cash
and cash equivalents, end of period |
$ |
1,491 |
$ |
2,061 |
||||||
Supplemental
Disclosure of Cash Information: |
||||||||||
Income taxes received, net |
$ |
(32 |
) |
$ |
(300 |
) | ||||
Interest paid |
$ |
24 |
$ |
28 |
||||||
The
accompanying Notes to the Financial Statements are an integral part of
these statements. |
Three
Months Ended
March 31 |
2004 |
2003 |
|||||||||||
(In
millions) |
As
Reported |
As
Restated |
As
Reported |
As
Restated |
|||||||||
Other
Operating Expenses |
$ |
1,367 |
$ |
1,375 |
$ |
1,310 |
$ |
1,311 |
|||||
Income
from
Continuing Operations |
$ |
217 |
$ |
212 |
$ |
188 |
$ |
187 |
|||||
Net
Income |
$ |
78 |
$ |
73 |
$ |
236 |
$ |
235 |
|||||
Income
from
Continuing Operations
per share |
|||||||||||||
Basic |
$ |
1.55 |
$ |
1.51 |
$ |
1.35 |
$ |
1.34 |
|||||
Diluted |
$ |
1.54 |
$ |
1.50 |
$ |
1.34 |
$ |
1.34 |
|||||
Net
Income per share |
|||||||||||||
Basic |
$ |
0.56 |
$ |
0.52 |
$ |
1.69 |
$ |
1.68 |
|||||
Diluted |
$ |
0.55 |
$ |
0.52 |
$ |
1.68 |
$ |
1.68 |
As
of
March
31, 2004 |
As
of
December
31, 2003 |
||||||||||||
(In
millions) |
As
Reported |
As
Restated |
As
Reported |
As
Restated |
|||||||||
Deferred
Tax Asset |
$ |
1,079 |
$ |
1,119 |
$ |
1,001 |
$ |
1,040 |
|||||
Shareholders’
Equity |
$ |
4,628 |
$ |
4,668 |
$ |
4,519 |
$ |
4,558 |
Three
Months Ended
March
31, |
|||||||
(In
millions, except per share amounts) |
2004 |
2003 |
|||||
(As
Restated) |
|||||||
Net
income as reported |
$ |
73 |
$ |
235 |
|||
Compensation
expense for restricted
stock grants, net of taxes,
included in net income as reported |
4 |
4 |
|||||
Compensation
expense for stock options, net of
taxes, included in net income as reported |
5 |
1 |
|||||
Total
compensation expense for stock
options and restricted stock grants
under fair value method for all
awards, net of taxes |
(14 |
) |
(13 |
) | |||
Pro
forma net income |
$ |
68 |
$ |
227 |
|||
Basic
- as reported |
$ |
0.52 |
$ |
1.68 |
|||
Basic
- pro forma |
$ |
0.49 |
$ |
1.63 |
|||
Diluted - as reported | $ | 0.52 | $ | 1.68 | |||
Diluted
- pro forma |
$ | 0.48 | $ | 1.62 |
FINANCIAL
SUMMARY
(In millions) |
|
Three Months Ended
March
31, 2003 | ||||||||
Income
Statement Data |
||||||||||
Revenues |
$— | |||||||||
Loss
before income tax benefits |
$(3) | |||||||||
Income
tax benefits |
(1) | |||||||||
Loss
from operations |
(2) | |||||||||
Gains
on sales, net of taxes
of $25 |
50 | |||||||||
Income
from discontinued operations |
$48 |
(In
millions) |
Health
Care |
Corporate |
Total |
|||||||
First
quarter 2004 charge: |
||||||||||
Severance |
$ |
39 |
$ |
31 |
$ |
70 |
||||
Real estate and other |
5 |
— |
5 |
|||||||
Total |
44 |
31 |
75 |
|||||||
First
quarter 2004 activity: |
||||||||||
Severance |
(2 |
) |
(4 |
) |
(6 |
) | ||||
Balance
as of March 31, 2004 |
$ |
42 |
$ |
27 |
$ |
69 |
· |
The
reserves represent estimates of the present value of net amounts expected
to be paid, less the present value of net future premiums and investment
returns expected to be received. Included in net amounts expected to be
paid is the excess of the guaranteed death benefits over the values of the
contractholders’ accounts (based on underlying equity and bond mutual fund
investments). |
· |
The
reserves include an estimate for partial surrenders that essentially lock
in the death benefit for a particular policy based on annual election
rates that vary from 0-10% depending on the net amount at risk for each
policy. |
· |
The
mean investment performance assumption is 5% considering CIGNA's program
to reduce equity market exposures using futures and forward contracts
(described below). |
· |
The
volatility assumption is 16-31%, varying by equity fund type; 4-8%,
varying by bond fund type; and 1% for money market
funds. |
· |
The
mortality assumption is 70-75% of the 1994 Group Annuity Mortality table,
with 1% annual improvement beginning January 1,
2000. |
· |
The
lapse rate assumption is 0-15%, depending on contract type, policy
duration and the ratio of the net amount at risk to account
value. |
· |
The
discount rate is 5.75%. |
As
of |
|||||||
(Dollars
in millions) |
March
31, 2004 |
December
31, 2003 |
|||||
Highest
annuity value |
|||||||
Account value |
$ |
40,523 |
$ |
41,497 |
|||
Net amount at risk |
$ |
10,057 |
$ |
10,951 |
|||
Average attained age of contractholders |
65 |
65 |
|||||
Anniversary
value reset |
|||||||
Account value |
$ |
3,188 |
$ |
4,474 |
|||
Net amount at risk |
$ |
278 |
$ |
309 |
|||
Average attained age of contractholders |
59 |
59 |
|||||
Other
|
|||||||
Account value |
$ |
4,472 |
$ |
6,530 |
|||
Net amount at risk |
$ |
1,277 |
$ |
1,660 |
|||
Average attained age of contractholders |
63 |
64 |
|||||
Total |
|||||||
Account value |
$ |
48,183 |
$ |
52,501 |
|||
Net amount at risk |
$ |
11,612 |
$ |
12,920 |
|||
Average attained age of contractholders
(weighted
by exposure) |
64 |
64 |
|||||
Number of contractholders |
1.3
million |
1.4
million |
Three
Months
Ended
March
31, |
|||||||
(In
millions) |
2004 |
2003 |
|||||
Service
cost |
$ |
22 |
$ |
20 |
|||
Interest
cost |
55 |
55 |
|||||
Expected
return on plan
assets |
(48 |
) |
(50 |
) | |||
Amortization
of |
|||||||
net
loss from past
experience |
18 |
6 |
|||||
Net
pension cost |
$ |
47 |
$ |
31 |
Three
Months
Ended
March
31, |
|||||||
(In
millions) |
2004 |
2003 |
|||||
Service
cost |
$ |
1 |
$ |
1 |
|||
Interest
cost |
9 |
11 |
|||||
Expected
return on plan
assets |
(1 |
) |
(1 |
) | |||
Amortization
of prior
service cost |
(4 |
) |
(5 |
) | |||
Net
other postretirement
benefit cost |
$ |
5 |
$ |
6 |
Three
Months
Ended
March
31, |
|||||||
(In
millions) |
2004 |
2003 |
|||||
Fixed
maturities |
$ |
9 |
$ |
(23 |
) | ||
Equity
securities |
2 |
(16 |
) | ||||
Mortgage
loans |
— |
(1 |
) | ||||
Real
estate |
(2 |
) |
(1 |
) | |||
Derivatives
and other |
12 |
10 |
|||||
Realized
investment gains
(losses), before income
taxes (benefits) |
21 |
(31 |
) | ||||
Less
income taxes
(benefits) |
7 |
(10 |
) | ||||
Net
realized investment
gains (losses) |
$ |
14 |
$ |
(21 |
) |
Three
Months
Ended
March
31, |
|||||||
(In
millions) |
2004 |
2003 |
|||||
Proceeds
from sales |
$ |
653 |
$ |
1,623 |
|||
Gross
gains on sales |
$ |
34 |
$ |
55 |
|||
Gross
losses on sales |
$ |
(3 |
) |
$ |
(39 |
) |
· |
length
of time of decline; |
· |
financial
health and specific near term prospects of the issuer; and
|
· |
changes
in the regulatory, economic or general market environment of the issuer’s
industry or geographic region. |
(In millions) |
Fair
Value |
|
Amortized
Cost |
|
Unrealized
Depreciation |
|||||
One
year or less: |
||||||||||
Investment
grade |
$ |
932 |
$ |
950 |
$ |
(18 |
) | |||
Below
investment grade |
$ |
102 |
$ |
107 |
$ |
(5 |
) | |||
More
than one year: |
||||||||||
Investment
grade |
$ |
111 |
$ |
117 |
$ |
(6 |
) | |||
Below
investment grade |
$ |
56 |
$ |
58 |
$ |
(2 |
) |
(In
millions) |
Pre-Tax |
Tax
(Expense) Benefit |
After-Tax
|
|||||||
Three
Months Ended March 31, |
||||||||||
2004 |
||||||||||
Net
unrealized appreciation, securities: |
||||||||||
Unrealized
appreciation on securities held |
$ |
244 |
$ |
(85 |
) |
$ |
159 |
|||
Gains
realized on securities |
(11 |
) |
4 |
(7 |
) | |||||
Net
unrealized appreciation, securities |
$ |
233 |
$ |
(81 |
) |
$ |
152 |
|||
Net
unrealized appreciation, derivatives |
$ |
11 |
$ |
(4 |
) |
$ |
7 |
|||
Net
translation of foreign currencies |
$ |
13 |
$ |
(4 |
) |
$ |
9 |
|||
Minimum
pension liability adjustment |
$ |
(174 |
) |
$ |
61 |
$ |
(113 |
) | ||
2003 |
||||||||||
Net
unrealized appreciation,
securities: |
||||||||||
Unrealized
appreciation on securities held |
$ |
60 |
$ |
(20 |
) |
$ |
40 |
|||
Losses
realized on securities |
39 |
(14 |
) |
25 |
||||||
Net
unrealized appreciation, securities |
$ |
99 |
$ |
(34 |
) |
$ |
65 |
|||
Net
unrealized depreciation, derivatives |
$ |
(3 |
) |
$ |
1 |
$ |
(2 |
) | ||
Net
translation of foreign currencies:
Net
translation on foreign currencies held |
$ |
5 |
$ |
(2 |
) |
$ |
3 |
|||
Foreign
currency translation losses realized
on sales of businesses |
17 |
(6 |
) |
11 |
||||||
Net
translation of foreign currencies |
$ |
22 |
$ |
(8 |
) |
$ |
14 |
(Dollars
in millions, except per share amounts) |
Basic |
Effect
of Dilution |
Diluted |
||||||||||||||||
Three
Months Ended March 31, |
|||||||||||||||||||
2004 |
|||||||||||||||||||
Income
from continuing operations |
$ |
212 |
$ |
— |
$ |
212 |
|||||||||||||
Shares
(in
thousands): |
|||||||||||||||||||
Weighted
average |
139,999 |
— |
139,999 |
||||||||||||||||
Options
and restricted stock grants |
1,305 |
1,305 |
|||||||||||||||||
Total
shares |
139,999 |
1,305 |
141,304 |
||||||||||||||||
EPS |
$ |
1.51 |
$ |
(0.01 |
) |
$ |
1.50 |
||||||||||||
2003 |
|||||||||||||||||||
Income
from continuing operations |
$ |
187 |
$ |
— |
$ |
187 |
|||||||||||||
Shares
(in
thousands): |
|||||||||||||||||||
Weighted
average |
139,691 |
— |
139,691 |
||||||||||||||||
Options
and restricted stock grants |
369 |
369 |
|||||||||||||||||
Total
shares |
139,691 |
369 |
140,060 |
||||||||||||||||
EPS |
$ |
1.34 |
$ |
— |
$ |
1.34 |
Three
Months Ended
March
31, |
|||||||
(In
millions) |
2004 |
2003 |
|||||
Premiums
and fees |
|||||||
Individual
life insurance and
annuity business sold |
$ |
73 |
$ |
78 |
|||
Other |
39 |
45 |
|||||
Total |
$ |
112 |
$ |
123 |
|||
Reinsurance
recoveries |
|||||||
Individual
life insurance and
annuity business sold |
$ |
79 |
$ |
75 |
|||
Other |
38 |
32 |
|||||
Total |
$ |
117 |
$ |
107 |
Three
Months
Ended
March
31, |
|||||||
(In
millions) |
2004 |
2003 |
|||||
Premiums
and fees and other revenues |
|||||||
Health
Care |
$ |
3,095 |
$ |
3,415 |
|||
Disability
and Life |
475 |
423 |
|||||
Retirement |
250 |
90 |
|||||
International
|
241 |
214 |
|||||
Run-off
Reinsurance |
(9 |
) |
79 |
||||
Other
Operations |
65 |
70 |
|||||
Corporate |
(19 |
) |
(18 |
) | |||
Total |
$ |
4,098 |
$ |
4,273 |
|||
Income
(loss) from continuing
operations
|
|||||||
Health
Care |
$ |
156 |
$ |
125 |
|||
Disability
and Life |
35 |
34 |
|||||
Retirement
|
35 |
55 |
|||||
International
|
15 |
10 |
|||||
Run-off
Reinsurance |
(10 |
) |
(15 |
) | |||
Other
Operations |
10 |
20 |
|||||
Corporate
(restated) |
(43 |
) |
(21 |
) | |||
Segment
earnings (restated) |
198 |
208
|
|||||
Realized
investment gains (losses),
net of taxes |
14 |
(21 |
) | ||||
Income
from
continuing operations (restated) |
$ |
212 |
$ |
187 |
· |
CIGNA
guarantees that separate account assets will be sufficient to pay certain
retiree or life benefits. The sponsoring employers are primarily
responsible for ensuring that assets are sufficient to pay these benefits
and are required to maintain assets that exceed a certain percentage of
benefit obligations. This percentage varies depending on the asset class
within a sponsoring employer’s portfolio (for example, a bond fund would
require a lower percentage than a riskier equity fund) and thus will vary
as the composition of the portfolio changes. If employers do not maintain
the required levels of separate account assets, CIGNA has the right to
redirect the management of the related assets to provide for benefit
payments. As of March 31, 2004, employers maintained assets that exceeded
102% to 132% of benefit obligations. Benefit obligations under these
arrangements were $3.5 billion as of March 31, 2004 and December 31, 2003.
There were no additional liabilities required for these guarantees as of
March 31, 2004, or December 31, 2003. |
· |
For
certain employer-sponsored savings and retirement plans, CIGNA guarantees
that participants will receive the value of their accounts at the time of
withdrawal. These guarantees could require payment by CIGNA in the event
that a significant number of plan participants withdraw their accounts
when the market value of the related separate account assets is less than
plan participant account values at the time of withdrawal. Participant
account values under these arrangements are invested primarily in fixed
income investments and were $1.9 billion as of March 31, 2004, and $2.0
billion as of December 31, 2003. There were no additional liabilities
required for these guarantees as of March 31, 2004, or December 31,
2003. |
· |
CIGNA
guarantees a minimum level of earnings (based on investment, mortality and
retirement experience) for a certain group annuity contract. If the actual
investment return is less than the minimum guaranteed level, CIGNA is
required to fund the difference. The guaranteed benefit obligation was
$303 million as of March 31, 2004, and $304 million as of December 31,
2003. CIGNA had additional liabilities for this guarantee of $16 million
as of March 31, 2004, and $15 million as of December 31, 2003. The fair
value of separate accounts assets for this group annuity contract were as
follows: |
(In
millions) |
March
31,
2004 |
December
31, 2003 |
|||||
Fixed
maturities |
$ |
354 |
$ |
342 |
|||
Mortgage
loans |
132 |
134 |
|||||
Other |
2 |
3 |
|||||
Total |
$ |
488 |
$ |
479 |
· |
No
annuitants surrendered their accounts, and |
· |
All
annuitants lived to elect their benefits,
and |
· |
All
annuitants elected to receive their benefit on the first available date
(beginning in 2004 through 2014), and |
· |
All
underlying mutual fund investment values remained at the March 31, 2004
value of $3.3 billion, with no future
returns. |
· |
initiatives
to increase health care regulation; |
· |
efforts
to expand tort liability of health plans; |
· |
class
action lawsuits targeting large corporations, including CIGNA;
|
· |
initiatives
to restrict insurance pricing and the application of underwriting
standards; |
· |
efforts
to change risk-based capital and reserve requirements for variable
annuities, impacting run-off reinsurance operations;
and |
· |
efforts
to revise federal tax laws. |
· |
additional
mandated benefits or services that increase costs without improving the
quality of care; |
· |
narrowing
of ERISA preemption of state laws; |
· |
changes
in ERISA regulations resulting in increased administrative burdens and
costs; |
· |
additional
restrictions on the use of prescription drug formularies;
|
· |
additional
privacy legislation and regulations that interfere with the proper use of
medical information for research, coordination of medical care and disease
management; |
· |
additional
rules establishing the time periods for payment of health care provider
claims that vary from state to state; and |
· |
legislation
that would exempt independent physicians from antitrust
laws. |