Cigna Corporation Stock

CIGNA Corporation Quarterly Statistical Supplement December 31, 2008 This document is dated February 5, 2009. The data contained in this document may not be accurate after such date and CIGNA does not undertake to update or keep it accurate after such date. TABLE OF CONTENTS PAGE 1 2 3 Income and Per Share Data for Periods Ended December 31 Consolidated Income Statements for Periods Ended December 31 Consolidated Balance Sheets Investment Summaries: Summary of Fixed Maturities - Asset Quality / Type - Fair Value Summary of Fixed Maturities - Analysis of Amortized Cost vs. Fair Value Summary of Commercial Mortgage Loan Distribution Stock and Balance Sheet Analyses Condensed Consolidated Statements of Cash Flows Business Segment analysis: Health Care Disability and Life International Run-off Reinsurance Other Operations Corporate 4 5 6 7 8 9 13 14 15 16 17 BASIS OF PRESENTATION: All dollar amounts are in millions, unless otherwise noted. Certain reclassifications have been made to prior year amounts to conform with the 2008 presentation. CIGNA measures the financial results of its segments using "segment earnings (loss)," which is defined as income (loss) from continuing operations before net realized investment gains (losses). Adjusted income (loss) from operations is defined as segment earnings excluding special items, which are identified and quantified on page 1A, and beginning in 2008, also excludes results of CIGNA's guaranteed minimum income benefit business. Prior period results have been reclassified to conform to the new presentation. Adjusted income (loss) from operations is a measure of profitability used by CIGNA's management because it presents the underlying results of operations of CIGNA's businesses and permits trend analysis. This measure is not determined in accordance with generally accepted accounting principles (GAAP) and should not be viewed as a substitute for income (loss) from continuing operations or net income determined in accordance with GAAP. For the year ended December 31, 2008, CIGNA reported income from discontinued operations of $4 million which consisted of the following: - In the fourth quarter of 2008, a gain of $1 million after-tax primarily related to settlement of certain issues related to a past divestiture. - In the third quarter of 2008, a gain of $1 million after-tax primarily for tax settlements related to the sale of its Chilean and Guatemalan operations. - In the second quarter of 2008, a loss of $1 million after-tax primarily related to the sale of its Brazilian life operations. - In the first quarter of 2008, a gain of $3 million after-tax primarily related to settlement of certain issues related to a past divestiture. For the year ended December 31, 2007, CIGNA reported a loss from discontinued operations of $5 million which consisted of the following: - In the third quarter of 2007, a gain of $2 million after-tax related to the completion of an IRS examination associated with the disposition of a business in recent years. - In the second quarter of 2007, a net loss of $19 million after-tax, which consisted of a $23 million after-tax loss associated with the sale of its Chile operations (which was completed in the third quarter of 2007) and a $4 million after-tax gain primarily associated with the disposition of certain real estate investments. - In the first quarter of 2007, a gain of $12 million after-tax related to the disposition of certain real estate investments. CIGNA Corporation Income and Per Share Data (unaudited) (Dollars in millions, except per share amounts) Three Months Ended December 31, 2008 2007 Change Year Ended December 31, 2008 2007 Change ADJUSTED INCOME (LOSS) FROM OPERATIONS (1) Health Care Disability and Life International Run-off Reinsurance Other Operations Corporate Total $ 209 64 44 (179) 23 (29) 132 $ 170 57 45 27 24 (29) 294 23 % 12 (2) (4) (55) % $ 715 275 188 (209) 87 (110) 946 $ 679 248 174 80 104 (107) 1,178 5 % 11 8 (16) (3) (20) % $ $ $ $ NET INCOME (LOSS) Segment Earnings (Loss) Health Care (3) (4) Disability and Life (4) International (4) Run-off Reinsurance (2) Other Operations Corporate (3) Total Net realized investment gains (losses), net of taxes Income (loss) from continuing operations Income (loss) from discontinued operations Net income (loss) $ 182 62 38 (394) 23 (29) (118) (92) (210) 1 (209) $ 170 57 45 10 24 (29) 277 (14) 263 263 7 % 9 (16) (4) (557) - % % $ 664 273 182 (646) 87 (162) 398 (110) 288 4 292 $ 679 254 176 (11) 109 (97) 1,110 10 1,120 (5) 1,115 (2) % 7 3 (20) (67) (64) (74) % (74) % $ $ $ $ $ $ $ $ $ $ $ $ DILUTED EARNINGS PER SHARE Adjusted income from operations (1) Results of guaranteed minimum income benefits business, after-tax (2) Net realized investment gains (losses), net of taxes Special item(s), after-tax (3) (4) Income (loss) from continuing operations Income (loss) from discontinued operations Net income (loss) Weighted Average Shares (in thousands) $ 0.49 (0.80) (0.34) (0.13) (0.78) 0.01 (0.77) 270,112 $ 1.04 (0.06) (0.05) 0.93 0.93 282,683 (53) % (580) - % % (4) % $ 3.42 (1.58) (0.40) (0.40) 1.04 0.01 1.05 276,802 $ 4.08 (0.32) 0.03 0.08 3.88 (0.01) 3.87 288,332 (16) % (394) (73) % (73) % (4) % $ $ $ $ $ $ $ $ (1) Adjusted income (loss) from operations is segment earnings (loss) (income (loss) from continuing operations before net realized investment gains (losses)) excluding results of CIGNA's guaranteed minimum income benefits business and special items. See page 1A for a detailed reconciliation of adjusted income (loss) from operations to segment earnings (loss), consolidated income from continuing operations and consolidated net income presented in accordance with generally accepted accounting principles. (2) The year ended December 31, 2008 includes a pre-tax charge of $202 million ($131 million after-tax) on the adoption of SFAS No. 157 for guaranteed minimum income benefit contracts recorded in the first quarter of 2008. The year ended December 31, 2007 includes a pre-tax charge of $86 million ($56 million after-tax) related to guaranteed minimum income benefits reserves recorded in the second quarter of 2007. (3) The year ended December 31, 2008 includes a pre-tax charge of $80 million ($52 million after-tax) in Corporate for the second quarter of 2008 and a pre-tax charge of $37 million ($24 million after-tax) in Health Care for the first quarter of 2008, both of which related to litigation matters. The year ended December 31, 2007 includes an income tax benefit of $23 million for the third quarter of 2007 related to the completion of an IRS examination. (4) The fourth quarter and year ended December 31, 2008 includes a pre-tax charge of $55 million ($35 million after-tax) related to the cost reduction program. - Pre-tax charge of $44 million ($27 million after-tax) in Health Care; pre-tax charge of $3 million ($2 million after-tax) in Disability and Life; and pre-tax charge of $8 million ($6 million after-tax) in International. 1 CIGNA Corporation Supplemental Financial Information (unaudited) Reconciliation of Adjusted Income from Operations to GAAP Net Income (Dollars in millions, except per share amounts) Diluted Earnings Per Share (1) 4Q08 * 4Q07 3Q08 $ 0.49 $ 1.04 $ 0.89 Quarterly Results: Adjusted income (loss) from operations (2) Results of guaranteed minimum income benefits business, excluding charge on adoption of SFAS No. 157 Special item(s), after-tax: Charge for cost reduction program (3) Consolidated 4Q08 4Q07 3Q08 $ 132 $ 294 $ 246 Health Care 4Q08 4Q07 3Q08 $ 209 $ 170 $ 187 4Q08 $ 64 Disability & Life 4Q07 3Q08 $ 57 $ 70 International 4Q08 4Q07 3Q08 $ 44 $ 45 $ 44 Run-off Reinsurance 4Q08 4Q07 3Q08 $ (179) $ 27 Other Operations 4Q08 4Q07 3Q08 $ 24 $ 20 Corporate 4Q08 4Q07 3Q08 $ (29) $ (29) $ (31) $ (44) $ 23 (0.80) (0.06) (0.22) (215) (17) (61) - - - - - - - - - (215) (17) (61) - - - - - - (0.13) - - (35) - - (27) - - (2) - - (6) - - - - - - - - - - - Segment earnings (loss) (2) Net realized investment gains (losses), net of taxes Income (loss) from continuing operations (4) Income from discontinued operations Net income (loss) (4) (0.44) (0.34) (0.78) 0.01 0.98 (0.05) 0.93 - 0.67 (0.05) 0.62 $ 0.62 (118) (92) (210) 1 277 (14) 263 $ 185 (15) 170 1 171 $ 182 $ 170 $ 187 $ 62 $ 57 $ 70 $ 38 $ 45 $ 44 $ (394) $ 10 $(105) $ 23 $ 24 $ 20 $ (29) $ (29) $ (31) $(0.77) $ 0.93 $(209) $ 263 Year Ended December 31, Adjusted income (loss) from operations (2) Results of guaranteed minimum income benefits business, after-tax: Charge on adoption of SFAS No. 157 Results of guaranteed minimum income benefits business, excluding charge on adoption of SFAS No. 157 (5) Total Special item(s), after-tax: Charge for cost reduction program (3) Charges associated with litigation matters (6) Income tax benefit related to the completion of an IRS examination (7) Diluted Earnings Per Share (1) 2008 2007 $ 3.42 $ 4.08 Consolidated 2008 2007 $ 946 $ 1,178 Health Care 2008 2007 $ 715 $ 679 Disability & Life 2008 $ 275 2007 $ 248 International 2008 2007 $ 188 $ 174 Run-off Reinsurance 2008 2007 $ (209) $ 80 Other Operations 2008 2007 $ 87 $ 104 Corporate 2008 2007 $ (110) $ (107) (0.47) (1.11) (1.58) (0.32) (0.32) (131) (306) (437) (91) (91) - - - - - - (131) (306) (437) (91) (91) - - - - (0.13) (0.27) - 0.08 (35) (76) - 23 (27) (24) - - (2) - 6 (6) - 2 - - - 5 (52) - 10 Segment earnings (loss) (2) Net realized investment gains (losses), net of taxes Income from continuing operations (4) Income (loss) from discontinued operations Net income (4) 1.44 (0.40) 1.04 0.01 $ 1.05 3.85 0.03 3.88 (0.01) $ 3.87 398 (110) 288 4 $ 292 $ 1,110 10 1,120 (5) 1,115 $ 664 $ 679 $ 273 $ 254 $ 182 $ 176 $ (646) $ (11) $ 87 $ 109 $ (162) $ (97) (1) All earnings per share figures have been adjusted to reflect the three-for-one stock split of CIGNA's common shares effective June 4, 2007. (2) CIGNA measures the financial results of its segments using "segment earnings (loss)," which is defined as income (loss) from continuing operations before net realized investment gains (losses). Adjusted income (loss) from operations is defined as segment earnings excluding special items, and beginning in 2008, also excludes results of CIGNA's guaranteed minimum income benefit business. Prior period results have been reclassified to conform to the new presentation. (3) The fourth quarter of 2008 and year ended December 31, 2008 includes a pre-tax charge of $55 million ($35 million after-tax) related to the cost reduction program. (4) Income from continuing operations and net income are presented in accordance with generally accepted accounting principles (GAAP). (5) The year ended December 31, 2007 includes a pre-tax charge of $86 million ($56 million after-tax) related to guaranteed minimum income benefits reserves recorded in the second quarter of 2007. (6) The year ended December 31, 2008 includes a pre-tax charge of $80 million ($52 million after-tax) in Corporate for the second quarter of 2008 and a pre-tax charge of $37 million ($24 million after-tax) in Health Care for the first quarter of 2008, both of which related to litigation matters. (7) The year ended December 31, 2007 includes an income tax benefit of $23 million for the third quarter of 2007 related to the completion of an IRS examination. * Because of the overall loss from continuing operations for the three months ended December 31, 2008 (including the special items above), the number of shares used to compute EPS does not reflect the dilution caused by common stock equivalents (i.e., stock options and restricted stock grants). Such common stock equivalents are excluded from the computation for the fourth quarter of 2008 but their effect did not result in a change to CIGNA's reported loss per share. 1A CIGNA Corporation Consolidated Income Statements (Dollars in millions) Three Months Ended December 31, 2008 2007 Change Year Ended December 31, 2008 2007 Change Revenues: Premiums and fees Net investment income Mail order pharmacy revenues (1) Other revenues (2) Net realized investment gains (losses) Total revenues Benefits and Expenses: Health Care medical claims expense Other benefit expenses Mail order pharmacy cost of goods sold Policy acquisition expenses Guaranteed minimum income benefits expense (3) Other operating expenses excluding special items (4) Special item(s) (5) Total benefits and expenses Income (loss) from continuing operations before income taxes (benefits) Income taxes (benefits): (6) Current Deferred Total taxes Income (loss) from continuing operations Income (loss) from discontinued operations Net income (loss) $ 4,038 261 322 338 (142) 4,817 $ 3,799 274 292 112 (22) 4,455 6 % (5) 10 202 (545) 8 $ 16,203 1,063 1,204 801 (170) 19,101 $ 15,008 1,114 1,118 368 15 17,623 8 (5) 8 118 8 % 1,802 1,378 257 132 337 1,196 55 5,157 (340) 1,691 894 235 117 27 1,103 4,067 388 7 54 9 13 8 27 - 7,252 4,285 961 493 690 4,870 172 18,723 378 6,798 3,401 904 412 147 4,330 15,992 1,631 7 26 6 20 369 12 17 (77) 37 (167) (130) (210) 1 $ (209) $ 91 34 125 263 263 (59) % $ 311 (221) 90 288 4 292 $ 511 511 1,120 (5) 1,115 (39) (82) (74) (74) % (1) Reflects revenues for non-risk pharmacy mail order fulfillment services. (2) Includes a pre-tax gain of $215 million for the fourth quarter of 2008, a pre-tax gain of $333 million for the year ended December 31, 2008, a pre-tax gain of $14 million for the fourth quarter of 2007, and a pre-tax loss of $32 million for the year ended December 31, 2007 from futures contracts entered into as part of a program to manage equity risks in CIGNA's run-off reinsurance operations. CIGNA recorded corresponding offsets in benefits and expenses to adjust liabilities for reinsured guaranteed minimum death benefit contracts. (3) The year ended December 31, 2008 includes a pre-tax charge of $202 million ($131 million after-tax) on the adoption of SFAS No. 157 for guaranteed minimum income benefit contracts recorded in the first quarter of 2008. The year ended December 31, 2007 includes a pre-tax charge of $86 million ($56 million after-tax) related to guaranteed minimum income benefits reserves recorded in the second quarter of 2007. (4) Beginning in 2008, other operating expenses excludes expenses for CIGNA's guaranteed minimum income benefits business. Prior period results have been reclassified to conform to the new presentation. (5) The fourth quarter of 2008 and year ended December 31, 2008 include a pre-tax charge of $55 million ($35 million after-tax) related to the cost reduction program. The year ended December 31, 2008 includes a pre-tax charge of $80 million ($52 million after-tax) in Corporate for the second quarter of 2008 and a pre-tax charge of $37 million ($24 million after-tax) in Health Care for the first quarter of 2008, both of which related to litigation matters. (6) The year ended December 31, 2007 includes an income tax benefit of $23 million for the third quarter of 2007 related to the completion of an IRS examination. This amount is noted as a special item on page 1A. 2 CIGNA Corporation Consolidated Balance Sheets (Dollars in millions) As of December 31, 2008 As of December 31, 2007 As of December 31, 2008 As of December 31, 2007 Assets Investments: Fixed maturities, at fair value (1) (amortized cost, $11,492 and $11,409) Equity securities, at fair value (cost, $140 and $127) Commercial mortgage loans (2) Policy loans Real estate Other long-term investments Short-term investments Total investments Liabilities $ 11,781 112 3,617 1,556 53 632 236 17,987 $ 12,081 132 3,277 1,450 49 520 21 17,530 Contractholder deposit funds Future policy benefits Unpaid claims and claim expenses Health Care medical claims payable Unearned premiums and fees Total insurance and contractholder liabilities Accounts payable, accrued expenses and other liabilities Short-term debt Long-term debt Nonrecourse obligations Separate account liabilities Total liabilities $ 8,539 8,762 4,056 924 414 22,695 6,875 301 2,090 16 5,864 37,841 $ 8,594 8,147 4,127 975 496 22,339 4,127 3 1,790 16 7,042 35,317 Shareholders' Equity Common stock Additional paid-in capital Net unrealized (depreciation) appreciation - fixed maturities Net unrealized appreciation - equity securities Net unrealized depreciation - derivatives Net translation of foreign currencies Postretirement benefits liability adjustment Accumulated other comprehensive income (loss) Retained earnings Less treasury stock, at cost Total shareholders' equity Total 88 2,502 $ (147) 7 (13) (60) (861) (1,074) 7,374 (5,298) 3,592 $ 41,433 $ $ 140 7 (19) 61 (138) 51 7,113 (4,978) 4,748 40,065 88 2,474 Cash and cash equivalents Accrued investment income Premiums, accounts and notes receivable Reinsurance recoverables Deferred policy acquisition costs Property and equipment Deferred income taxes, net Goodwill Other assets, including other intangibles Separate account assets Total $ 1,342 225 1,407 7,000 789 804 1,617 2,878 1,520 5,864 41,433 $ 1,970 233 1,405 7,331 816 625 794 1,783 536 7,042 40,065 (1) Refer to the Summary of Fixed Maturities - Asset Quality / Type - Fair Value exhibit on page 4 and Summary of Fixed Maturities - Analysis of Amortized Cost vs. Fair Value exhibit on page 5. (2) Refer to the Summary of Commercial Mortgage Loan Distribution exhibit by property type and geographic region on page 6. 3 CIGNA Corporation Summary of Fixed Maturities (unaudited) Asset Quality / Type Fair Value (Dollars in millions) As of December 31, 2008 Sector United States Government States and Local Government Foreign Government Government Basic Industry Capital Goods Communications Consumer Electric and Utility Energy and Natural Gas Financial Other Corporate Collateralized Debt Obligations Credit Card Home Equity Foreign Bank Obligations Other Asset-Backed Securities Commercial Mortgage-Backed Securities Collateralized Mortgage Obligations Total Fixed Maturities (2) % of Fixed Maturities $ $ Public 762 $ 2,479 890 4,131 414 277 355 552 256 273 896 103 3,126 19 10 2 31 123 38 7,449 $ 63% Private 7 54 61 766 582 123 783 558 609 302 7 3,730 489 51 540 1 4,332 $ 37% $ Total (1) 762 2,486 944 4,192 1,180 859 478 1,335 814 882 1,198 110 6,856 19 10 2 489 51 571 123 39 11,781 100% 7% 21% 8% 36% 10% 7% 4% 11% 7% 8% 10% 1% 58% 0% 0% 0% 5% 0% 5% 1% 0% 100% $ $ Public 628 2,481 808 3,917 403 292 413 600 211 258 1,215 118 3,510 14 24 3 41 218 1 7,687 $ 64% $ As of December 31, 2007 Private 8 74 82 804 671 139 717 597 595 377 9 3,909 378 23 401 2 4,394 $ 36% $ Total (1) 628 2,489 882 3,999 1,207 963 552 1,317 808 853 1,592 127 7,419 14 24 3 378 23 442 218 3 12,081 100% 5% 21% 7% 33% 10% 8% 4% 11% 7% 7% 13% 1% 61% 0% 0% 0% 4% 0% 4% 2% 0% 100% (1) 92% and 93% of fixed maturities were investment grade as of December 31, 2008 and December 31, 2007 respectively. The remaining 9% and 7% of below investment grade holdings are invested mainly in corporate debt, split relatively even between public and private placements. (2) Amortized cost, net of asset write downs, for problem and potential problem bonds, were $161 million and $42 million as of December 31, 2008 and December 31, 2007 respectively. For more information, please refer to CIGNA's Form 10-K for the annual period ended December 31, 2008. 4 CIGNA Corporation Summary of Fixed Maturities (unaudited) Analysis of Amortized Cost vs. Fair Value (Dollars in millions) Sector United States Government States and Local Government Foreign Government Government Basic Industry Capital Goods Communications Consumer Electric and Utility Energy and Natural Gas Financial Other Corporate Collateralized Debt Obligations Credit Card Home Equity Foreign Bank Obligations Other Asset-Backed Securities Commercial Mortgage-Backed Securities Collateralized Mortgage Obligations Total Fixed Maturities $ $ Amortized Cost 359 $ 2,391 882 3,632 1,237 958 494 1,397 817 904 1,310 101 7,218 22 10 2 365 57 456 148 38 11,492 $ As of December 31, 2008 Unrealized Unrealized Appreciation Depreciation 403 $ 117 70 590 26 18 7 32 28 21 24 11 167 128 128 1 886 $ 22 8 30 83 117 23 94 31 43 136 2 529 3 4 6 13 25 597 $ $ Fair Value 762 2,486 944 4,192 1,180 859 478 1,335 814 882 1,198 110 6,856 19 10 2 489 51 571 123 39 11,781 $ $ Amortized Cost 345 $ 2,362 868 3,575 1,171 933 519 1,284 772 799 1,590 119 7,187 25 25 3 354 23 430 214 3 11,409 $ As of December 31, 2007 Unrealized Unrealized Appreciation Depreciation 283 $ 130 32 445 50 38 36 48 42 59 31 13 317 28 1 29 6 797 $ 125 $ 3 18 21 14 8 3 15 6 5 29 5 85 11 1 4 1 17 2 $ Fair Value 628 2,489 882 3,999 1,207 963 552 1,317 808 853 1,592 127 7,419 14 24 3 378 23 442 218 3 12,081 5 CIGNA Corporation Summary of Commercial Mortgage Loan Distribution (unaudited) As of December 31, 2008 (Dollars in millions) Property Type Office Apartment Buildings Buildings Industrial Hotels Retail Other Total (1) 254 177 12 18 16 477 25 8 20 53 $ 254 $ 202 $ 20 $ 18 $ 36 $ $ 530 157 82 20 259 44 52 39 135 201 52 121 20 394 13 35 132 9 65 254 11 74 81 30 16 212 12 136 148 30 75 22 127 20 18 38 44 169 349 114 103 779 66 91 48 205 11 1 49 36 97 128 17 45 20 210 194 119 46 49 104 512 72 149 26 44 291 34 3 4 41 106 149 29 48 332 304 232 15 147 127 24 849 15 65 7 71 158 48 15 63 319 297 70 162 198 24 1,070 1,118 $ $ 988 $ 514 $ 512 $ 441 $ 44 $ 3,617 31% 27% 14% 14% 12% 1% 100% % of Mortgage Loans 13% 1% 14% 7% 4% 11% 7% 6% 4% 4% 1% 22% 6% 3% 6% 15% 8% 1% 9% 23% 4% 2% 29% 100% Geographic Region Massachusetts Connecticut New England New York Other (3) Middle Atlantic Florida Georgia South Carolina Virginia Other (3) South Atlantic Texas Tennessee Other (3) Central Colorado Other (3) Mountain California Washington Oregon Pacific Totals % of Mortgage Loans Loan to Value Distribution (2) Office Apartment Buildings Buildings 62% 70% % of Mortgage Loans Loan to Value Ratios Below 50% 50% to 59% 60% to 69% 70% to 79% 80% to 89% 90% to 99% 100% or above Totals Amortized Cost $ 716 423 1,103 1,065 249 61 3,617 % of Mortgage Loans 20% 12% 30% 29% 7% 2% 0% 100% Loan to Value % (2) Origination Years Pre-2005 2005 2006 2007 2008 Totals Industrial 69% Hotels 57% Retail 60% Other 59% Total (1) 64% $ $ 281 206 273 211 147 1,118 $ $ 250 179 415 114 30 988 $ $ 149 119 173 73 514 $ $ 52 169 98 25 168 512 $ $ 226 64 83 20 48 441 $ 44 44 $ $ $ 958 737 1,086 370 466 3,617 27% 20% 30% 10% 13% 100% $ (1) Potential problem commercial mortgage loan amortized cost, net of valuation reserves, was $92 million and $70 million as of December 31, 2008 and December 31, 2007 respectively. For more information, please refer to the Investment Summary in the Management's Discussion and Analysis section of CIGNA's annual Form 10-K. (2) Valuations are internal estimates based on the most recent full year audited financial statements and budgets/projections for the next year, considering occupancy, rental rates, operating costs, and other relevant information. The values are determined as part of an annual review process which was completed during the third quarter 2008. Other than problem loans, amounts are not adjusted quarterly. (3) Represents states in a region with a concentration of less than 3%. 6 CIGNA Corporation Stock and Balance Sheet Analyses (unaudited) Three Months Ended December 31, 2008 2007 High Low $ $ 34.47 8.00 $ $ 56.89 48.21 Year Ended December 31, 2008 2007 $ $ $ $ $ $ $ 0.010 3 $ $ 56.98 8.00 16.85 0.040 11 $ $ $ $ $ 56.89 42.33 53.73 0.038 11 (In millions, except per share data) Price range of common stock: Market price (as of end of period) Dividends declared per share Common dividends declared As of December 31, 2008 2007 Common shares outstanding (in thousands) Book value per share $ 271,036 13.25 $ 279,588 16.98 Note: All share and per share amounts have been adjusted to reflect the three-for-one stock split of CIGNA's common shares effective June 4, 2007. 7 CIGNA Corporation Condensed Consolidated Statements of Cash Flows (Dollars in millions) Year Ended December 31, 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash provided by operating activities: (Income) loss from discontinued operations Insurance liabilities Reinsurance recoverables Deferred policy acquisition costs Premiums, accounts and notes receivable Other assets Accounts payable, accrued expenses and other liabilities Current income taxes Deferred income taxes Realized investment (gains) losses Depreciation and amortization Gains on sales of businesses (excluding discontinued operations) Commercial mortgage loans originated and held for sale Proceeds from sales of mortgage loans held for sale Other, net Net cash provided by operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities Effect of foreign currency rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period $ (4) 486 62 (74) 219 (860) 1,466 (72) (221) 170 244 (38) 1 (15) 1,656 (2,572) 314 (26) (628) 1,970 1,342 $ 5 (24) 159 (106) 47 (134) 150 10 (15) 194 (47) (80) 76 (8) 1,342 269 (1,041) 8 578 1,392 1,970 $ 292 $ 1,115 8 CIGNA Corporation Health Care Segment Earnings (Dollars in millions) Three Months Ended December 31, 2008 2007 Change Revenues: Premiums and fees Net investment income Mail order pharmacy revenues Other revenues Segment revenues Benefits and Expenses: Health Care medical claims expense * Other benefit expenses * Mail order pharmacy cost of goods sold Policy acquisition expenses Other operating expenses excluding special items Special items ** Benefits and expenses Income before income taxes Income taxes Segment earnings, after-tax Less: Special items, after-tax ** Adjusted income from operations Net realized investment gains (losses), net of taxes $ $ Year Ended December 31, 2008 2007 Change $ 2,887 46 322 86 3,341 $ 2,650 45 292 64 3,051 9 2 10 34 10 % $ 11,615 200 1,204 317 13,336 $ 10,666 202 1,118 250 12,236 9 % (1) 8 27 9 1,802 12 257 38 914 44 3,067 274 92 182 (27) 209 (36) $ $ 1,691 41 235 30 805 2,802 249 79 170 170 (7) 7 (71) 9 27 14 9 10 16 7 23 % $ $ 7,252 193 961 138 3,695 81 12,320 1,016 352 664 (51) 715 (13) $ $ 6,798 225 904 100 3,172 11,199 1,037 358 679 679 14 7 (14) 6 38 16 10 (2) (2) (2) 5 % % (414) % The fourth quarter and year ended December 31, 2008 results include the impact of the Great-West Healthcare acquisition, effective April 1, 2008. * Other benefit expenses reported for the fourth quarter 2008, include a year-to-date reclassification of (-$30) million from non-medical to medical claims expense associated with the Great-West acquired business. ** Consists of the following special items noted on page 1A: - Pre-tax charge of $44 million ($27 million after-tax) for the fourth quarter of 2008 and year ended December 31, 2008 related to the cost reduction program. - Pre-tax charge of $37 million ($24 million after-tax) for the first quarter of 2008 and year ended December 31, 2008 related to litigation matters. 9 CIGNA Corporation Health Care Revenue Analysis (unaudited) (Dollars in millions) Three Months Ended December 31, 2008 2007 Change Premiums: Medical: Commercial HMO (1) Open Access / Other Guaranteed Cost (2) Total guaranteed cost excluding voluntary / limited benefits Voluntary / Limited Benefits Experience-rated (3) Dental Medicare Medicare Part D Acquired business (4) Other (5) Total medical (1) Life and other non-medical Acquired business (4) Total life and other non-medical Total Premiums Fees (6) Acquired business - fees Total Fees Mail order pharmacy revenues (7) Other revenues (8) Net investment income Year Ended December 31, 2008 2007 Change $ 317 527 844 49 450 196 100 50 232 296 2,217 36 (29) 7 2,224 548 115 663 322 86 46 $ 486 445 931 42 490 200 88 74 274 2,099 41 41 2,140 510 510 292 64 45 (35) % 18 (9) 17 (8) (2) 14 (32) 8 6 (12) (83) 4 7 30 10 34 2 $ 1,430 2,025 3,455 200 1,946 785 400 299 603 1,168 8,856 156 28 184 9,040 2,208 367 2,575 1,204 317 200 $ 2,220 1,657 3,877 160 1,877 773 349 326 1,062 8,424 235 235 8,659 2,007 2,007 1,118 250 202 (36) % 22 (11) 25 4 2 15 (8) 10 5 (34) (22) 4 10 28 8 27 (1) Segment revenues $ 3,341 $ 3,051 10 % $ 13,336 $ 12,236 9 % The fourth quarter and year ended December 31, 2008 results include the impact of the Great-West Healthcare acquisition, effective April 1, 2008, referred to above as Acquired business. Certain reclassifications have been made to conform to the current presentation. (1) Includes premiums of $57 million for the year ended December 31, 2007 (of which $52 million are reflected in Commercial HMO) associated with the health care members in Tucson, Arizona, which were transitioned to CIGNA as the result of a Department of Justice requirement related to the merger of two health care industry competitors. As of December 31, 2007, premiums associated with all of the members that chose to renew on CIGNA contracts are reflected in the products for which they renewed. (2) Includes premiums associated with other risk-related products. (3) Minimum premium funding arrangements combine insurance protection with an element of self-funding. The policyholder assumes the risk for, and self-funds, claim costs up to a predetermined aggregate, maximum amount, and CIGNA bears the risk for claim costs incurred in excess of that amount, but has the potential to recover this excess from policyholders that renew their minimum premium contracts with CIGNA. Accordingly, minimum premium funding arrangements have a risk profile similar to retrospectively experience-rated funding arrangements and therefore minimum premium members are presented with experience-rated members. The risk portion of minimum premium revenue is reported in experience-rated premium whereas the selffunding portion of minimum premium revenue is recorded in fees. (4) Premiums reported for the fourth quarter 2008, include a year-to-date reclassification of (-$39) million from non-medical premiums to medical premiums associated with the Great-West Healthcare acquired business. (5) Other medical premiums primarily include risk revenue for stop loss and specialty products. (6) Fees represent administrative service fees for medical members and related specialty products and also include fees related to Medicare Part D of $24 million for the fourth quarter of 2008, $96 million for the year ended December 31, 2008, $17 million for the fourth quarter of 2007 and $61 million for the year ended December 31, 2007. In addition, fees include $4 million for the fourth quarter of 2008, $16 million for the year ended December 31, 2008, $4 million for the fourth quarter of 2007, and $7 million for the year ended December 31, 2007 related to the Sagamore Health Network which was acquired in August 2007. (7) Reflects revenues for non-risk pharmacy mail order fulfillment services. (8) Includes amounts relating to Medicare Claim Administration of $26 million for the fourth quarter of 2008, $97 million for the year ended December 31, 2008, $24 million for the fourth quarter of 2007, and $79 million for the year ended December 31, 2007. Net of this item, Other revenues primarily reflect non-risk revenues for direct channel specialty products. 10 CIGNA Corporation Health Care Key Metrics (unaudited) (Dollars in millions) Three Months Ended December 31, 2008 2007 Change Year Ended December 31, 2008 2007 Change OTHER OPERATING EXPENSES EXCLUDING SPECIAL ITEMS: Pharmacy expenses (1) Medicare Part D expenses Disease management expenses Transformation amortization expenses Voluntary / limited benefits expenses (2) Medicare claim administration Acquired business expenses (3) Other operating expenses Other operating expenses excluding special items $ 44 16 42 19 16 25 137 615 914 $ 48 17 47 22 15 23 633 805 (8) % (6) (11) (14) 7 9 (3) 14 % $ 182 58 171 83 64 96 457 2,584 3,695 $ 183 56 183 89 60 80 2,521 3,172 (1) % 4 (7) (7) 7 20 2 16 % $ $ $ $ (1) Includes expenses supporting both mail order and retail pharmacy operations. (2) Represents operating expenses of the Star HRG voluntary / limited benefits business acquired in July 2006. (3) Acquisition of Great-West Healthcare effective April 1, 2008. Includes operating expenses, intangible amortization expenses as well as integration costs. RATIOS (4) : Three Months Ended December 31, Change 2008 2007 Better (Worse) Year Ended December 31, 2008 2007 Change Better (Worse) Guaranteed Cost loss ratio (excluding voluntary / limited benefits) 85.7 % 84.6 % (1.1) 84.8 % 83.9 % (0.9) Guaranteed Cost loss ratio (including voluntary / limited benefits) 84.1 % 83.2 % (0.9) 83.4 % 82.7 % (0.7) (4) The Guaranteed Cost loss ratio includes Commercial HMO and Other Guaranteed Cost medical premiums and excludes the stop loss products associated with experience-rated and service members. 11 CIGNA Corporation Health Care Covered Lives (unaudited) As of December 31, 2008 2007 ESTIMATED COVERED LIVES: (Lives in thousands) Medical membership : Guaranteed Cost: Commercial HMO Medicare Open Access / Other guaranteed cost (1) Total guaranteed cost excluding voluntary / limited benefits Voluntary / Limited Benefits Total guaranteed cost Experience-rated (2) Service Acquired business (3) Total medical membership Non-medical membership : Medicare Part D (4) Dental (5) Behavioral care (5) Pharmacy (5) Change 326 35 530 891 201 1,092 851 8,096 1,640 11,679 523 31 515 1,069 180 1,249 907 8,013 10,169 (38) % 13 3 (17) 12 (13) (6) 1 15 % 326 10,615 18,316 6,203 320 10,906 17,688 6,434 2 % (3) % 4 % (4) % (1) Includes membership associated with other risk-related products, primarily open access products. (2) Includes minimum premium members, who have a risk profile similar to experience-rated funding arrangements. The risk portion of minimum premium revenue is reported in experience-rated medical premium whereas the self funding portion of minimum premium revenue is recorded in fees. Also, includes certain non-participating cases for which special customer level reporting of experience is required. (3) Reflects members associated with the acquisition of Great-West Healthcare effective April 1, 2008. (4) Reflects members enrolled in CIGNA’s Medicare Part D program, which provides access to prescription medications through a nationwide pharmacy network. (5) Reflects members enrolled in CIGNA’s dental, behavioral care or managed pharmacy programs, which provide access to services through a nationwide network. These members may also be medical members, or they may have stand-alone dental, behavioral care or pharmacy coverage. 12 CIGNA Corporation Disability and Life Segment Earnings (Dollars in millions) Three Months Ended December 31, 2008 2007 Change Revenues: Premiums and fees: Life Disability Other Total premiums and fees Net investment income Other revenues Segment revenues Benefits and Expenses: Benefit expenses Policy acquisition expenses Other operating expenses Special item (1) Benefits and expenses Income before income taxes Income taxes (2) Segment earnings, after-tax Less: Special items, after-tax (1) (2) Adjusted income from operations Net realized investment gains (losses), net of taxes $ $ Year Ended December 31, 2008 2007 Change $ 338 255 73 666 63 27 756 $ 294 240 73 607 69 30 706 15 % 6 10 (9) (10) 7 $ 1,261 1,004 297 2,562 256 117 2,935 $ 1,148 942 284 2,374 276 131 2,781 10 % 7 5 8 (7) (11) 6 511 2 153 3 669 87 25 62 (2) 64 (25) $ $ 472 1 155 628 78 21 57 57 (4) 8 100 (1) 7 12 19 9 12 % $ $ 1,914 6 630 3 2,553 382 109 273 (2) 275 (48) $ $ 1,819 6 610 2,435 346 92 254 6 248 (5) 5 3 5 10 18 7 11 % (525) % (860) % (1) Includes a pre-tax charge of $3 million ($2 million after-tax) for the fourth quarter of 2008 and year ended December 31, 2008 related to the cost reduction program. (2) Includes income tax benefit of $6 million for the year ended December 31, 2007 related to the completion of an IRS examination. 13 CIGNA Corporation International Segment Earnings (Dollars in millions) Three Months Ended December 31, 2008 2007 Change Revenues: Premiums and fees Net investment income Other revenues Segment revenues Benefits and Expenses: Benefit expenses Policy acquisition expenses Other operating expenses Special item (1) Benefits and expenses Income before income taxes Income taxes (2) Segment earnings, after-tax Less: Special items, after-tax (1) (2) Adjusted income from operations Net realized investment gains (losses), net of taxes $ $ Year Ended December 31, 2008 2007 Change $ 448 17 6 471 $ 496 21 4 521 (10) % (19) 50 (10) $ 1,870 79 18 1,967 $ 1,800 77 7 1,884 4 3 157 4 % 238 90 76 8 412 59 21 38 (6) 44 (1) $ $ 273 84 92 449 72 27 45 45 - (13) 7 (17) (8) (18) (22) (16) (2) % % $ $ 1,003 343 329 8 1,683 284 102 182 (6) 188 (3) $ $ 997 294 321 1,612 272 96 176 2 174 1 1 17 2 4 4 6 3 8 % % (1) Includes a pre-tax charge of $8 million ($6 million after-tax) for the fourth quarter of 2008 and year ended December 31, 2008 related to the cost reduction program. (2) Includes income tax benefit of $2 million for the year ended December 31, 2007 related to the completion of an IRS examination. 14 CIGNA Corporation Run-off Reinsurance Segment Earnings (Dollars in millions) Three Months Ended December 31, 2008 2007 Change Revenues: Premiums and fees Net investment income Other revenues (1) Segment revenues Benefits and Expenses: Benefit expenses Guaranteed minimum income benefits expense (2) Other operating expenses (3) Benefits and expenses Income (loss) before income tax benefits Income benefits Segment income (loss), after-tax Results of guaranteed minimum income benefits business, after-tax: Charge on adoption of SFAS No. 157 Results of guaranteed minimum income benefits business, excluding charge on adoption of SFAS No. 157 (4) Total Adjusted income (loss) from operations Net realized investment gains (losses), net of taxes $ $ Year Ended December 31, 2008 2007 Change $ 8 34 214 256 $ 19 23 11 53 (58) % 48 383 $ 43 104 331 478 $ 60 93 (47) 106 (28) % 12 351 520 337 4 861 (605) (211) (394) 11 27 8 46 7 (3) 10 (50) - 782 690 27 1,499 (1,021) (375) (646) (24) 147 37 160 (54) (43) (11) 369 (27) 837 (772) - (215) (215) (179) (14) $ $ (17) (17) 27 (1) % % $ $ (131) (306) (437) (209) (19) $ $ (91) (91) 80 2 (236) (380) % % (1) Includes a pre-tax gain of $215 million for the fourth quarter of 2008, a pre-tax gain of $333 million for the year ended December 31, 2008, a pre-tax gain of $14 million for the fourth quarter of 2007, and a pre-tax loss of $32 million for the year ended December 31, 2007 from futures contracts entered into as part of a program to manage equity risks in CIGNA's run-off reinsurance operations. CIGNA recorded corresponding offsets in benefits and expenses to adjust liabilities for reinsured guaranteed minimum death benefit contracts. (2) The year ended December 31, 2008 includes a pre-tax charge of $202 million ($131 million after-tax) on the adoption of SFAS No. 157 for guaranteed minimum income benefit contracts recorded in the first quarter of 2008. The year ended December 31, 2007 includes a pre-tax charge of $86 million ($56 million after-tax) related to guaranteed minimum income benefits reserves recorded in the second quarter of 2007. (3) Beginning in 2008, other operating expenses excludes expenses for CIGNA's guaranteed minimum income benefits business. Prior period results have been reclassified to conform to the new presentation. (4) Results of guaranteed minimum income benefits business include "Guaranteed minimum income benefits expense," as well as net investment income and income taxes associated with this business. 15 CIGNA Corporation Other Operations Segment Earnings (Dollars in millions) Three Months Ended December 31, 2008 2007 Change Revenues: Premiums and fees Net investment income Other revenues Segment revenues Benefits and Expenses: Benefit expenses Policy acquisition expenses Other operating expenses Benefits and expenses Income before income taxes Income taxes (1) Segment earnings, after-tax Less: Special items, after-tax (1) Adjusted income from operations Net realized investment losses, net of taxes $ $ 2008 Year Ended December 31, 2007 Change $ 29 101 17 147 $ 27 108 18 153 7 % (6) (6) (4) $ 113 414 71 598 $ 108 437 82 627 5 % (5) (13) (5) 101 2 11 114 33 10 23 23 (16) $ $ 102 2 11 115 38 14 24 24 (2) (1) (1) (13) (29) (4) (4) % (700) % $ $ 408 6 54 468 130 43 87 87 (27) $ $ 400 12 61 473 154 45 109 5 104 (2) 2 (50) (11) (1) (16) (4) (20) (16) % % (1) Includes income tax benefit of $5 million for the year ended December 31, 2007 related to the completion of an IRS examination. 16 CIGNA Corporation Corporate (Dollars in millions) Three Months Ended December 31, 2008 2007 Change Revenues: Net investment income Other revenues (1) Segment revenues Benefits and Expenses: Benefit expenses (1) Other operating expenses excluding special items Special items (2) Benefits and expenses Loss before income tax benefits Income tax benefits (3) Loss, after-tax Less: Special items, after-tax (2) (3) Adjusted loss from operations Net realized investment gains (losses), net of taxes $ $ 2008 Year Ended December 31, 2007 Change $ (12) (12) $ 8 (15) (7) 20 (71) % $ 10 (53) (43) $ 29 (55) (26) (66) % 4 (65) (4) 38 34 (46) (17) (29) (29) $ $ (5) 32 27 (34) (5) (29) (29) - 20 19 26 (35) (240) % % $ $ (15) 135 80 200 (243) (81) (162) (52) (110) $ $ (16) 129 113 (139) (42) (97) 10 (107) - 6 5 77 (75) (93) (67) (3) % % (1) Other revenues and Benefit expenses include amounts for elimination of intercompany revenues and expenses. (2) The year ended December 31, 2008 includes a pre-tax charge of $80 million ($52 million after-tax) for the second quarter of 2008 related to litigation matters. (3) Includes income tax benefit of $10 million for year ended December 31, 2007 related to the completion of an IRS examination. 17