This summary is based on the first quarter fiscal 2007 earnings call conducted by CIGNA Corp (CI) on May 2, 2007.
Chairman and Chief Executive Officer: Edward Hanway
Executive Vice President and Chief Financial Officer: Michael Bell
President, CIGNA HealthCare: David Cordani
Vice President of Investor Relations: Ted Detrick
Key Investors Issues
- Earnings per share grew to $2.93 from $2.87 in the prior year quarter.
- Quarterly revenue was $4.4 billion as against $4.1 billion in last year.
- The estimated second quarter EPS is in a range of $2.45 to $2.70.
First Quarter Fiscal 2007 Financial Highlights
Consolidated revenues were $4.4 billion for the first quarter of 2007 versus $4.1 billion for the first quarter of 2006.
The net income was $289 million, or $2.93 per share for the first quarter of 2007 compared with $352 million, or $2.87 per share for the same period last year.
Net income for the first quarter of 2006 included after-tax realized investment gains of $94 million. CIGNA''s adjusted income from operations was $264 million or $2.67 per share for the first quarter of 2007 versus $258 million, or $2.11 per share for the same period last year. This quarter''s earnings reflect strong results in CIGNA''s health care, disability and life, and international businesses.
For the first quarter, healthcare earnings were $168 million.
Excluding $3 million of after-tax prior year claim development, first quarter healthcare earnings of $165 million were at the upper end of the company’s expected range. These results reflected effective execution of guaranteed cost pricing strategy, membership growth and strong contributions from specialty businesses.
Healthcare
membership grew by approximately 440,000 in the quarter, a 4.7% increase relative to year-end 2006. On an organic basis, excluding 28,000 members related to a small acquisition, membership growth was 4.4%. This result was modestly ahead of the firm’s previous estimates.
The first quarter guaranteed cost medical loss ratio was consistent with expectations. Excluding $7 million of after-tax favorable prior year claim development and the guaranteed cost book, and excluding the results of the firm’s voluntary benefits business, the MLR for the first quarter was 84.4% as compared to 86.5% in first quarter of 2006. This is consistent with the firm’s guidance full year MLR estimate of 84%.
Relative to operating expenses, first quarter 2007 results demonstrated good progress in achieving the firm’s expected productivity improvements. The stat supplement breaks out the operating expense impacts of various growth initiatives and transformation amortization. Excluding these items, the operating expenses for first quarter 2007 were flat relative to fourth quarter 2006, while the company grew membership. The quarter’s expenses did include some favorable timing impacts, which the firm expects to reverse later in the year. The company continues to expect that full year operating expenses per member on this basis will decline 1% to 2% relative to full year 2006. Healthcare premiums and fees for the first quarter were up 14% versus 2006, reflecting medical membership growth, including the voluntary business, as well as guaranteed cost rate increases in higher Medicare Part D revenue.
The first quarter 2007 earnings in the disability and life segment were $60 million.
This result reflected competitively attractive margins driven by strong disability management results and favorable mortality in the group accident business.
In the international segment, earnings of $38 million reflected competitively strong margins in expatriate benefits and life accident and health businesses.
The group insurance and international businesses continue to be important contributors to the consolidated results.
