CIGNA REPORTS 2016 RESULTS, EXPECTS ATTRACTIVE EARNINGS GROWTH IN 2017

o	Total revenues for 2016 increased 5% to $39.7 billion

o	Shareholders' net income for 2016 was $1.9 billion, or $7.19 per share

o	Adjusted income from operations1 for 2016 was $2.1 billion, or $8.10 per share

o	Global medical customer base2 is projected to grow in the range of 300,000 to 500,000 lives in 2017

o	Adjusted income from operations1,3,4 is projected to grow in the range of 12% to 18%, to $2.35 billion to $2.48 billion in 2017, or $9.00 to $9.50 per share, excluding capital deployment

BLOOMFIELD, CT, February 2, 2017 – Cigna Corporation (NYSE: CI) today reported 2016 results with a solid fourth quarter performance, and projecting attractive earnings growth in 2017.

"We concluded 2016 with strong momentum that positions the company for attractive earnings and customer growth in 2017" said David M. Cordani, President and Chief Executive Officer.  "We continue to deliver differentiated value for our customers and clients with innovative solutions that drive greater levels of affordability and personalization."

Total revenues for 2016 were $39.7 billion, an increase of 5% over 2015, driven by continued growth in Cigna's targeted customer segments.

Shareholders' net income for 2016 was $1.9 billion, or $7.19 per share, compared with $2.1 billion, or $8.04 per share in 2015.  For the fourth quarter of 2016, shareholders' net income was $382 million, or $1.47 per share, compared with $426 million, or $1.64 per share, for the fourth quarter of 2015.

Cigna's adjusted income from operations¹ for full year 2016 was $2.1 billion, or $8.10 per share, compared with $2.3 billion, or $8.66 per share, for full year 2015.  For the fourth quarter of 2016, adjusted income from operations¹ was $485 million, or $1.87 per share, compared with $486 million, or $1.87 per share, for the fourth quarter of 2015.   Adjusted income from operations¹ for the full year and the fourth quarter of 2016 reflect continued strong results in our Commercial Healthcare and Global Supplemental Benefits businesses, and actions we have taken to improve results in our Seniors and Disability & Life businesses.

Reconciliations of shareholders' net income to adjusted income from operations¹ are provided on the following page, and on Exhibit 2 of this earnings release.

CONSOLIDATED HIGHLIGHTS

 

The following table includes highlights of results and reconciliations of consolidated operating revenues⁵ to total revenues and adjusted income from operations¹ to shareholders' net income:

 

·	2016 shareholders' net income included special item1 charges of $252 million after-tax, or $0.97 per share, for transaction costs related to Cigna's proposed combination with Anthem, the establishment of an allowance against risk corridor program receivables, and a litigation matter.

·	Fourth quarter 2016 shareholders' net income included special item1 charges of $119 million after-tax, or $0.46 per share, for the establishment of an allowance against risk corridor program receivables and transaction costs related to Cigna's proposed combination with Anthem.

·	Cash and marketable investments at the parent company were $2.8 billion at December 31, 2016 and $1.4 billion at December 31, 2015.

·	In 2016, the Company repurchased 785,000 shares of common stock for approximately $110 million.4

HIGHLIGHTS OF SEGMENT RESULTS

See Exhibit 2 for a reconciliation of adjusted income (loss) from operations¹ to shareholders' net income.

This segment includes Cigna's Commercial and Government businesses that deliver medical and specialty health care products and services to domestic and multi-national clients and customers using guaranteed cost, retrospectively experience-rated and administrative services only ("ASO") funding arrangements.  Specialty health care includes behavioral, dental, disease and medical management, stop loss and pharmacy-related products and services.

		As of the Periods Ended
		December 31,								September 30,
Customers:		2016				2015				2016
Commercial			14,631				14,432				14,594
Government			566				567				583
Medical			15,197				14,999				15,177
Behavioral Care			26,238				24,674				26,102
Dental			14,981				13,869				14,960
Pharmacy			8,461				8,068				8,370
Medicare Part D			972				1,476				999

·	Fourth quarter 2016 premiums and fees increased 2% relative to fourth quarter 2015, driven by customer growth, specialty contributions, and rate actions in our Commercial business, partially offset by, as expected, reductions in Medicare Part D and Individual customers.

·	The medical customer base2 at the end of 2016 totaled 15.2 million, including an increase of approximately 200,000 customers during the year, driven by organic growth in our Middle Market, Select, and International segments.

·

Fourth quarter 2016 adjusted income from operations1 and adjusted margin, after-tax6 reflect strong contributions from our Commercial employer and specialty businesses, partially offset by the impact of not recording $16 million, after tax of additional risk corridor receivables in fourth quarter 2016.

·	Adjusted income from operations1 included favorable prior year reserve development on an after-tax basis of $7 million for full year 2016, compared to $60 million for full year 2015.

 

 

 

·	The Total Commercial medical care ratio7 ("MCR") of 79.3% for full year 2016 reflects continued strong performance in our Commercial employer business, consistent with our expectations.

·

The Commercial MCR7 of 83.1% for fourth quarter 2016 reflects ongoing strength in our Commercial employer business, continued high medical costs in our U.S. Individual business, expected higher seasonal medical costs and the aforementioned risk corridor impact.  The Commercial MCR7 for fourth quarter 2016 also reflects more normalized stop loss claim experience, as expected, compared to the favorable stop loss experience reported in fourth quarter 2015.

·	The Total Government MCR7 of 85.3% for full year 2016 reflects solid performance in Medicare Advantage.  The Government MCR7 of 83.2% for fourth quarter 2016 reflects increased medical costs in our Medicaid business.

·	Full year medical cost trend for our total U.S. Commercial book of business was modestly below the low end of our previous range of 4% to 5%, reflecting improved pharmacy trend as well as continued favorable medical costs, physician engagement and low utilization trend.

·	Fourth quarter 2016 Global Health Care operating expense ratio7 of 22.0% reflects costs related to our CMS audit response as well as continued investments in strategic initiatives, offset by continued efficiency gains.

·	Global Health Care net medical costs payable8 was approximately $2.26 billion at December 31, 2016 and $2.11 billion at December 31, 2015.

This segment includes Cigna's global individual supplemental health, life and accident insurance business, primarily in Asia, and Medicare supplement coverage in the United States.

Financial Results (dollars in millions, policies in thousands):

	As of the Periods Ended
	December 31,								September 30,
	2016				2015				2016
Policies9			12,151				12,888				12,069

·	Global Supplemental Benefits delivered strong results again in 2016, reflecting the benefits of our differentiated solutions for individual consumers.

·	Fourth quarter 2016 premiums and fees grew 10% over fourth quarter 2015 on a currency-adjusted basis, reflecting continued business growth.

·	Fourth quarter 2016 adjusted income from operations1 and adjusted margin, after-tax6 reflect business growth as well as the impact of strategic investments supporting long-term growth.

This segment includes Cigna's group disability, life and accident insurance operations.

Financial Results (dollars in millions):

·	Fourth quarter 2016 premiums and fees increased 4% over fourth quarter 2015 driven by business growth across disability and life products.

·	Fourth quarter 2016 adjusted income from operations1 and adjusted margin, after-tax6 reflect stabilized life claim experience as well as continued improvement in disability results.

Adjusted loss from operations¹ for Cigna's remaining operations is presented below:

 

Financial Results (dollars in millions):

	Three Months Ended												Year Ended
	December 31,								September 30,				December 31,
	2016				2015				2016				2016
Corporate & Other Operations		$	(53	)		$	(45	)		$	(47	)		$	(167	)

 

2017 OUTLOOK

Cigna's outlook for full year 2017 consolidated adjusted income from operations^1,3 is in the range of $2.35 billion to $2.48 billion, or $9.00 to $9.50 per share.  Cigna's outlook excludes the impact of additional prior year reserve development and potential effects of any future capital deployment.⁴

 

The foregoing statements represent the Company's current estimates of Cigna's 2017 consolidated and segment adjusted income from operations^1,3 and other key metrics as of the date of this release.  Actual results may differ materially depending on a number of factors.  Investors are urged to read the Cautionary Note Regarding Forward-Looking Statements included in this release.  Management does not assume any obligation to update these estimates.

This quarterly earnings release and the Quarterly Financial Supplement are available on Cigna's website in the Investor Relations section (http://www.cigna.com/aboutcigna/investors).  A link to the conference call, during which management will review fourth quarter 2016 results and discuss full year 2017 outlook, is available in the Investor Relations section of Cigna's website located at http://www.cigna.com/cignadotcom/aboutcigna/investors/events/index.page

Notes:

1.

Adjusted income (loss) from operations is defined as shareholders' net income (loss) excluding the following after-tax adjustments: net realized investment results, net amortization of other acquired intangible assets and special items.  Net amortization of other acquired intangible assets in 2015 included the one-time benefit of an acquisition in which the fair value of acquired net assets exceeded the purchase price.  Special items are identified in Exhibit 2 of this earnings release.

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 analysis of trends in underlying revenue, expenses and shareholders' net income.  This consolidated measure is not determined in accordance with accounting principles generally accepted in the United States (GAAP) and should not be viewed as a substitute for the most directly comparable GAAP measure, shareholders' net income. See Exhibits 1 and 2 for a reconciliation of adjusted income from operations to shareholders' net income.

2.

Global medical customers include individuals who meet any one of the following criteria: are covered under a medical insurance policy, managed care arrangement, or service agreement issued by Cigna; have access to Cigna's provider network for covered services under their medical plan; or have medical claims and services that are administered by Cigna.

3.

Management is not able to provide a reconciliation to shareholders' net income (loss) on a forward-looking basis because we are unable to predict, without unreasonable effort, certain components thereof including (i) future net realized investment results and (ii) future special items.  These items are inherently uncertain and depend on various factors, many of which are beyond our control. As such, any associated estimate and its impact on shareholders' net income could vary materially.  The Company believes it is reasonably likely that a guaranty fund assessment related to Penn Treaty Network America Insurance Company and its subsidiary American Network Insurance Company will be finalized in 2017.  Due to uncertainties surrounding this matter, the Company's share of this guaranty fund assessment is uncertain, but based on current information, is estimated to be approximately $85 million after tax.  The Company expects to treat this guaranty fund assessment as a special item.

4.	The Company's outlook excludes the potential effects of any share repurchases or business combinations that may occur after the date of this earnings release.

5.

The measure "consolidated operating revenues" is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, "total revenues."  We define consolidated operating revenues as total revenues excluding realized investment results.  We exclude realized investment results from this measure because our portfolio managers may sell investments based on factors largely unrelated to the underlying business purposes of each segment.  As a result, gains or losses created in this process may not be indicative of past or future underlying performance of the business.  See Exhibit 1 for a reconciliation of consolidated operating revenues to total revenues.

6.	Adjusted margin, after-tax, is calculated by dividing adjusted income (loss) from operations by operating revenues for each segment.

7.	Operating ratios are defined as follows:

·

Total Commercial medical care ratio represents medical costs as a percentage of premiums for all commercial risk products, including medical, pharmacy, dental, stop loss and behavioral products provided through guaranteed cost or experience-rated funding arrangements in both the United States and internationally.

·	Total Government medical care ratio represents medical costs as a percentage of premiums for Medicare Advantage, Medicare Part D, and Medicaid products.

·	Global Health Care Operating Expense Ratio represents operating expenses excluding acquisition related amortization expense as a percentage of operating revenue in the Global Health Care segment.

8.	Global Health Care medical costs payable are presented net of reinsurance and other recoverables.  The gross Global Health Care medical costs payable balance was $2.53 billion as of December 31, 2016 and $2.36 billion as of December 31, 2015.

9.

Cigna owns a 50% noncontrolling interest in its China joint venture.  Cigna's 50% share of the joint venture's earnings is reported in Other Revenues using the equity method of accounting under GAAP.  As such, the premiums and fees and policy counts for the Global Supplemental Benefits segment do not include the China joint venture.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release, and oral statements made with respect to information contained in this release, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are based on Cigna's current expectations and projections about future trends, events and uncertainties.  These statements are not historical facts.  Forward-looking statements may include, among others, statements concerning our projected adjusted income (loss) from operations outlook for 2017, on both a consolidated and segment basis; projected total revenue growth and global medical customer growth, each over year end 2016; projected medical care and operating expense ratios and medical cost trends; future financial or operating performance, including our ability to deliver personalized and innovative solutions for our customers and clients and future growth, business strategy, strategic or operational initiatives; economic, regulatory or competitive environments, particularly with respect to the pace and extent of change in these areas; financing or capital deployment plans and amounts available for future deployment; our prospects for growth in the coming years; statements regarding the proposed merger between Cigna and Anthem, Inc. (Anthem); statements regarding the timing of resolution of the issues raised by CMS; and other statements regarding Cigna's and Anthem's future beliefs, expectations, plans intentions, financial condition or performance.  You may identify forward-looking statements by the use of words such as "believe," "expect," "plan," "intend," "anticipate," "estimate," "predict," "potential," "may," "should," "will" or other words or expressions of similar meaning, although not all forward-looking statements contain such terms.   

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