Cigna 2010 Annual Report Download - page 54

CIGNA CORPORATION  2010 Form 10K
34
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Key Consolidated Financial Data
(Dollars in millions) 2010 2009 2008
Revenues $ 21,253 $ 18,414 $ 19,101
Medical membership (in thousands) (1) 12,473 11,669 12,338
Adjusted income from operations (2) $ 1,277 $ 1,097 $ 946
Shareholders’ income from continuing operations $ 1,345 $ 1,301 $ 398
Cash fl ows from operating activities $ 1,743 $ 745 $ 1,656
Shareholders’ equity $ 6,645 $ 5,417 $ 3,592
(1) Includes medical members of the Company’s Health Care segment as well as the International health care business, including expatriate benefits.
(2) For a definition of adjusted income from operations, see the “Consolidated Results of Operations” section of this MD&A beginning on page 38.
Results of Operations
•Revenues rose signifi cantly in 2010, refl ecting strong premium
growth in the Company’s ongoing operating segments due to solid
growth in each of the Company’s targeted markets. Net investment
income and realized investment results also improved signifi cantly
primarily refl ecting improving economic conditions.
•Medical membership increased, refl ecting the acquisition of
Vanbreda International as well as the strength of the Company’s
value proposition centered around health advocacy and its focus on
growth in targeted markets, primarily the middle market and select
segments.
•Adjusted income from operations increased signifi cantly in 2010,
refl ecting focused execution of the Company’s business strategy,
which includes a growing global customer base.
•Shareholders’ income from continuing operations also increased,
but at a lower rate than adjusted income from operations.  is is
primarily due to signifi cantly lower results in the Company’s run-
off GMIB business. Results from this business are volatile, as key
market inputs to the valuation of these assets and liabilities, such as
interest rates, are adjusted each quarter.
•Cash fl ows from operating activities remain strong, refl ecting solid
underlying earnings as well as business growth. Strong operating
cash fl ows enabled the Company to contribute $212 million to its
pension plan as well as to repurchase 6.2 million shares of stock for
$201 million.
Liquidity and Financial Condition
During 2010, the Company entered into several transactions to
position itself to execute on its strategy as well as to strengthen its
liquidity and fi nancial condition.
• e recent acquisition of Vanbreda International in the third
quarter of 2010 positions the Company to be a global leader in the
delivery of expatriate benefi ts.
• e Company sold its workers’ compensation and case management
business to GENEX Holdings.
• e Company reduced its balance sheet exposure in the run-
off reinsurance operations by reinsuring its run-off workers’
compensation and personal accident business.
• e Company retired portions of its long-term debt through a
tender off er process, and issued replacement debt at a signifi cantly
lower interest rate.
Shareholders’ equity increased substantially during 2010, refl ecting
strong shareholders’ net income as well as increased invested asset
values (primarily fi xed maturities) refl ecting lower market yields.
 ose favorable impacts were partially off set by the unfavorable eff ects
of the pension plan liability on shareholders’ equity due to changes
in the discount rate and mortality assumptions.  e Company’s
commercial mortgage loan portfolio continued to perform well, with
minimal write-downs and stabilizing real estate valuations.
Business Strategy
As a global health service organization, CIGNA’s mission is to help
the people it serves improve their health, well-being and sense of
security. As part of this mission, the Company remains committed
to health advocacy as a means of creating sustainable solutions for
employers, improving the health of the individuals that the Company
serves, and lowering the costs of health care for all constituencies.
CIGNA’s long-term growth strategy is based on: (1) growth in targeted
geographies, product lines, buying segments and distribution channels;
(2) improving its strategic and fi nancial fl exibility; and (3) pursuing
additional opportunities in high-growth markets with particular focus
on individuals. Our strategy can be summarized as follows:
•“Go deep” with growth in targeted customer segments, geographies,
buying segments and distribution channels;
•“Go individual” by delivering high quality products and services
which improve health, wellness and insurance needs that are helpful
and easy to use; and
•“Go global” by pursuing additional opportunities in high-growth
markets across the globe and serving individuals regardless of where
they live and work.
To achieve these goals, CIGNA expects to focus on the following
which have the most potential for profi table growth:
•Domestic Health Care segment. In this market, CIGNA is focused
on expanding and deepening client and customer relationships
across each segment. Specifi cally: (1) within key geographic
segments, growing the “Select” market, which generally includes
employers with more than 50 but fewer than 250 employees and
the “Middle Market” segment which generally includes employers
with more than 250 but less than 5,000 employees, by leveraging
the Company’s customer knowledge, diff erentiated service model,
product portfolio and distribution model; (2) engaging those
national account employers who share and will benefi t from
the Company’s value proposition of using health advocacy and
employee engagement to increase productivity, performance and