Cigna 2014 Annual Report Download - page 65

PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We present the financial results of our businesses in the following three reportable segments:
Segment % of Revenues Description
Global Health Care 78% Aggregates the Commercial and Government operating segments:
Commercial
Encompasses both our U.S. commercial and certain international
health care businesses.
Serves employers and their employees, including globally mobile
individuals, and other groups (e.g., governmental and
non-governmental organizations, unions and associations). In
addition, our U.S. commercial health care business also serves
individuals.
Offers insured and self-insured medical, dental, behavioral health,
vision, and prescription drug benefit plans, health advocacy programs
and other products and services that may be integrated as part of a
comprehensive global health care benefit program.
Government
Offers Medicare Advantage, Medicare Part D and Medicaid plans.
Global Supplemental Benefits 9% Offers supplemental health, life and accident insurance products in selected
international markets and the U.S.
Group Disability and Life 11% Offers group long-term and short-term disability, group life, accident and
specialty insurance products and related services.
We present the remainder of our segment results in Other Operations, consisting of the corporate-owned life insurance business (‘‘COLI’’),
run-off reinsurance and settlement annuity businesses and deferred gains associated with the sales of the individual life insurance and annuity and
retirement benefits businesses.
Key Transactions and Other Significant Items
The following is a summary of key transactions and other significant to earnings in 2014 through improved clinical management,
items since January 1, 2012 affecting period-to-period comparisons of purchasing and administrative efficiencies.
our results. Organizational Efficiency Plans. We regularly evaluate ways to
Run-off Reinsurance Transaction. Prior to February 4, 2013, our deliver our products and services more efficiently and at a lower cost.
run-off reinsurance business had significant exposures, primarily from During 2013 and 2012, we adopted specific plans to increase our
our guaranteed minimum death benefits (‘‘GMDB’’ also known as organizational efficiency, resulting in a charge of $60 million pre-tax
‘‘VADBe’’) and guaranteed minimum income benefits (‘‘GMIB’’) ($40 million after-tax) in 2013 and $77 million pre-tax ($50 million
businesses. Effective February 4, 2013, we entered into an agreement after-tax in 2012. See Note 6 to the Consolidated Financial
with Berkshire to reinsure future exposures for this business, net of Statements for additional information.
existing retrocessional arrangements, up to a specified limit, for a
payment of $2.2 billion. The reinsurance transaction aligned with our
Disability Claims Regulatory Matter
strategy of increasing financial flexibility by accomplishing an effective
exit from the GMDB and GMIB businesses. As a result of this During the second quarter of 2013, we finalized an agreement with
transaction, we recorded an after-tax charge of $507 million in the the Departments of Insurance for Maine, Massachusetts,
first quarter of 2013 that was reported as a special item. See Note 7 to Pennsylvania, Connecticut and California (together, the ‘‘monitoring
the Consolidated Financial Statements and the Other Operations states’’) related to our long-term disability claims handling practices.
section of this MD&A for additional information. In connection with the terms of the agreement, the Company
recorded a charge of $77 million before-tax ($51 million after-tax) in
Pharmacy Benefit Management (‘‘PBM’’) Services Agreement. In the first quarter of 2013. The charge was comprised of two elements:
June 2013, we entered into a 10-year pharmacy benefit management (1) $48 million of benefit costs and reserves from reassessed claims
services agreement with Catamaran Corporation. Under this expected to be reopened, and (2) $29 million of additional costs for
agreement, we utilize their technology and service platforms, retail open claims as a result of the claims handling changes being
network contracting and claims processing services. In the second implemented. This charge was reported in the Group Disability and
quarter of 2013, we recorded one-time transaction costs of Life segment. We are actively implementing the terms of the
$37 million pre-tax ($24 million after-tax) that were reported as a agreement and continue to communicate with the monitoring states
special item. This arrangement has produced a positive contribution on progress. If the monitoring states find material non-compliance
CIGNA CORPORATION - 2014 Form 10-K 33
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