Cigna 2011 Annual Report Download - page 57

35CIGNA CORPORATION2011 Form10K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Key Consolidated Financial Data
(Dollars in millions) 2011 2010 2009
Revenues $ 21,998 $ 21,253 $ 18,414
Medical membership (in thousands)(1) 12,680 12,473 11,669
Shareholders’ income from continuing operations $ 1,327 $ 1,345 $ 1,301
Adjusted income from operations(2) $ 1,428 $ 1,277 $ 1,097
Cash ows from operating activities $ 1,491 $ 1,743 $ 745
Shareholders’ equity $ 8,344 $ 6,645 $ 5,417
(1) Includes medical members of the Company’s Health Care segment as well as the International health care business, including global health 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.
Consolidated Results of Operations
•
Revenues rose 4% in 2011, reecting solid growth in the Company’s
strategically targeted domestic and international customer segments of
its ongoing health care, disability and life, and international businesses.
In addition, the increase in revenue reects the eect of the programs
to hedge equity and growth interest rate exposures in the run-o
reinsurance operations. See the Run-o Reinsurance section of this
MD&A beginning on page51 for additional information. ese
increases were partially oset by the exit from certain non-strategic
markets, primarily the Medicare Advantage Individual Private Fee
For Service (“Medicare IPFFS”) business.
•
Medical membership increased 2%, reecting growth in targeted
markets, primarily the middle and select market segments domestically
as well as growth in the global health benets business. ese increases
were partially oset by exits from certain non-strategic markets,
primarily Medicare IPFFS.
•
Shareholders’ income from continuing operations decreased 1% in
2011, reecting higher losses in the GMIB business substantially oset
by higher overall earnings from the Company’s ongoing businesses.
•
Adjusted income from operations increased 12% in 2011, continuing
to demonstrate the value of the Company’s diversied portfolio of
businesses, resulting in strong earnings contributions from each
of the Company’s ongoing businesses. ese results were achieved
primarily as a result of continued growth, eective execution of the
Company’s business strategy and low medical services utilization
trend in the health care business.
•
Cash ows from operating activities in 2011 reected the strong
earnings contributions from the ongoing businesses, partially oset
by pension plan contributions and claim run-out from the Medicare
IPFFS business.
Liquidity and Financial Condition
During 2011, the Company entered into several transactions to
strengthen its liquidity and nancial condition as well as to strategically
deploy its capital as follows:
•
entered into an agreement to acquire HealthSpring,Inc.
(“HealthSpring”) for approximately $3.8billion in cash and Cigna
stock awards. e transaction closed on January31,2012;
•
the HealthSpring acquisition was nanced in part by the issuance
of $2.1billion of debt and 15.2million shares of common stock for
$650million ($629million, net of underwriting discount and fees) in
the fourth quarter of 2011. As a result of these transactions, cash at the
parent company was approximately $3.8billion at December31,2011;
• acquired FirstAssist for approximately $115million in the fourth
quarter of 2011;
•contributed $250million to its domestic qualied pension plans;
•repurchased 5.3million shares of stock for $225million; and
•
entered into a new ve-year revolving credit and letter of credit
agreement for $1.5billion, that permits up to $500million to be
used for letters of credit. e credit agreement includes options to
increase the commitment amount to $2.0billion and to extend the
term past June2016.
Shareholders’ equity increased substantially during 2011, reecting strong
shareholders’ net income, increased invested asset values (primarily xed
maturities) reecting lower market yields (largely due to lower interest
rates), and the impact of the fourth quarter common stock issuance.
ose favorable items were partially oset by the unfavorable eects
of the pension plan liability on shareholders’ equity due to a 100basis
point decline in the discount rate and lower than expected asset returns.
Business Strategy
Cigna’s mission is to improve the health, well-being and sense of security
of the individuals it serves around the world. Key to our mission and
strategy is our customer-centric approach; we seek to engage our
U.S.-based and global customers in maintaining and improving their
health, well-being and sense of security by oering eective, easy-to-
understand insurance, health and wellness products and programs
that meet their unique individual needs. We do this by providing
access to relevant information to ensure informed buying decisions,
partnering with physicians and care providers in the U.S. and around
the world, and delivering a highly personalized customer experience.
is approach aims to deliver high quality care at lower costs for each
of our stakeholders: individuals, employers and government payors.
Cigna’s long-term growth strategy is based on:(1) repositioning the
portfolio for growth in targeted geographies, product lines, buying
segments and distribution channels;(2) improving its strategic and
nancial exibility; and(3) pursuing additional opportunities in high-
growth markets with particular focus on individuals.
Our mission is carried out through our enterprise growth strategy,
which has the following three tenets:
•
GO DEEP: Cigna seeks to drive scale by increasing presence and
brand strength in key geographic areas, growing in targeted segments
or capabilities, and deepening its relationships with current customers.
• GO GLOBAL: Cigna delivers a range of dierentiated products
and superior service to meet the distinct needs of a growing global
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