Cigna 2011 Annual Report Download - page 71

49CIGNA CORPORATION2011 Form10K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Segment earnings increased 2% in 2010 compared to 2009 reecting
4% higher adjusted income from operations partially oset by the
absence of a $5million favorable special item related to the completion
of the 2005 and 2006 IRS examinations. Adjusted income from
operations increased as a result of higher net investment income and
the $11million after-tax gain on the sale of the workers’ compensation
and case management business.
Largely osetting these factors were:
•less favorable claims experience in the disability insurance business,
primarily related to lower short-term disability underwriting margins.
ese results include the favorable after-tax impact of disability reserve
studies of $29million in 2010 compared with $20million in 2009,
which reect continued strong disability claims management programs;
• slightly less favorable accident claims experience including the less
favorable after-tax impact of reserve studies of $3million in 2010
compared with $5million in 2009; and
•
lower earnings in specialty products largely due to the sale of the
student and participant accident business.
Revenues
Premiums and fees increased 4% in 2011 compared with 2010 reecting
disability and life sales growth and continued solid persistency partially
oset by the impact of the Company’s exit from a large, low-margin
assumed government life insurance program. Excluding the impact
of this item, premiums and fees increased 6%. Disability premiums
and fees grew by 9%.
Premiums and fees increased 1% in 2010 compared with 2009 as a
result of disability and life sales growth combined with solid persistency,
largely oset by the Company’s exit from two large, non-strategic
assumed government life insurance programs and the sale of the renewal
rights for the student and participant accident business. Excluding the
impact of these items, premiums and fees increased 7%.
Net investment income increased 2% in 2011 compared with 2010
due to higher average assets reecting business growth and higher
prepayment fees partially oset by lower yields. Net investment income
increased by 7% in 2010 reecting higher income from security and
real estate partnerships and higher assets.
Other revenues. e absence of other revenues in 2011 reects the
sale of the workers’ compensation and case management business that
was completed during the fourth quarter of 2010. Other revenues in
2010 include the $18million pre-tax gain on the sale of the workers’
compensation and case management business in 2010.
Benefits and Expenses
Benets and expenses were essentially at in 2011 as compared with
2010 reecting disability and life business growth, less favorable
disability claims experience and a higher operating expense ratio,
largely oset by the absence of operating expenses associated with the
workers’ compensation and case management business that was sold
in 2010 and favorable life and accident claims experience. Benets and
expenses include the favorable before tax impact of reserve studies of
$59million in 2011 as compared with $55million in 2010.
Benets and expenses increased 2% in 2010 compared with 2009,
primarily reecting disability and life business growth and less favorable
short-term disability claims experience. Benets and expenses include the
favorable before tax impact of disability reserve studies of $43million
in 2010 as compared with $29million in 2009, largely driven by
continued strong disability claims management programs. ese factors
were partially oset by the Company’s exit from two large, non-strategic
assumed government life insurance programs and the sale of the renewal
rights for the student and participant accident business.
International Segment
Segment Description
e International segment includes supplemental health, life and
accident insurance products and international health care products
and services, including those oered to individuals and globally mobile
employees of multinational corporations and organizations.
e key factors for this segment are:
•premium growth, including new business and customer retention;
•benets expense as a percentage of earned premium (loss ratio);
•
operating expense as a percentage of earned premium (expense
ratio); and
•impact of foreign currency movements.
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