Cigna 2012 Annual Report Download - page 63

PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
U.S. Virgin Islands, Canada, Europe, the Middle East, and Asia.
Global Health Care Segment
Cigna services its globally mobile customers virtually everywhere in
the world. These products and services are offered through a variety
Segment Description
of funding arrangements such as administrative services only (ASO),
As discussed in the Introduction section of this MD&A and Note 23 guaranteed cost and retrospectively experience rated.
to the Consolidated Financial Statements, effective December 31,
The Government operating segment offers Medicare Advantage
2012, the Company changed its reporting segments. The Global
plans to seniors in 13 states and the District of Columbia, Medicare
Health Care segment now includes the Company’s international
Part D plans in all 50 states and the District of Columbia and
health care business, previously reported in the former International
Medicaid plans. Results for the Government operating segment
segment and excludes certain disability and life business that is now
include HealthSpring from the date of acquisition, January 31,
reported in the Group Disability and Life segment. Prior year
2012.
information has been conformed to the new segment presentation.
The international health care business is included in the Commercial The Company measures the operating effectiveness of the Global
operating segment. Health Care segment using the following key factors:
Global Health Care aggregates the following two operating segments: segment earnings and adjusted income from operations;
The Commercial operating segment includes both the U.S. customer growth;
commercial and international health care businesses that offer
insured and self-insured medical, dental, behavioral health, vision, sales of specialty products;
and prescription drug benefit plans, health advocacy programs and other operating expense as a percentage of segment revenues
other products and services that may be integrated to provide (operating expense ratio); and
comprehensive global health care benefit programs to employers
and their employees, including globally mobile individuals. Cigna, medical expense as a percentage of premiums (medical care ratio) in
either directly or through its partners, offers some or all of these the guaranteed cost and Medicare businesses.
products and services in all 50 states, the District of Columbia, the
Results of Operations
Financial Summary
(In millions) 2012 2011 2010
Premiums and fees $ 20,973 $ 14,443 $ 14,134
Net investment income 259 263 230
Mail order pharmacy revenues 1,623 1,447 1,420
Other revenues 225 236 269
Segment revenues 23,080 16,389 16,053
Mail order pharmacy cost of goods sold 1,328 1,203 1,169
Benefits and other operating expenses 19,541 13,465 13,424
Benefits and expenses 20,869 14,668 14,593
Income before taxes 2,211 1,721 1,460
Income taxes 793 616 520
SEGMENT EARNINGS 1,418 1,105 940
Less: special items (after-tax) included in segment earnings:
Charge for realignment and efficiency plan (See Note 6 to the Consolidated Financial Statements) (42) - -
Costs associated with the HealthSpring acquisition (See Note 3 to the Consolidated Financial Statements) (7) - -
Completion of IRS examination (See Note 20 to the Consolidated Financial Statements) - 1 -
Charge related to litigation matter (See Note 24 to the Consolidated Financial Statements) (13) - -
ADJUSTED INCOME FROM OPERATIONS $ 1,480 $ 1,104 $ 940
Realized investment gains, net of taxes $ 9 $ 23 $ 25
Segment earnings increased 28% in 2012 compared with 2011, due The Global Health Care segment’s adjusted income from operations
to higher adjusted income from operations, partially offset by the increased 34% in 2012, as compared with 2011 reflecting:
special items related to the realignment and efficiency plan charge, the strong earnings contributions from the government segment,
costs associated with the acquisition of HealthSpring and a litigation primarily attributable to the acquired HealthSpring business
matter. Segment earnings increased 18% in 2011 compared with reflecting effective medical cost and pharmacy management
2010, due to higher adjusted income from operations. programs;
CIGNA CORPORATION - 2012 Form 10-K 41
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