Cigna Reports Strong 2015 Results, Expects Revenue and Earnings Growth in 2016

Cigna Corporation (NYSE: CI) today reported strong fourth quarter and full year 2015 results with revenue and earnings contributions across the Company’s diversified portfolio of businesses driven by the continued effective execution of our strategy. Consolidated revenues for 2015 were $37.9 billion, an increase of 8% over 2014.

Cigna's adjusted income from operations¹ for full year 2015 was $2.3 billion, or $8.66 per share, compared with $2.1 billion, or $7.87 per share, for 2014. This represents per share growth of 10% and reflects strong revenue growth and continued favorable medical and operating costs in the Global Health Care segment. For the fourth quarter of 2015, adjusted income from operations¹ was $486 million, or $1.87 per share, compared to $475 million, or $1.80 per share, for the fourth quarter of 2014.

“The strong results we delivered in 2015 reflect our proven ability to create sustained value for customers and clients,” said David M. Cordani, President and Chief Executive Officer. “The effective execution of our global strategy and our differentiated capabilities provide us with strong momentum as we begin 2016. Our pending combination with Anthem will further accelerate our strategy to improve quality, choice, and affordability in the marketplace.”

Cigna also reported shareholders’ net income in 2015 of $2.1 billion, or $8.04 per share, compared to $2.1 billion, or $7.83 per share, for 2014. Shareholders’ net income for 2015 included special items¹, which resulted in after-tax charges of $122 million, or $0.47 per share, for costs associated with the early redemption of long term debt as well as transaction costs related to Cigna’s proposed merger with Anthem.

For the fourth quarter of 2015, shareholders’ net income was $426 million, or $1.64 per share, compared with $467 million, or $1.77 per share, for the fourth quarter of 2014. Fourth quarter 2015 shareholders’ net income included a special item¹ charge of $28 million after-tax, or $0.11 per share, for transaction costs related to Cigna’s proposed merger with Anthem.

CONSOLIDATED HIGHLIGHTS

The following table includes highlights of results and a reconciliation of adjusted income from operations¹ to shareholders’ net income:

• Cash and marketable investments at the parent company were approximately $1.4 billion at December 31, 2015 and approximately $400 million at December 31, 2014.
• In 2015, the Company repurchased approximately 5.5 million shares of stock for approximately $685 million. During the period January 1, 2016 through February 3, 2016, the Company repurchased an additional 785,000 shares of common stock for approximately $110 million.³
• Given the pending combination with Anthem, it is unlikely that the Company will make further share repurchases in 2016.

HIGHLIGHTS OF SEGMENT RESULTS

See Exhibit 2 for a reconciliation of adjusted income (loss) from operations¹ to shareholders’ net income.

Global Health Care

This segment includes Cigna’s Commercial and Government businesses that deliver medical and specialty health care products and services to domestic and multi-national clients and customers using guaranteed cost, retrospectively experience-rated and administrative services only (“ASO”) funding arrangements. Specialty health care includes behavioral, dental, disease and medical management, stop loss and pharmacy-related products and services.

• Global Health Care delivered another strong result in 2015, reflecting consistent strong performance in our well-positioned growth businesses.
• Full year 2015 premiums and fees grew 10% to $26.8 billion reflecting ongoing growth in our self-funded programs, specialty products, and Government businesses.
• Cigna’s medical customer base grew 543,000, or 4%, in 2015 to a total of 15 million customers, driven by organic growth in our Middle Market, International, Select, and Medicare segments as well as the impact of our acquisition of Qualcare Alliance Networks.
• Full year adjusted income from operations¹ reflects business growth, including specialty contributions, and continued favorable medical costs in our Commercial employer business.
• Fourth quarter 2015 adjusted income from operations¹ and adjusted margin, after-tax⁵ reflect strong contributions from our Commercial employer and specialty businesses, as well as unfavorable medical costs in our Individual and Government businesses. The decline in fourth quarter 2015 relative to the third quarter 2015 is primarily driven by the seasonal impact of medical costs as well as higher spending on strategic initiatives.
• Adjusted income from operations¹ included favorable prior year reserve development on an after-tax basis of approximately $60 million for full year 2015 compared to $53 million for full year 2014.
• For full year 2015, Cigna has recorded receivables of approximately $250 million, after-tax related to 2015 risk mitigation programs with approximately 40% of the total related to reinsurance and the remainder split fairly evenly between risk adjustment and risk corridor.
• The Total Commercial medical care ratio⁹ (MCR) of 78.1% for the full year 2015, and 80.4% in fourth quarter 2015, reflect the ongoing strong performance of our Commercial employer business as well as continued high medical costs in our U.S. Individual business. The fourth quarter MCR also reflects expected higher seasonal medical costs.
• The Total Government MCR⁹ of 85.2% for the full year 2015, and 83.1% in fourth quarter 2015, reflect the ongoing strong performance in our Medicare Advantage business, partially offset by pressure in our Medicare Part D business. Fourth quarter Medicare Advantage results also include some unfavorable medical cost variability in a specific market.
• Full year medical cost trend for our total U.S. Commercial book of business was approximately 5% and reflects continued favorable medical costs, physician engagement and low utilization trend.
• The 2015 Global Health Care operating expense ratio⁹ of 21.4%, and the fourth quarter 2015 ratio of 22.7%, reflect ongoing efficiency gains, offset by continued investments in strategic initiatives and higher non-recurring expenses in the fourth quarter.
• Global Health Care net medical costs payable⁶ was approximately $2.11 billion at December 31, 2015 and $1.93 billion at December 31, 2014.

Global Supplemental Benefits

This segment includes Cigna’s global individual supplemental health, life and accident insurance business, primarily in Asia, and Medicare supplement coverage in the United States.

• Global Supplemental Benefits delivered attractive growth and profitability in 2015 on a currency adjusted basis as we continue to provide value to individual consumers with affordable and personalized solutions on a direct basis.
• Excluding the impact of foreign currency movements, 2015 premiums and fees grew 12% in Global Supplemental, reflecting ongoing customer growth in Cigna's target markets and strong retention.
• Full year 2015 adjusted income from operations¹ and adjusted margin, after-tax⁵ reflect business growth and favorable claims experience in Korea partially offset by the impact of foreign currency movements.
• Fourth quarter 2015 adjusted income from operations¹ and adjusted margin, after-tax⁵ reflect favorable claims experience in Korea and business growth.
• Foreign currency movements adversely impacted full year 2015 adjusted income from operations¹ by $26 million after-tax⁸.

Group Disability and Life

This segment includes Cigna’s group disability, life and accident insurance operations.

• Group Disability and Life results continue to reflect the value created for our customers by our differentiated productivity and return to work programs.

• Full year 2015 premiums and fees increased 8% over 2014 driven by business growth across the disability, life and accident product lines.
• Adjusted income from operations¹ and adjusted margin, after-tax⁵ for full year 2015 reflect continued strong results, including an improvement in claims experience in our life business.
• Third quarter 2015 adjusted income from operations¹ and adjusted margin, after-tax⁵ includes the favorable after-tax impact related to reserve studies of $11 million.

Corporate & Other Operations

Adjusted income (loss) from operations¹ for Cigna's remaining operations is presented below:

• Third quarter 2015 adjusted income from operations¹ benefited from lower corporate expenses.

2016 OUTLOOK

Cigna's outlook for full year 2016 consolidated adjusted income from operations^{1, 2} is in the range of $8.85 to $9.25 per share. This outlook excludes the impact of prior year reserve development and the potential effects of future capital deployment.³

Effective January 21, 2016, the Centers for Medicare & Medicaid Services (“CMS”) imposed sanctions suspending Cigna's enrollment and marketing activities related to all Cigna Medicare Advantage and standalone prescription drug plan contracts. The suspension does not impact current Cigna Medicare Advantage and Medicare Part D enrollees’ benefits or plans. Cigna is committed to ensuring that its customers have access to the quality healthcare, customer service and prescription drugs that they need and is working to resolve these matters as quickly as possible in full cooperation with CMS. The expected impact from these sanctions is reflected in Cigna's 2016 outlook for growth in revenue, adjusted income from operations^1,2, adjusted income from operations per share^1,2, and global medical customers.

The foregoing statements represent the Company’s current estimates of Cigna's 2016 consolidated and segment adjusted income from operations^1,2 and other key metrics as of the date of this release. Actual results may differ materially depending on a number of factors. Investors are urged to read the Cautionary Note Regarding Forward-Looking Statements included in this release. Management does not assume any obligation to update these estimates.

This quarterly earnings release and the Quarterly Financial Supplement are available on Cigna’s website in the Investor Relations section (http://www.cigna.com/aboutcigna/investors).

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release, and oral statements made with respect to information contained in this release, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on Cigna's current expectations and projections about future trends, events and uncertainties. These statements are not historical facts. Forward-looking statements may include, among others, statements concerning our projected consolidated adjusted income (loss) from operations outlook for 2016; projected consolidated revenue growth and global medical customer growth, each over year end 2015; future financial or operating performance, including our ability to deliver personalized and innovative solutions for our customers and clients and future growth, business strategy, strategic or operational initiatives; economic, regulatory or competitive environments, particularly with respect to the pace and extent of change in these areas; financing or capital deployment plans; our prospects for growth in the coming years; statements regarding the proposed merger between Cigna and Anthem, Inc. (Anthem); statements regarding the timing of resolution of the issues raised by CMS; and other statements regarding Cigna’s and Anthem’s future beliefs, expectations, plans intentions, financial condition or performance. You may identify forward-looking statements by the use of words such as “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “may,” “should,” “will” or other words or expressions of similar meaning, although not all forward-looking statements contain such terms.

Forward-looking statements are subject to risks and uncertainties, both known and unknown, that could cause actual results to differ materially from those expressed or implied in forward-looking statements. Such risks and uncertainties include, but are not limited to: our ability to achieve our financial, strategic and operational plans or initiatives; our ability to predict and manage medical costs and price effectively and develop and maintain good relationships with physicians, hospitals and other health care providers; our ability to identify potential strategic acquisitions or transactions and realize the expected benefits of such transactions; the substantial level of government regulation over our business and the potential effects of new laws or regulations, or changes in existing laws or regulations; the outcome of litigation, regulatory audits, including the CMS review and sanctions, investigations and actions and/or guaranty fund assessments; uncertainties surrounding participation in government-sponsored programs such as Medicare; the effectiveness and security of our information technology and other business systems; and unfavorable industry, economic or political conditions, including foreign currency movements; the timing and likelihood of completion of the proposed merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals for the proposed merger that could reduce anticipated benefits or cause the parties to abandon the transaction; the possibility that the expected synergies and value creation from the proposed merger will not be realized or will not be realized within the expected time period; the risk that the businesses of Cigna and Anthem will not be integrated successfully; disruption from the proposed merger making it more difficult to maintain business and operational relationships; the risk that unexpected costs will be incurred; the possibility that the proposed merger does not close, including due to the failure to satisfy the closing conditions; the risk that financing for the proposed merger may not be available on favorable terms, as well as more specific risks and uncertainties discussed in our most recent report on Form 10-K and subsequent reports on Forms 10-Q and 8-K available on the Investor Relations section of www.cigna.com as well as on Anthem’s most recent report on Form 10-K and subsequent reports on Forms 10-Q and 8-K available on the Investor Relations section of www.antheminc.com. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance or results, and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Cigna undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law.

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