QUOTE AND NEWS
Forbes  Oct 20  Comment 
The Cigna Health and Life Insurance company is suing Health Diagnostic Laboratory Inc. for $84 million.  As reported previously, the embattled lab company is the subject of an ongoing Federal investigation concerning kickbacks and fraudulent...
StreetInsider.com  Oct 17  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Corporate+News/BioTelemetry+%28BEAT%29+Higher+after+Cigna+Reinstates+Coverage/9919543.html for the full story.
Market Intelligence Center  Oct 17  Comment 
The patented options-trade picking algorithms used by MarketIntelligenceCenter.com found a trading opportunity with CIGNA Corp. (CI) that should provide a 5.26% return in just 92 days. Sell one Jan. '15 call at the $87.50 level for each 100 shares...
newratings.com  Oct 16  Comment 
LifeWatch AG: LifeWatch AG / Key word(s): Agreement 16.10.2014 23:07 Release of an ad hoc announcement pursuant to Art. 53 KR --------------------------------------------------------------------------- Press Release LifeWatch Services, Inc....
Benzinga  Oct 16  Comment 
BioTelemetry, Inc. (Nasdaq: BEAT), the leading wireless medical technology company focused on the delivery of health information to improve quality of life and reduce cost of care, announced today that Cigna Corporation will reinstate coverage of...
Jutia Group  Oct 16  Comment 
[Business Wire] - Cigna and Regional HealthPlus have launched a collaborative care initiative to improve patient access to health care, enhance care coordination, and achieve the goal of improved health, affordability and patient experience. Read...
Benzinga  Oct 15  Comment 
Sterne Agee lowered its rating on Cigna Corporation (NYSE: CI) from Buy to Neutral in a report issued Tuesday with a $110 price target. Analyst Brian Wright continued to "view CI's international assets as under appreciated," however, he was...
TheStreet.com  Oct 14  Comment 
NEW YORK (TheStreet) -- Sterne Agee analysts downgraded Cigna Corp. to "neutral" from "buy" this morning with a price target of $110. The global health services company that processed over 160 million medical claims in 2013 is a victim of...
Jutia Group  Oct 14  Comment 
[Business Wire] - In light of a new state law requiring all Baltimore County students to learn cardiopulmonary resuscitation before graduation, Cigna has donated CPR in Schools Trai Read more on this. Cigna Corp. (CI), valued at $23.14B, started...
Benzinga  Oct 14  Comment 
Analysts at Sterne Agee downgraded Cigna (NYSE: CI) from Buy to Neutral. Cigna shares have gained 13.16% over the past 52 weeks, while the S&P 500 index has surged 9.62% in the same period. Cigna's shares fell 0.85% to $88.92 in after-hours...




 

CIGNA Corporation (NYSE:CI) is a health insurance company - sort of. For one, three-quarters of Cigna's health insurance business isn't really insurance - Cigna manages health plans for companies who self-insure, agreeing to pay employee's health care costs. Employees get Cigna cards and access to Cigna's negotiated rates with doctors, and Cigna handles billing, but the employer bears the risk of paying for care when employees get sick. This arrangement means less risk for Cigna, but also smaller premiums. The majority of CIGNA's revenues come from these so called self-funded administrative-only plans.

Cigna also differs from its competitors in that the majority of the company's pretax operating income comes from investment income- 50% higher than its next most-invested competitor, Aetna, and almost four times that of other large national health account providers.[1] [2] This reliance on investment income makes the company much more vulnerable to market conditions than most other health insurance companies.

The company’s Medicare membership comprises only 0.3% of its total coverage, shielding CIGNA from legislation like the 2006 Deficit Reduction Act, which aims to cut Medicare funding by over $4.8 billion before 2011 and threatens competitors’ profit margins.

Company Overview

Business Financials

CIGNA earned total revenues of $18.4 billion in 2009, a slight decrease from its 2008 total revenues of $19.1 billion.[3] Despite this decrease in revenues, CIGNA was able to substantially increase its net income from $288 million in 2008 to $1.3 billion in 2009.[3] This was largely the result of CIGNA realizing a run off reinsurance gain of $185 million in 2009 as opposed to a $674 million loss the previous year.

Business Segments

CIGNA breaks its operations into five major business segments: i) Health Care, ii) Disability and Life, iii) International, iv) Run-off Reinsurance, and v) Other Operations.

The Health Care Segment (61.8% of 2009 revenue)[4]

The health care segment provides health insurance through a variety of forms such as health maintenance organizations (HMOs), point of service (POS) plans, preferred provider (PPO) plans, and more limited voluntary plans primarily to national, regional, and small-business employers. They also offer specialty plans such as dental insurance and prescription drug plans. The division offers three pricing schemes: a guaranteed cost scheme, where CIGNA takes on all medical cost risk in exchange for a monthly premium; a retrospectively experience-rated scheme, where the premium includes a margin that can be adjusted based on each individual or employers medical history; and a self-funded administrative services only (ASO) scheme, in which the customer pays a smaller fee in exchange for CIGNA taking on all administrative costs, but the customer incurs their own medical costs up to a "stop-loss" amount. In 2009, this segment earned $13.1 billion in total revenues.[4]

The Disability and Life Segment (16.2% of 2009 revenue)[5]

This segment provides group life insurance, long and short-term disability insurance, workers’ compensation, and accident insurance to national and regional employers and employees through its subsidiaries. For disability insurance, CIGNA acts for both the employer and employee, providing a fixed level of income to the employee, assisting the employee in his/her return to work, and assisting the employer in managing the cost of employee disability. All services in this division are contracted under a guaranteed cost scheme. In 2009, this segment earned $2.99 billion in total revenues.[5]

The International Segment (10.7% of 2009 revenue)[6]

This segment includes revenues from life, accident, and health insurance services offered by CIGNA’s foreign subsidiaries. These services are offered to foreign employers, as well as multinational companies. In 2009, this segment posted total revenues of $1.97 billion.[6]

Run Off Reinsurance

Prior to 2000, this segment offered to reinsure part or all of the risks written off by other insurance companies under life, accident, or health insurance policies. In 2000, CIGNA sold these subsidiaries, but still generates revenue from previously invested income and incurs contractual payments as a “run-off” to these policies. In 2009, the segment had a negative revenue of $141 million.[7]

Other Operations (3.2% of 2009 revenue)[8]

This segment includes the sale of corporate-owned life insurance (COLI) plans, or employers’ life insurance on certain employees; deferred revenue from the 1998 and 2004 sales of their life insurance, annuity, and retirement benefits businesses; and their settlement annuity business, or liability settlements for non-guaranteed payments. In 2009, this segment posted total sales of $583 million.[8]

Trends and Forces

Decline in proportional Medicare membership allows CIGNA to maintain margins in wake of funding cuts

Under Medicare and Medicaid plans, a health insurance company takes on medical cost risk for a customer in exchange for monthly premiums paid by the government. The 2006 Deficit Reduction Act, however, included a plan to cut Medicaid funding by $4.8 billion before 2011.[9] This bill, along with any additional legislation of this form, would lead to decreased profit margin for any customer under a Medicaid or Medicare plan. As this funding is cut, CIGNA increasingly low exposure to government payments offers it a competitive advantage over competitors providing a large proportion of Medicare plans. Medicare customers represented only 0.3% of CIGNA’s coverage, helping keep CIGNA insulated from this development.

Heavy reliance on self-funded accounts mediates risks, but dampens revenue growth potential

Under self-funded accounts, customers pay a smaller premium in exchange for administrative services, but incur their own medical costs up to a given "stop-loss" amount. While this prevalence of self-funded accounts eliminates some inherent risks of medical costs, it dampens revenue growth by generating smaller premiums per member. For example, Medical Membership in CIGNA's Health Care Segment grew by over 8% in 2007, but the total premiums generated by this segment grew only 7% in this same time period.[10]

Competition

CIGNA’s Health Care services face a highly competitive industry that competes on the prices and comprehensiveness of benefits, location and choice of health care providers, quality of customer service, and reputation of financial strength. Its greatest competition comes from other national account companies such as Aetna (AET), UnitedHealth Group (UNH), and WellPoint Health Networks (WLP).


References

  1. | CI 2007 10-K, Item 8: Financial Statements and Supplementary Data, pg 67
  2. Stiffel Nicolaus Report, CVH, 8/16/2007
  3. 3.0 3.1 CI 10-K 2009 Item 6 Pg. 47
  4. 4.0 4.1 CI 10-K 2009 Item 7 Pg. 62
  5. 5.0 5.1 CI 10-K 2009 Item 7 Pg. 69
  6. 6.0 6.1 CI 10-K 2009 Item 7 Pg. 71
  7. CI 10-K 2009 Item 7 Pg. 73
  8. 8.0 8.1 CI 10-K 2009 Item 7 Pg. 77
  9. CVH 2007 10-K, Risk Factors, pg 20
  10. | CI 2007 10-K, Membership, pg 49-51
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