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WELCOME! WE WILL GET STARTED SOON.
Business Acumen connects the dots…in order to respond effectively
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Shopping carts get
abandoned
Sales are lost; order rates go
down
Customer service gets angry calls
VP Sales has to talk to the IT VP to get
ETA on site fix
Emotions run high; relationships are
strained
Cost of sales increases
Customer loyalty and retention suffers
CFO fields calls from Wall Street because the sales
forecast was missed
Market share is lost; stock price drops
When the server that hosts the e- commerce
web site crashes…
CIGNA Q1-2015 QUARTERLY ALUMNI REVIEW CALL
Follow-up from Business Acumen Class—Earnings Call held April 30, 2015
Keith GulledgeAcumen Learning, LLC
May 13-14, 2015
REMINDER: Do NOT use the WebEx call-back feature. Use the special call-in numbers in your invite.
THIS CALL IS BEING RECORDED
Online hosts
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Program Manager: Alicia EngelAlicia.Engel@cigna.com
Phoenix, AZ USA
Salt Lake City, UT USA
Acumen Learning: Keith Gulledge
KGulledge@acumenlearning.com
ANNOTATION (SLIDE MARKER) TOOLS
Use these as your hosts indicate
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Highlighter / Pencil Color paletteText tool
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Left-click on an icon to activate the tool and
left-click again to deactivate.
You’ll see a box around the tool that is active as
pointed out here.
Click on the down arrow to the right of
each icon to see additional tools.
WHERE ARE YOU NOW?
Use any annotation tool to mark your current location on the map.
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
PARTICIPANT INVOLVEMENT
We want you to be INVOLVED in this call!
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Ask questions at any time:Unmute your phone (*6 or your mute button) and just jump in…OR…Use the chat box
─ AND / OR ─
Wait until the end for formal Q&A.
WHY PARTICIPATE IN QUARTERLY EARNINGS CALLS AND QUARTERLY REVIEW CALLS?
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Quarterly Earnings Calls (public)
Better understand Analyst questions and concerns; hear how Cigna responds
Quarterly Review Calls (internal)
Understand the “story” behind each quarter’s performance
Knowledge supports better decisionmaking
Keith GulledgeAcumen Learning—Orem, Utah
REVIEW OF Q1-2015EARNINGS CALL
8Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
In conjunction with
Preparation we hope you have made:
1. Listen to or read the Transcript of the Q1-2015 Earnings Call on April 30, 2015
2. Quarterly News Release
3. Quarterly Financial Supplement
4. Quarterly Earnings Call Workbook
5. Navigating the Financials—Q1-2015 (end of Workbook)
Thank you for joining us!
Call will last approximately one hour.
Q1-2015 EARNINGS CALL REVIEW
Preparations for this Alumni Review Call
DISCLOSURE
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
The primary intent of this call is to supplement and support your Business Acumen training. Our focus is to understand Cigna’s corporate messaging and reported financial performance within the context of the “Five Business Drivers” model which was introduced in the Building Business Acumen training session.
The information covered today should not be used to make any investment decisions. Our role is not to editorialize or speculate about business decisions, the sufficiency of communications to investors, or other business matters.
AGENDA
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Introduction and Overview 10 min.
Key Messages & Financial Analysis 40 min. Key themes and issues discussed Performance: Cash, Profit, Asset, Growth, People, External Factors Analyst Questions & Discussion Outlook and Guidance for 2015
Wrap-up, Q&A 10 min.
FURTHER STUDY
Resources to study—Q1-2015 Earnings Call
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
News Release
Recording or Transcript of Earnings Call
Financial Supplement
Form 10-Q
Cigna.com / Investor Relations / Quarterly Reports
Preparation for participating in this Quarterly Alumni Review Call
QUARTERLY EARNINGS CALL WORKBOOK
POLLING QUESTION
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
VoteVote
Did you listen to the Q1-2015 Earnings Call or read the transcript?
A. YES – all of it
B. YES – some of it
C. NO – but read the News Release
D. NO – did not listen or read any documents
YOUR PREPARATION
David M. Cordani—Cigna President and CEO
Thomas A. McCarthy—Cigna CFO
Will McDowell—Cigna VP of Investor Relations
13 analysts from: Wells Fargo Securities
Bank of America Merrill Lynch
Barclays Capital
Wedbush Securities
Morgan Stanley & Co.
Cowen & Co.
Deutsche Bank
Credit Suisse AG
Susquehanna Financial Group
UBS Investment Bank
Leerink Partners
Goldman Sachs
Jeffries, LLC
Q1-2015 EARNINGS CALL PARTICIPANTS
About 20 analysts regularly follow Cigna with about 11-13 on each call
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
STOCK MARKET 5-YEAR PERFORMANCE
What is the relationship of the 5 DRIVERS to Cigna’s stock price?
July 2010 s $30
REVIEW OF 5-DRIVERS
Earnings Call Workbook Summary
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Please Review the 5 Drivers in the Summary of the Earnings Call Workbook
www.5-drivers.com/behealthy
5-DRIVER FOCUS FROM ANALYSTS
and EARNINGS CALL
INTRODUCTION
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
BASIC FOCUS OF ANALYSTS AROUND 5 DRIVERS
What analysts are looking for
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Capital Allocation Liquidity Consistent Cash Flow Reasons for increase/decrease
Profit & EPS outlook Cost analysis & trend:
MLR & SG&A Impact of exchanges Segment analysis—
Gov’t. & Commercial Business units as Assets Diversification, Efficiency Minimum focus on Cash investments or hard Assets
Focus: Revenue & EPS Growth Strategies: Acquisitions, markets Outlook for Profits, EPS, members Sources of Growth
Membership Growth, Segments Seniors Market Outlook for Exchanges, ACA Costs associated with Segments
MESSAGES AROUND THE 5 DRIVERS
Please complete this Activity in the Earnings Call Workbook
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
OVERALL THEMES DISCUSSED
BIG PICTURE of Earnings Call topics
David’s major themes: Financial strength and capital deployment Execution of profitable Growth strategy—Outlook Cigna’s integrated and differentiated capabilities Strategy to focus NOT on financing costs of illness
and disease cure, but on preventive health care and maintaining and improving health and wellness
Costs: Medical trends, operating expenditures Exchanges: Trends and cost impact Market segments: Trends, opportunities Impact of alliances—only questions on Assets
Themes the analysts focused on:
13 analysts asked @ 25 questions plus follow-ups
Dominant questions and discussion:
PROFITABILITY (Costs) driven by PEOPLE
Customers, Markets, Exchanges + Cost pressures
15 or 60% PROFIT – Costs focus—in context of Growth & various Cost pressures
5 or 20% PEOPLE – Exchanges, Customer segments, Markets, Medicare Advantage
2 or 8% ASSETS –JV with Catamaran in light of UNH; JV & SCAN Health
2 or 8% CASH – Strategic spending in Q-1
1 or 4% GROWTH– Context of Commercial and Government business
Analysts’ questions by Driver (many questions addressed more than one Driver):
AREAS OF FOCUS BY ANALYSTS & MANAGEMENT
Here’s what was on their mind
INTRODUCTION TO EARNINGS CALL
Q1-2015 Earnings Call—David Cordani, Pres. & CEO
“Cigna's first-quarter 2015 performance represents a strong start to the year. We are pleased withour results, which extends our track record of attractive financial performance.
“Once again, our success was driven by the effective and disciplined execution of our strategy, which continues to guide our actions in a dynamic marketplace. Our first-quarter 2015 consolidated revenue increased 11% to $9.5 billion with strong contributions across our business segments.”
Cigna Q1-2015 performanceRevenues: ▲ 11% to $9.5 billion
Adjusted Income from Operations: DN 4% to $513 million
Adjusted Income from Operations per share: ▲ 1% to $1.96
Shareholders’ Net Income: ▲ 1% to $533 million
Shareholders’ Net Income per share: ▲ 6% to $2.04
“We are pleased with our results.”
Q1-2015 PERFORMANCE OVERVIEW
Key metrics highlighted by Cigna management
CASH
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
POLLING QUESTION
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
VoteVote
How did CASH FLOW perform in Q1-2015 as compared with Q1-2014?
A. Slightly higher
B. Significantly higher
C. Slightly lower
D. Significantly lower
CASH
POLLING QUESTION
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
VoteVote
Which of the following is NOT core to Cigna’s Capital Deployment priorities?
A. Buying back stock
B. Reinvesting in operations for Growth
C. Paying increasingly high dividends
D. Investing in selected acquisitions worldwide
CASH
“Our capital deployment strategies and priorities have not changed.” These priorities are:
Support Growth of our ongoing operations;
Pursuing M&A activity to focus on acquiring capabilities and scale to further grow in our targeted areas of focus; and
Return capital to shareholders—primarily through share repurchase.
CAPITAL DEPLOYMENT PRIORITIES
Q1-2015 Earnings Call—Tom McCarthy, CFO
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Diversified portfolio of businesses produce “significant free cash flow”
Enables “financial flexibility”
Over $500 million to repurchase shares Q-1
Provides “continued focus and effective strategic execution”
Help us meet “unique local market needs through the right balance of affordability and personalization of our produces and services”
End Q1 with $1.3 B in parent company Cash—includes $900 M in long-term debt
CASH STRENGTHS
Q1-2015 Earnings Call—David Cordani, Pres. & CEO
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Consolidated
CASH PERFORMANCE
Snapshot in Time
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
“Our free cash flow outlook continues to reflect the industry leading margins and returns on capital in our businesses, and a high level of capitalefficiency, particularly from our fee-based businesses.
IMPORTANCE OF CAPITAL IN GROWTH
Q1-2015 Earnings Call—Tom McCarthy, CFO
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
“This capital efficiency allows us to fund attractive organic growth while continuing to generate significant free cash flow to be deployed for the benefit of shareholders.”
PROFIT
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
PROFIT: COSTS AND PRODUCTIVITY
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Q1-2015 Earnings Call—David Cordani, Pres. & CEO
“…we've chosen to redefine our orientation around scale to ensure that we have appropriate scale to have competitive cost structure from an administrative cost standpoint, which we have. We've been able to prove productivity gains year in, year out, and free capacity to further ongoing investment back to within the franchise.
“And then you come down to medical cost in your dialogue, and that's a very localized conversation.”
POLLING QUESTION
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
VoteVote
What is the PRIMARY measure used by Cigna management in reporting past and projected earnings?
A. Shareholders’ Net Income
B. Income Before Income Taxes
C. Adjusted Income from Operations
D. Total Revenues
PROFIT
E. Shareholders’ Net Income per Share
PROFIT TERMINOLOGY
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
1. What does “adjusted” mean?
2. What does “diluted” earnings per share mean (in contrast to “basic”)?
“Adjusted” means “normalized”
“Diluted” EPS includes all the eligible options that could be converted to shares
POLLING QUESTION
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
VoteVote
How did ADJUSTED INCOME FROM OPERATIONS perform in Q1-2015 as compared with Q1-2014?
A. Slightly higher
B. Significantly higher
C. Slightly lower
D. Significantly lower
PROFIT
Consolidated
PROFIT PERFORMANCE
DEPS = Diluted Earnings Per Share
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
What is the high end range of revised Adjusted Income from Operations, per share (EPS) for 2015?
$7.00 $8.75$7.75
Range: $8.15 to $8.50
REVISED ADJ. EPS OUTLOOK FOR 2015
Mark with your Annotation Tool
$9.00$8.50$7.25 $7.50 $8.00 $8.25
ASSETS
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
ASSETS & PEOPLE STRATEGY
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Q1-2015 Earnings Call—David Cordani, Pres. & CEO
“By leveraging our integrated capabilities and coordinating clinical care resources for each individual through their health journey, we are improving affordability while creating a more sustainable health care system.
“Over the long term, we believe our approach to healthcare rather than sick care will promote better health, sustainability, and economic vibrancy, and lower the cost burden on customers as well as employers.”
ASSETS & PEOPLE STRATEGY –Cont’d.
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Q1-2015 Earnings Call—David Cordani, Pres. & CEO
“And this success translates to shareholder value as we leverage our capabilities to meet customer needs with products and services that are enhanced through our highly aligned coordinated offerings.
“This value is evidenced by our industry-leading medical cost trend over the last several years, higher customer retention levels, and strong growthin our specialty and integrated services to achieve the personalization of services outcomes that I previously referenced.”
1 Liabilities adds redeemable non-controlling interests of Finansbank
ASSET PERFORMANCE
Consolidated
*Quarterly figures are annualized (x4)
1
GROWTH
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
GROWTH STRATEGY
Q1-2015 News Release—David Cordani, Pres. & CEO
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
"Cigna continues to deliver differentiated, personalized and affordable solutions, creating value for our customers and clients. "We continue our focus on delivering innovative products and services centered around unique local market needs, driving growth in new and existing markets."
SUMMARY: GROWTH PERFORMANCE
Already looked at GROWTH for each Driver
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
GROWTH STRATEGY
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Q1-2015 Earnings Call—David Cordani, Pres. & CEO
“As we have discussed previously, we have a clear framework to drive ongoing future value creation for Cigna. First, our diversified businesses are well positioned to create attractive value for customers and clients, and as a result, differentiated revenue growth.
“Second, we are focused on targeted and effective capital deployment to create ongoing shareholder value through investments in our business,strategic M&A, and share repurchase. Our businesses generate high levels of free cash flow which give us financial flexibility and the opportunity to deploy capital to further create value for the benefit of shareholders.
GROWTH STRATEGY
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Q1-2015 Earnings Call—David Cordani, Pres. & CEO
Framework for GrowthFramework for Growth
“And finally, we continue to seek new and emerging opportunities to expand in new distribution marketplaces, new geographies, and new buyingSegments…This framework also positions us to support our focus on enabling healthcare over financing sick care, which is well aligned with Cigna's efforts to improve the current healthcare system.
“M&A continues to be a component of our value creation framework.”
PEOPLE
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
PEOPLE FOCUS
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Q1-2015 Earnings Call—David Cordani, Pres. & CEO
“To meet these goals, we must continue to accelerate the transition from yesterday's view of health insurance as a mechanism for financing the cost of illness to an orientation centered around maintaining and improving the health and wellness of individuals.
“At Cigna, we are and will continue to make significant strides toward achieving a more sustainable healthcare system by engaging with individuals and physicians through coordinated offerings and aligned incentives.”
PEOPLE PERFORMANCE
From Q1-2015 Financial Supplement
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Putting it all together
SUMMARY& CONCLUSIONS
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
$2.62 B$664 M
$9.47 B$854 M
9.0%
$533 M
0.9%
11.4%
6.3%
19.5%
$2.04
5.6%
Q-1 2015
NAVIGATING THE FINANCIALS WORKSHEET
Pre-call preparation
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Use this worksheet to put it all together for yourself.
www.5-drivers.com/behealthy
POLLING QUESTION
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
VoteVote
What is the revised projected Consolidated Revenue Growth for 2015?
A. 2% to 4%
B. 5% to 7%
C. 8% to 10%
C. 11% to 13%
GROWTH
2015 FULL-YEAR OUTLOOK
Excludes potential effects of future capital deployment
1. Revenue Growth: ▲ 8% to 10% over 2014
2. Adjusted Inc. from Operations: $2.12 B to $2.21 B ▲ 6.2% to 10.7%
INCREASED: Prior Outlook = $2.10 B to $2.20B
1. Adjusted Inc. fr. Ops. per Share (EPS): $8.15 to $8.50 ▲ 9.7% to 14.4%
INCREASED: Prior Outlook = $8.00 to $8.40
1. Global Health Care Operating Expense Ratio: 21% to 22%
2. Commercial MCR: 78% to 79%
3. Government MCR: 84.5% to 85.5
4. Global Medical Customer Growth: ▲ 2% to 4% 2014 = 3%
INCREASED: Prior Outlook = 1-3%
EARNINGS CALL SUMMARY
“We are effectively executing our strategy and creating value for our customers and clients by leveraging integrated capabilities that promote health care rather than sick care, and driving improved personalization and affordability for the benefit of the individuals we serve.
Q1-2015 Earnings Call—David Cordani, Pres. & CEO
“We remain committed to our long-term objective, which is to double the size of our business over the next seven to eight years, yielding an 8% to 10% annual revenue growth rate on average.
“And over this time horizon, we expect to continue to deliver competitively attractive long-term EPS growth of 10% to 13% annually on average, all while we continue to invest in our Company's business portfolio.”
ENCOURAGEMENT & CHALLENGE
What will you do from here?
Quarterly review of Cigna’s financial performance
� Investor Relations section of Cigna website
� Financial information each Quarter Listen to quarterly Earnings Call or review transcript Quarterly reviews of competitors, industry, economy Continue to watch stock performance Consider how your decisions impact business metrics
as represented by the 5 Drivers Teach your teams
QUESTIONS AND FEEDBACK
Participant comments, Questions and Answers
Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Program Manager: Alicia EngelAlicia.Engel@cigna.com
Acumen Learning: Keith Gulledge
KGulledge@acumenlearning.com
TO LEARN MORE
Acumen Learning publication
60Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Now go make good things happen for us all.
61Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
62Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna
Offered by: Connecticut General Life Insurance Company or Cigna Health and Life Insurance Company.
“Cigna” and the “Tree of Life” logo are registered service marks, and “Together, all the way.” is a service mark, of Cigna Intellectual Property, Inc., licensed for use by Cigna Corporation and its operating subsidiaries. All products and services are provided by or through such operating subsidiaries, including Connecticut General Life Insurance Company and Cigna Health and Life Insurance Company, and not by Cigna Corporation. All models are used for illustrative purposes only.
000000 00/15 © 2015 Cigna. Some content provided under license.
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