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Company Analysis: CIGNA Corporation
GR 602: Competing in a Global Marketplace
Strategy and Implementation Fall 1999 - Prof. Hoffman
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History
CIGNA Corporation was formed in 1982 through the merger of INA Corporation and
Connecticut General (CG) Corp. INA was founded in 1792 as a company offering marine and
fire insurance. It expanded its offerings to include various types of property and casualty
coverage, and eventually won approval for multiple-line underwriting. CG began as a life
insurance company in 1865, then concentrated on providing affordable life, medical, dental and
retirement coverage to working Americans. From the sale of its first group life policy in 1913,
CG was also a leader in the areas of integrated group insurance and group pension contracts.
CIGNA's formation in 1982 merged a leading property-casualty insurer with a leading supplier of
life insurance and employee benefits. Over time, CIGNA has narrowed its focus on employee
benefits, divesting its individual life insurance business in 1998, and its domestic and international
property and casualty operations in 1999.
While the MSIC and SIC define CIGNA as an insurance carrier, both its 1998 10K and
Annual Report state, “CIGNA Corp. is not an insurance company.” The company defines its
business in broader terms; specifically, as an “investor-owned insurance organization” that
“offers customers a unique business advantage: the ability to organize and integrate their
employee benefits needs through one of the industry's broadest portfolios of quality health care;
group life, accident and disability; and retirement and investment products and services."
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STRATEGIC DIRECTION
Mission
Characterizing the firm as “a business of caring”, CIGNA strives to be the premier
provider of employee benefits in the world. The business units include: Employee Health Care,
Life and Disability Benefits; Employee Retirement Benefits and Investment Services;
International Life, Health and Employee Benefits; Other Operations; Property and Casualty; and
Corporate, which primarily constitutes unallocated corporate income and expense.
The following statements, taken from CIGNA’s 1998 Annual Report, reveal more about
the firm’s identity and purpose:
Vision
At CIGNA, we intend to be the best at helping our customers enhance and extend their lives
and protect their financial security. Satisfying customers is the key to meeting employee needs and
shareholder expectations, and will enable CIGNA to build on our reputation as a financially
strong and highly respected company.
We believe:
• Providing customers with products and services they value more than those of our
competitors is critical to our success;
• Talented, well-trained, committed and mutually supportive people - working to the
highest standards of performance and integrity - are what make success possible;
• The profitable growth of our businesses makes career opportunities and personal growth
possible; and
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• Profitability is the ultimate measure of our success.
Objectives
• To expand or extend CIGNA's employee benefits franchises in areas including market
share, service capability and technology.
• To realize profit growth and maximize shareholder’s value by acquisition and disposition.
• To improve efficiency and internal growth by resource reallocation, such as cost
reduction initiatives and IT integration.
• To increase international presence by investment in emerging markets.
INDUSTRY ENVIRONMENT - THE FIVE FORCES OF COMPETITION
Existing Competitors
The multi-line insurance industry is mature, and is characterized by the presence of
several strong, well-established companies with deep pockets. To create opportunities for
growth, many companies have sought ways to expand their business, either through backward or
forward integration of their existing products and competencies. CIGNA's competitors in the
multi-line insurance sector include The Prudential Insurance Company (Prudential), Metropolitan
Life Insurance Company (MetLife), and Aetna.
Prudential is the number one provider of life insurance, employee benefits services, and
financial annuities. Their total net income in 1998 exceeded $1.1 billion and they are ranked
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number twenty in the FORTUNE 500 listing. They are a well-established, well-known brand
with substantial financial resources.
MetLife, another rival competitor of CIGNA, is the second largest insurance company
behind Prudential. MetLife recently merged with New England Mutual Life Insurance and
acquired Lincoln National Life Insurance of Fort Wayne, Indiana. The company had an
estimated $360.7 billion in assets at the end of year 1998. MetLife also reported a net income for
1998 of $1.3 billion and is ranked number thirty-nine in the FORTUNE 500 listing.
Aetna began as a leader in the insurance industry. Since its inception, it has redefined
itself as a leader in the managed health care industry. Aetna also offers retirement services that
include investment and pension-planning services. The firm’s identity continues to evolve
through the late 1990's, as evidenced by recently-announced plans to open a savings bank called
"Aetna Trust Company". Aetna boasted a net income in 1998 of $84 million and ranks number
sixty-one in the FORTUNE 500 listing.
Barriers to Entry
The multi-line insurance industry has very large barriers to entry for potential
competitors. Three primary barriers discourage potential new entrants from trying to compete in
this industry: (1) capital requirements, (2) brand loyalty and reputation, and (3) regulation.
The multi-line insurance industry requires immense sums of capital in order to compete
successfully. CIGNA, Prudential, MetLife, and Aetna in 1998 combined represent a total of $732
billion in total assets and $96.2 billion in revenue. Industry analysts explain that extensive capital
holdings are necessary to allow for the protection of policyholders and support the enormous
risk that is inherent in the underwriting insurance business. Minimum levels of capital resources
by insurance companies are defined and monitored by industry regulators.
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The second barrier to entry is brand loyalty and reputation. In the areas of insurance and
healthcare, consumers are purchasing 'peace of mind' as much as a tangible service. They want to
put their financial security and healthcare needs in the hands of a reputable company in which
they have confidence. Therefore, the insurance companies that survive as other firms are
selected out tend to be those that have strong brand recognition and generate brand loyalty.
Companies that portray a stable, lasting image create a sense of security for consumers who are
purchasing insurance and protection for themselves and their families.
The insurance industry has always existed in a highly regulated environment, and federal
regulation represents the third major barrier to entry. In the early days of the insurance industry
in the United States, regulation was controlled at the state level. Each state defined parameters
for rates, coverage, settlements, and cancellation criteria. In 1944 the US Supreme Court ruled
that the insurance business constituted a form of interstate commerce and should, therefore, be
regulated at the federal level. The McCarran-Ferguson Federal Legislation of 1945 (McCarran-
Ferguson), which was a reaction to this ruling, removed the insurance industry from federal
oversight and exempted it from the Sherman Antitrust Act. On the international level, many
countries have traditionally placed heavy regulations on the insurance and banking industries that
have made it difficult for US and other foreign competitors to penetrate their market. One of the
most highly regulated countries is Japan, home of Nippon Life, the second largest insurance
company in the world.
Recent deregulation efforts in the US and abroad have started to chip away at the
regulatory barriers that have been in place. The Gramm-Leach-Bliley Act of 1999, which
President Clinton recently signed into law, will create sweeping changes by removing many of the
barriers that had previously been in place. This new law will blur the lines of distinction between
banks, security firms and insurance companies and allow them to merge. It will also enable
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American companies to better compete in the global economy. Many experts believe that this
historic piece of legislation will revolutionize the three affected industries in the years to come.
Substitute Products
The insurance industry has many substitute products. The three most significant include:
(1) banks, (2) financial services, and (3) HMO and health care companies.
The banking industry became heavily regulated after the stock market crash of 1929 and
Franklin Roosevelt's resultant economic policies. However, recent legislation has loosened up
regulatory contol and changed the nature of the industry. The 1994 Riegle-Neal Act permitted
interstate banking without requiring separate state charters. Streams of other new banking laws
have slowly cracked the foundation of the highly restrictive Glass-Steagall Act of 1933. Among
the most notable was legislation, passed in 1997, that enabled banks to add securities subsidiaries.
In recent years, the banking industry has been characterized by massive consolidation and
increased competition. Approximately 9,100 commercial banks are competing vigorously for a
share of the $520 billion US market, the most powerful of which include Nations Bank, Citicorp,
and Fleet. The banking industry has access to large amounts of capital. Banks and S&L's
combined have more than $6 trillion in total assets, which makes them a force to contend with.
In the financial services sector of the securities industry, Charles Schwab, Merrill Lynch
and Company, and Fidelity Investments are three of the largest companies that compete with
CIGNA. Although not as endowed as the banking industry, it does account for $160 billion of
the US Gross Domestic Product (GDP) (see exhibit ). Recent deregulation of the insurance,
banking and financial securities industry has led to a flood of consolidations. This was
demonstrated by the creation of Citigroup, which was formed by the merger of banking great
Citicorp and insurance and securities competitor, Travelers Group.
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The most serious competitors in the health maintenance organization (HMO) and
healthcare industry include United HealthCare, PacifiCare Health Systems, and Columbia/HCA
Healthcare. Since their introduction, the growth of HMOs in the US has radically changed the
environment of healthcare in the 1990's. HMOs, which provide healthcare coverage to
consumers through a defined affiliation of physicians for a set fee, have caused a largescale
emigration from traditional fee-for-service insurance. Approximately 67 million consumers are
currently enrolled in an HMO.
The HMO/healthcare industry has become extremely competitive. Analysts have labeled
HMO membership and health insurance as commodity products with little to distinguish them.
Firms compete on price, forcing companies to look for cost cutting measures. Healthcare
providers have relied heavily on economies of scale to supply their needed denominator cuts.
The companies exploit the notion that the bigger an organization becomes, the more bargaining
power they have to negotiate pricing. This strength yields enormous returns from pharmaceutical
companies, materials management companies, hospitals, and physician groups which makes it
even more difficult for small companies to compete. Like banking and financial services, this
industry is also characterized by widespread consolidations. For example, Kaiser Foundation
Health Plan, the number two HMO in the country, has purchased the assets of Humana
Healthcare. It has also created strategic alliances with Group Health Cooperative and Community
Health Plan, which has enhanced each organization’s buying power. The healthcare industry is
also highly competitive and cost driven.
Power of Suppliers
The power of suppliers in the multi-line insurance business is relatively low. It does not
represent a commodity product in the traditional sense, nor is it dependent on a supply of raw
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materials. Insurance products are contracts and/or agreements that are drawn up in-house by the
company’s staff members and attorneys. It is, however, impacted by the cost of services it covers
for enrollees, such as physicians and medical procedures, and by pharmaceutical costs. As
competition and the pressure to control costs increases, the degree of power these suppliers yield
over healthcare providers may expand.
Power of Distributors
In the insurance industry, distributors have little power over health insurance firms.
Insurance coverage is provided through a wide variety of distribution channels including captive
and independent agents, strategic partners, other financial institutions, and direct marketing
networks. The industry tends to rely on both internal and external sales personnel from a variety
of areas to sell employee benefits and health care plans to businesses. The primary advantage of
possessing a variety of distribution channels is that it, if a problem occurs with one selling
method or channel, others will still be available.
MACRO ENVIRONMENT
The insurance industry is subject to a rapidly changing social, economic, political
(legal/legislative and regulatory), technological and global environment that can have a
tremendous impact on firms. These changing environments, which are all part of the industry’s
macro environment, will be discussed independently.
Social/Demographic Environment
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The multi-line insurance industry faces many challenges. Changing social demographics
are eroding some traditional markets and developing other markets. There are also changes in the
types of health care services consumers demand with the growing interest in alternative medicine.
Health insurers are responding by offering referrals and even coverage for patients seeking
treatment from alternative medicine practitioners. Also, as the American life expectancy increases
and more Americans are leading active lives well into their 80’s and beyond, public concern about
post-retirement financial security and affordable healthcare is on the rise. For corporations like
CIGNA, these issues represent a great opportunity that could lead to an increased market share.
The trend which has Americans marrying later and having fewer children leaves
households spending fewer years where they need life insurance coverage. Also, the increased
level of participation by women in the labor force means that married men are under less
pressure to be the primary (or sole) source of health insurance and other benefits that represent
financial security for couples and families.
Another noteworthy trend is that Americans are increasingly inclined to think of health
coverage as an inalienable right to which all are entitled. At the same time, there are an increasing
number of single parents and other non-traditional households. These phenomena have forced
employers and insurance companies to alter the coverage they provide and the methods in which
they address the increasingly complex healthcare needs of different age and income groups.
Economic Environment
The US economy is experiencing unprecedented, sustained growth which has been
accompanied by unusually low inflation and low unemployment. The Fed recently hiked interest
rates three times, in an effort to modify growth and prevent wage and price escalation. With the
unemployment rate holding steady at 4.1%, productivity rising at an annual rate of 2.9%,
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consumer price inflation is holding in the 2.0 to 2.5% range, the homeownership rate at a record
66.8%, and the S&P500 up over 25% in the past twelve months, there are no signs of a slow-
down in sight. According to reports as recent as 11/24/99, initial jobless claims are at a 25-year
low. Considering that today’s labor force is 34% larger than the one existed at the time previous
unemployment records were set in 1974, it is clear that labor markets have never been so tight.
After weeks of partisan jockeying over how to spend projected surpluses, President
Clinton vetoed on September 23, 1999, the $792 billion tax cut pushed by Republicans which led
to a protracted budget showdown that took months to resolve. However, despite idealogical
differences, both parties agree that a significant portion of the surplus should be designated for
improving Medicare and Social Security status for the growing population of elderly, and
politically involved, Americans.
The economic growth and tight labor market provide business opportunities for CIGNA.
First, the competition to attract and retain employees has intensified and employers are devoting
more attention to these tasks. As a result, they are seeking quality employee benefit services. In
this favorable business environment, many employers are able to and willing to pay a higher
premium and offer more extensive benefits. Second, with a growing number of small start-ups,
particularly in the high tech industry, new employers are increasingly seeking full-line benefit
services providers. CIGNA, which defines itself in precisely those terms, may be a good choice
for both large and small employers.
There are some threats that underlie the current economic climate. First, as a hot labor
market and the proliferation of online job agents create more opportunities for job-hopping,
more companies use contractors and outsource to reduce headcount. Secondly, the booming
stock market may pull proportionately more funds out of standard benefits packages. Finally,
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potential tax cuts would reduce the tax shield effect that employer matching pre-tax benefits
provide.
Political /Legal Environment
Some of the current issues which have arisen in the insurance industry’s political
environment, which could affect the competitive nature of CIGNA, include initiatives to:
• increase health care regulation;
• revise the system of funding cleanup of environmental damages
• restrict insurance pricing and the application of underwriting standards
• revise federal tax laws.
Efforts at the federal and state level to increase regulation of the health care industry could
have an adverse effect on CIGNA’s health care operations if these initiatives reduce market
competition and innovation or result in increased medical or administrative costs. One change
that could have an adverse effect is mandating particular benefits or services, which often
increases costs without improving the quality of care. Another issue that would affect CIGNA is
the potential loss of the Employee Benefits Interests of America (ERISA). Overturning ERISA,
which preempts legislative actions and court decisions that occur at the state level, would result in
changes in regulations governing claim appeal procedures and could impose increased
administrative burdens and costs while restricting the use of prescription drug formularies. The
ERISA industry committee believes that, ultimately, the success of health care reform will depend
on nationally uniform health care standards. Committee members and health reform advocates
believe this would promote high quality, cost-effective health care for everyone.
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Also, proposals for superfund reform remain under consideration by congress. The
superfund law has created many inefficiencies and problems in achieving an effective national
cleanup effort. This reform legislation is necessary to achieve improvements in provisions such as
those relating to remedy, liability, natural resource damages, the state-federal relationship and
inequities facing companies that contract with the government. Any changes in Superfund
relating to (1) assigning responsibility, (2) funding cleanup costs, or (3) establishing cleanup
standards could affect the liabilities of policy holders and insurers. This would pose a real threat
to CIGNA.
In early 1999, the Administration proposed a federal budget that would eliminate tax
deferment opportunities on certain statutory incomes for life insurance companies. The proposed
federal budget would also limit the deduction of interest expense on the general indebtedness of
corporations possessing non-leveraged corporate life insurance policies that cover the lives of
officers, employees or directors. This would have an adverse effect on the operations of the
employee retirement benefits and investment services segments. It is unclear at this time whether
either or both of these provisions were included in the final version of the budget that was
ultimately passed last month.
Technological Environment
There is an overwhelming demand for insurance companies to enable customers to
obtain instantaneous price quotes and policy coverage through the world wide web. While the
insurance industry has generally been slow to embrace the internet as a channel for distribution,
the outlook over the next five years is very positive. To date, the focus of many insurance
companies has been to use the internet as a research tool for prospective customers and to
generate leads for their agents.
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A trend, which seems likely to continue, is the enhancement of the on-line relationship
between the companies and their agents. The insurance industry’s efforts to create truly
transactive sites for the end are permitting customers to use the internet to streamline the policy
enrollment process. The dynamic nature of today’s insurance environment is requiring firms to
develop flexible, powerful and responsive systems and solutions for managing change.
Unisys Corporation has developed software for insurance solutions for e-business using
the web to cut underwriting time from days to minutes. This solution includes the methodology,
application software and a set of integration services to provide web-based direct writer services
allowing clients to pass on infrastructure cost savings to their customers. The internet is going to
change the industry, and the transformation is already well underway on the service side of the
equation. This poses a great opportunity for CIGNA to position itself as an industry leader if it
focuses on the development of market-oriented, advanced information systems.
Global Opportunities
There are a number of emerging markets on the global front, including some Asian
and Eastern European nations and Latin American countries. Latin America in particular
represents a significant opportunity for the insurance industry. The maturation and
stabilization of several Latin American economies is causing an influx of multinational firms
in search of new markets and resources. As theses firms increase their presence in the region,
they are managers and other staff who will expect health benefits similar to those they
enjoyed in their home country. Also, as firms expand their ranks of employees at all levels, they
are enrolling greater numbers in health and other benefits programs.
The prospect of China joining the World Trade Organization (WTO) also represents a
great opportunity for corporations like CIGNA. China's acceptance into the WTO will likely
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expand economic growth and employment opportunities that will eventually tax the existing
Chinese insurance industry. Foreign insurance companies are expected to gain some market
share with their advanced technologies and management know-how. The entry of foreign
players will also eventually bring an end to the old insurance enterprise structure and market
monopoly currently held by several state-owned companies. Opening up the Chinese market
can also be viewed as a threat, however, since the WTO agreement will also enable Chinese
insurance firms expand into the world market and permit them to participate in international
competition.
INTERNAL ENVIRONMENT ANALYSIS
Finance Objectives
CIGNA has several key financial objectives that they incorporate into their overall
strategy. First, CIGNA views profitability as the ultimate measure of their success. Second,
CIGNA has embarked on a cost reduction plan designed to restructure certain operations.
Specifically, CIGNA has restructured their domestic and international Property and Casualty
segments by selling off this unit to ACE limited. They have also redesigned their international
Life, Health and Employee Benefits segment by implementing improvements to their Brazilian
operations. Third, CIGNA has to a limited degree utilized acquisitions and mergers to
discontinue certain businesses (individual life and health) and enhance other segments (emerging
markets).
Finance Strengths
On the surface, CIGNA appears to be a relatively strong multi-line insurance company.
Several financial factors are indicative of this strength. First, CIGNA’s profit margin has
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remained stable for the past three years at just over 9% (see exhibit 2). Second, CIGNA’s
receivables have remained flat over the past ten years, suggesting that they have had no problems
collecting fees or premiums (see exhibit 3). Third, CIGNA’s long term debt-to-equity ratio has
remained well under the benchmark of 1.0 for the past ten years (see exhibit 4). The ratio of long
term debt to total assets is also well below the benchmark of .5 (see exhibit 5). Fourth, CIGNA
for the past two years has had roughly twice the amount of cash as it has debt (see exhibit 6 ).
This is indicative of an ability to service debt in the event of a significant downturn in the
economy.
CIGNA has also implemented a significant cost cutting plan that is expected to be
completed by the middle of the year 2000. Part of this plan includes reducing the workforce by
1,400 employees. Also, the company is expediting decisions to withdraw from unprofitable
sectors and markets, as was demonstrated by the elimination of its Brazilian healthcare
operations. CIGNA has also seen improvements in rate increases for its guaranteed cost health
maintenance business, which should improve operating income in 1999.
Finance Weaknesses
Although some factors indicate that CIGNA is financially strong, there are also signs of
some financial weakness. In general, when compared to industry and peer groups, CIGNA lags
behind its competitors in the key areas of profitability and growth. Exhibit IV graphs the real 5-
year growth of CIGNA versus its peers (Allstate, Chubb, CAN Financial Corp, Hartford, Loews,
SAFECO and St Paul Companies) and the insurance industry as a whole. As the graph indicates,
CIGNA is significantly behind its peers and the industry in terms of real growth. The graph also
suggests that, while most of the industry is moving ahead, CIGNA appears to be stagnating.
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There are several possible explanations for this stagnated growth. The healthcare market
is a mature industry in the United States. Competitors appear to be taking market share away
from one another rather than expanding business. The data suggests that CIGNA may be losing
market share to competitors. This phenomenon does not apply on the international front, as this
represents a growing market.
Another explanation for CIGNA's lack of real growth is its strategic philosophy. CIGNA
has stubbornly maintained that it will grow slowly. As Douglas L. Meyer, an analyst for Duff &
Phelps Credit Rating Co., suggests, CIGNA hasn't "grown in the health care business as fast as
other players in the market.” CIGNA acknowledges this strategic philosphy. According to
Donna J. DeFrank, president and general manger of CIGNA Healthcare of Illinois, “We aren’t
strategically trying to move up the ranks.”
CIGNA also has financial weaknesses related to profitability. Although they rate higher
in profitability than in company growth, they still lag behind their peers and the industry. Exhibit
V depicts a profitability analysis of CIGNA versus its peers and the industry as a whole. The
graphs clearly demonstrate that CIGNA has not been as profitable as its peers nor has it kept
pace with the industry over the last ten years. Among the likely causes of this lack of profitability
are strategic decisions to restructure failing business units and extraordinary losses due to
unfavorable events (including extensive weather-related and other natural disasters) that have
impacted the property and casualty unit.
Marketing Objectives
CIGNA has three main marketing objectives it favors in conducting business. First,
CIGNA seeks to have a strong market position in each major employee benefit business unit
(namely, healthcare, life insurance, disability insurance, and retirement and investment services).
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Second, CIGNA has established a goal of providing customers with products they value more
than those of their competitors. Third, CIGNA prides itself on providing quality service to its
clients.
Marketing Strengths
CIGNA has several identifiable marketing strengths. The first strength is a large a well-
trained sales force of 900 representatives in 147 locations throughout the world. The large sales
force is able to penetrate multiple markets and differentiate CIGNA’s products from its
competitors'. CIGNA’s sales force provides the direct contact and visibility necessary to be
successful in the insurance business.
Another of CIGNA's marketing strengths is the marketing leverage it is afforded because
of its size and (therefore) the economies of scale it enjoys. Cost of service in the insurance
business is driven by the unit cost times the number of units. CIGNA is able to negotiate tough
contracts with service providers because of its unit cost advantages. These contracts translate
into lower prices, which provides a marketing advantage when matched against other insurance
companies.
A third marketing strength CIGNA possesses is in its extensive use of technology.
CIGNA has established an extranet web site, which can be used by both customers and sales
representatives throughout the world. The sales representatives utilize this technology to produce
timely quotes and provide information to policyholders related to their accounts. The technology
also allows clients to access vital financial information directly from CIGNA. For example, a
customer can check his 401K balances or review policy information from the web site. These
capabilities help differentiate CIGNA’s products from the rest of their competitors.
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Marketing Weaknesses
Although CIGNA enjoys several marketing advantages, it also has some identifiable
marketing weaknesses. The primary deficiency for CIGNA is its lack of brand recognition
among the giants in the insurance industry. According to a recent survey by Corporate Branding
LLC, Allstate Corp was the most recognized insurance company among upper-level executives
for the second year in a row. Being recognized by corporate executives is an important
distinction because executives often are the ones responsible for selecting business insurance for
the company. Dan Latimore, director of electronic strategy financial services at Mainspring,
drives the important point home. “With business insurance, at the end of the day you are looking
at a commodity product. One of the biggest buying factors is brand”.
A second marketing weakness is in CIGNA’s reluctance to grow the business through
acquisitions and mergers. The insurance industry has been very active in this area. Competitors
of CIGNA are busy acquiring businesses and, therefore, market share. CIGNA on the other
hand, has opted to grow internally. It appears that CIGNA may be losing ground on its
competitors who are actively acquiring other businesses and penetrating competitors' markets.
Operational Objectives
One of CIGNA’s primary operational objectives relates to one of the finance objectives
stated earlier: cost reduction. The key to survival, particularly in today’s volatile and competitive
healthcare industry, is keeping a lid on costs and keeping premiums in line with rising expenses.
Their other main operational objective is to improve the quality of service. In a symbolic move,
they hired a former Citicorp executive with extensive knowledge of the financial services
industry, which has a reputation for providing a high level of service. William Pasture became
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CIGNA's senior vice president of national service operations in 1997 and his mission was to
instill a strong customer service focus.
Operational Strengths
CIGNA has succeeded in reducing operating costs in its healthcare division through a
combination of efforts. These include information technology, consolidation of businesses and
processes, and the inception of disease management.
CIGNA has frequently been lauded in the business and insurance industry press for
innovations in processing technology. Among its recent initiatives was the acquisition of a
software development company (now known as CIGNA Software Sciences or CSS) for the
creation of transaction automation programs. The first, introduced in 1996, was a suite of
transaction-processing and decision-support applications that offers customization capabilities to
incorporate unique rules and practices of users. It is being used to reduce costs and speed
processing for insurance as well as mortgage, tax and escrow analysis. Other technological
innovations that have yielded significant benefits include the development of a scanning system
for new enrollment forms (which cut processing costs in half and lead times by 1/3) and of the
integrated web application that enables employees and customers to access investment account
balances and policy information. CIGNA is using similar technology in its healthcare operations
to give providers and employees shared access to information about patients.
CIGNA takes advantage of opportunities to create efficiencies by combining related
businesses and processes. As recently as September of this year, CIGNA Group Insurance
announced the creation of a new enterprise, which joined CIGNA Group Insurance Managed
Disability and CIGNA Integrated Care. Besides reducing costs, these initiatives often create
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secondary advantages by being perceived by customers as efforts to streamline and simplify
services.
Finally, CIGNA was the first healthcare provider to pilot a disease management program.
The initiative, which involves early diagnosis and coordinated treatment of chronic or debilitating
conditions, was borne out of studies that show that one-fifth of patients use about four-fifths of
healthcare resources. The program uses established protocols that have proved most effective in
treating certain diseases and involves notification of physicians regarding patients that require
intervention (such as phone calls to check on eating habits, medication supply, etc.). So far, only
anecdotal results are available but it appears that disease management programs may reduce
emergency room visits and hospital admissions.
Operational Weaknesses
The Sachs Group, an Illinois-based research organization, explored the relationship
between customer satisfaction and loyalty in the health care industry, and sought to discover what
elements of a health plan’s operations most significantly affect loyalty. They also identified which
plans across the country stand out in their efforts to foster member loyalty. Their analysis showed
that member services holds the greatest potential for gaining customer loyalty. Though rankings
or specific company ratings were unavailable, CIGNA was not mentioned in an analysis of the
companies achieving the greatest degree of success in this area. Additionally, CIGNA was among
the largest managed-care companies that refused to release statistical data regarding performance
quality to NEWSWEEK magazine (which published ranking of HMOs) or to the National
Committee for Quality Assurance, a nonprofit accreditation group. CIGNA and other large
healthcare organizations that contract with physicians in unrelated practices contend that,
because they have less control over medical records than do health plans with doctors on staff,
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performance data is more easily skewed and that their services are underrepresented. This is
unverifiable so it would be speculative to assume that CIGNA is withholding information
because they are hiding poor results; however, it appears that they are not among the industry
leaders in the area of quality services as indicated by member satisfaction.
Human Resource Objectives
CIGNA’s primary human resources goal is to be the employer of choice in their industry.
They strive to achieve this through aggressive and innovative recruitment and retention strategies
and employment policies. In the process, they strive to serve as a model for other firms (whose
employee benefits business they seek) when it comes to demonstrating how much they value
their employees through progressive benefits offerings and wellness programs.
Human Resource Strengths
CIGNA appears sincere in its claims that its employees are highly valued. In its vision
statement, which appears in its annual report (and on pages 2 and 3 of this analysis), two of the
company’s four defined ‘beliefs’ relate to the notion that people are the key to company’s success.
Additionally, the "Working at CIGNA" portion of the company’s web page elaborates on their
human resources philosophy and cites examples that demonstrate how it manifests. In addition
to offering competitive salaries, CIGNA boasts a panoply of benefits, many of which have
earned them awards and recognition by special interest media organizations. Besides standard
medical, dental, life, and long-term medical insurance as well as vacation, holiday and retirement
benefits, the following represents a sampling of CIGNA’s other benefits: flexible work
arrangements; telecommuting programs; health and wellness programs (including on-site physical
therapy; guided stress breaks and massage therapy; and pre-natal, pregnancy and lactation
22
programs); paid paternity leaves; adoption assistance; on-site day care; and, vacation and
entertainment planning. CIGNA’s family friendly policies have earned it recognition as one of
the “10 Best Companies for Working Mothers” by Working Mother magazine, one of the “Top
25 Public Companies for Executive Women” by Working Woman magazine, and one of the 30
“Best Companies for Work and Family” by Business Week magazine. Besides providing a public
relations boost, these citations serve to enhance CIGNA's reputation as a good employer and
provide an advantage over the competition in recruiting quality employees.
CIGNA states that it values diversity and recognizes that “a culturally rich workforce
more fully serves” its customer base. It appears that CIGNA does more than pay lip service to
this philosophy, as it has been cited by Black Collegian magazine as one of the Top 100
Employers in the US and by Fortune as one of the 50 Best Companies for Asians, Blacks, and
Hispanics. The 1997 resignation from CIGNA's board of directors by a former MIT professor
over his alleged dissatisfaction with the company's diversity practices raised concern about
CIGNA's reputation in this area. However, since that time, there have been no further allegations
or notable criticisms of CIGNA's commitment, and citations related to their leadership in the
area of minority employment have continued.
Besides innovative benefits programs, CIGNA also provides extensive educational,
training and promotional opportunities. Among these are a Professional Growth and
Development tool which assists managers in building and sustaining their employees’ skills, and a
Leadership and Assessment and Development program, which consists of a 360-degree feedback
mechanism that identifies employee strengths and weaknesses and helps coaches assist employees
in reaching their potential. These and other initiatives helped CIGNA’s Information Technology
department reduce their turnover rate to half the industry average.
23
Human Resource Weaknesses
Weaknesses are difficult to identify, as CIGNA’s human resource efforts are among its
greatest attributes. However, no firm is perfect and CIGNA is no exception. Despite being
recognized as a firm that provides a positive working environment for people with disabilities, in
1998 CIGNA was sued by the EEOC for violating the Americans with Disabilities Act. The
company was targeted for not treating disabilities caused by mental illness in the same manner as
those caused by physical ailments.
Also in 1998, CIGNA created a public relations nightmare when it demanded that
employees surrender their right to sue the company over work grievance and allegations of
discrimination and harassment. It required that all of its workers sign an agreement which said
they accept mandatory arbitration for all employment claims or forego pay raises and benefit
enhancements.
CORE COMPETENCIES AND COMPETITIVE ADVANTAGE
CIGNA Corporation has displayed three primary competitive advantages/core
competencies in its business operations. The following is a discussion of each competency and its
likely impact on the future competitiveness of CIGNA’s business.
1. Integrated Marketing And Research Approach
A primary competency of CIGNA is their integrated approach to marketing data,
communication and research. CIGNA accomplishes this integration by gathering market research
data and actual customer behavior data that it uses for planning and developing marketing
activities. CIGNA has created a series of feedback channels designed to gather information about
customers that can be used throughout the company. One example of this is CIGNA’s UniLynx
application, which manages disability, worker’s compensation and health insurance under one
24
roof. This application allows for claim assignment, benefits coordination and care management
functionality across three CIGNA divisions.
Another example of CIGNA’s integrated approach is the use of Progress Software’s
AppServer, which allows brokers to access the company’s WAN to locate and retrieve policy
information. Using the extranet, a CIGNA broker can access 401K balances, payment
information and claims information. Having one centralized data source allows employees
anywhere within the company to access information that is critical to decision-making.
The value of an integrated marketing system is that it allows for strategic decisions to be
made on a company-wide basis. For example, advertising decisions made at a corporate or
business level ensure that messages across units are more strategically aligned. Also, the
centralized information that is provided enables CIGNA to design and implement strategic and
organizational programs using a customer-focused approach on a company-wide basis. Data
captured at the divisional level can be transformed into valuable corporate-level information that
can be used to analyze customer profiles and market opportunities.
2. Information Technology
Closely related to the integration of marketing data and research is the substantial
technological infrastructure in place at CIGNA. CIGNA is dedicated to the development of
technology solutions that improve its competitiveness and address customer needs. There are
numerous examples that demonstrate CIGNA’s commitment to maximizing opportunities for
technology implementation. One example is the implementation of a sales force automation
system for the healthcare division. This system is currently being used on 1,700 desktops in 60
locations. Another example is CIGNA’s medical management information system, which is part
of its disease management program. This system integrates information from clinical sources,
allowing CIGNA to evaluate cost and quality of care and to initiate actions that can both improve
25
health status and reduce medical expenses. For example, the system can trace whether an enrollee
who has high blood pressure is filling her prescription and can also notify that enrollee’s
physician to make necessary interventions.
CIGNA’s focus on technology development and application provides a competitive
advantage in three important ways. First, technology results in cost and time savings by
converting paper-based systems to electronic ones. Second, technology provides timely
information that can be used to develop customer-oriented products and services. Third,
technology-based information systems provide the information necessary for CIGNA to plan,
develop, execute and evaluate coordinated business- and functional-level strategies.
3. Product Differentiation
CIGNA’s third competitive advantage is in having a product that is differentiated on the
basis of quality. CIGNA achieves this by offering a comprehensive package of employee benefits.
Unlike its competitors, CIGNA views itself as an employee benefits company. Its 'best of breed'
approach to benefits results in it offering a complete and fully flexible product line. CIGNA
offers HMO, PPO, POS and indemnity healthcare products, on either a full-risk or non-risk
basis, as well as dental, disability and life insurance. Clients are free to choose any combination of
products and can select different benefits for different locations. Clients' ability to customize
their package should enhance the perceived quality of CIGNA's products and their concomitant
satisfaction.
The critical advantages of CIGNA’s differentiated products are threefold. First, CIGNA
is well positioned to take advantage of the trend among large employer groups toward using
fewer employee benefits vendors. Large national and international companies are reducing the
number of vendors used in an effort to streamline costs associated with administering their plans.
26
CIGNA's broad geographic presence and its comprehensive product line should make it an
appealing choice for employers who prefer to take a 'one stop shopping' approach.
A second advantage is CIGNA’s ability to service smaller companies that are increasingly
tending toward self-insurance. As more companies with less than 1000 employees look to self-
insurance as a method of cost containment, CIGNA is positioned to take advantage. CIGNA has
a well-established, differentiated self-insurance product that has historically been used in large
accounts that could easily be adapted for the small-company market.
The third advantage derived from CIGNA’s differentiated product line lies in its ability to
cross-sell between core segments. CIGNA estimates that, among its current clients, there is only
a 10-15% overlap between the core health and retirement business segments. Therefore, cross-
selling represents a significant growth opportunity for CIGNA to leverage its existing product
line and customer relationships.
KEY WEAKNESSES
We have identified the following five weaknesses in CIGNA’s strategy which we believe
makes them vulnerable in their highly-competitive industry.
1. Using profit as the ultimate measurement: As shown in CIGNA's “Vision” statement,
profitability is viewed as the ultimate measure for determining the success of the firm's strategy
and implementation. This perspective can lead to an overemphasis on short-term performance at
the possible expense of long-term success. When profits and net income are rising faster than
sales, for example, there will be negative long-term consequences if this phenomenon becomes a
trend.
2. An imbalanced portfolio: If we view CIGNA’s subsidiaries as strategic business units, we
found a very imbalance portfolio. After selling off its property and casualty business to Ace
27
Limited, CIGNA is heavily reliant on its healthcare and managed care businesses to generate
income. This segment currently generates 87.43% of the company's total revenue. As the
managed care industry grows increasingly volatile and politicized in the U.S., CIGNA’s future
becomes more uncertain.
3. Lack of brand recognition and brand loyalty: Although CIGNA is one of the largest
insurers in the healthcare and managed care segment, it does not enjoy widespread brand
recognition in other domains. Although it is generally well-known among the ranks of human
resources and benefits executives, CIGNA is not a household name for most rank-and-file
employees. Though HR managers are usually empowered to decide which vendors' services will
be offered, many firms still give their employees the ultimate power to choose a provider.
CIGNA's lack of recognition may restrict opportunities for market growth. And the firm's recent
refusal to release quality ratings to the public represents a missed opportunity for widespread
corporate exposure.
4. Limited mergers and acquisitions: Most aspects of the domestic multi-line insurance
industry are mature and, therefore, provide limited growth potential. Integrating a variety of
distribution channels is necessary in order to gain a competitive advantage. With deregulation
opening up the insurance, banking and financial securities industries, many firms are engaging in
mergers and acquisitions to build and/or strengthen core competencies, penetrate new markets
and develop deeper pockets. But CIGNA has remained steadfast in its commitment to an
internal growth strategy, which will ultimately limit its growth potential. CIGNA is wise to be
selective in choosing their merger and acquisition targets, such as in their 1997 acquisition of
Healthsource which expanded their HMO membership by 1.1 million. But this cautious approach
and continued emphasis on the healthcare and managed care is preventing CIGNA from
28
diversifying its risk and strengthening its position in other segments while many of its
competitors are doing just that.
5. Slow global expansion: CIGNA has established branches and representative offices overseas,
but it has been slow to penetrate foreign markets as acknowledged in its 1998 annual report. The
growth rate in domestic premium and fee revenue was 9.9% and 14.6% in 1997 and 1998
respectively, while in the international division it was –2.1% and 2.5% for the same respective
time periods.
CIGNA has extensive investments in South America, but has not aggressively explored
opportunities in Asia. Many firms believe China, with its population of 1.3 billion, represents a
tremendous opportunity for growth. China has become relatively stable, both socially and
economically, in recent years and the currency exchange rates between the RMB and USD have
also held steady. The Chinese medical and social security systems have undergone extensive
reforms in which is reducing state control and providing tremendous market opportunities for
private industry. Many companies have already begun to enter the Chinese market by establishing
strategic alliances with local insurance firms but, so far, CIGNA’s three representative offices in
China have failed to produce significant results. CIGNA's top management appears more
focused on the South American market.
CENTRAL PROBLEM
It seems clear that there is a mismatch between CIGNA's stated mission and their
business portfolio. The firm appears to have a sound vision for the future, and of the powerful
force CIGNA could represent if it can fulfill its objective to provide a broad portfolio of
employee benefits services. It possesses an impressive set of core competencies, all of which
positions CIGNA to take advantage of growth opportunities. The company's apparent
29
recognition of the importance of globalization is also suggestive of a sound vision and strategy.
However, its current business portfolio and apparent corporate inertia implies that a disconnect
exists between CIGNA's stated intentions and its actions.
What would constitute an ideal employee benefits provider is uncertain. But as the first
company to define itself in these terms, CIGNA is in a position to set the standard and to
develop itself in that image. Once CIGNA has achieved this, it simply needs to convince
potential clients that it represents the premier provider of integrated employee benefits. CIGNA
has a built-in advantage by being first, though it can expect others will soon catch on and follow
suit.
Recent decisions, such as the appointment of a new CEO from their healthcare division
or the avoidance of all acquisition opportunities except one that expanded their healthcare
business, raise questions about the firm's commitment to its stated objective. The resulting
incongruity between CIGNA's mission and its business portfolio will make it even more difficult
to break the current cycle of reliance on healthcare and managed care and shake its narrowly-
focused image.
It should be stated that a focus on healthcare is not inherently wrong. Though, as we've
stated, the managed care industry is experiencing volatility and is under attack by pending
legislation, we are not judging the soundness of a focused healthcare/managed care strategy. If
CIGNA made a strategic decision to narrow its focus in this way, we would independently assess
the soundness of that strategy and associate implementation. The point we are making is that a
firm can not achieve market leadership if its strategic initiatives are continually out of alignment
with its mission. If the company's management decides to concentrate on healthcare and
managed care, they should explicitly state this is the company's mission.
30
CIGNA's 'employee benefit provider' image is designed to go beyond the managed care
business. In order for the firm to achieve this identify, it needs to begin to demonstrate that it is
indeed "more than just an insurance company."
In terms of its strategic philosophy, we would position CIGNA in-between an analyst
and defender, which reflects the company's tendency to both seek out new markets, albeit in a
cautious and selective fashion, and to hold fast to some of its stalwart tendencies. While CIGNA
actively seeks out new opportunities and conducts extensive market analyses, it has been hesitant
to take bold or aggressive action.
STRATEGIC RECOMMENDATION AND IMPLEMENTATION
We have outlined five major recommendations:
1. Balance the business portfolio: CIGNA can only achieve the image of an employee benefits
provider when it has attained a balance across its business segments. If it moves quickly, CIGNA
may still be able to reap the rewards of being the 'first mover'. Otherwise, it is inevitable that a
second mover will enter the fray and will benefit from CIGNA's failure to fully exploit its first
mover advantage.
2. Milk the cash cow but feed the stars: CIGNA's healthcare division represents its cash cow.
CIGNA shouldn't abandon the segment in which it has achieved market leadership, but it should
'milk it' by sustaining but not growing it. CIGNA should devote proportionately more resources
to segments for which there appears to be more growth potential, such as the pension investment
division, group life insurance, and the international division (the 'stars'). This would best be
achieved by investing in mergers, acquisitions and joint ventures.
3. Build brand recognition in established and new territories: Domestically, CIGNA needs
to establish brand recognition and establish an identity as a full-line employee benefits provider.
31
It needs to extend its exposure beyond the realm of company executives and industry analysts.
An extensive media campaign that portrays CIGNA as both an established, reputable firm and as
a leader in the new employee benefits arena would be a good start.
In new, emerging markets, a marketing strategy that focuses on forming alliances with
established local firms would enable CIGNA to 'learn the ropes' and allow them to associate
themselves with existing, reputable companies. As in the domestic arena, early penetration
through a first-mover strategy would give CIGNA a significant advantage.
4. Improve service quality while keeping prices down: As competition throughout all
CIGNA's key business segments heat up, there is concurrent growing pressure to keep costs
down.
5. Hire an excellent legal staff: Given the level of regulatory and legislative activity associated
with the multi-line insurance industry, and considering the frequency with which consumer
groups are suing insurance companies today, competent legal representation is a necessity. And as
CIGNA expands more into the international arena, the increased complexity associated with
interpreting multiple foreign laws and regulations will increase CIGNA's reliance on legal services
even more.
Distribution of Responsibilities
The defined tasks will need to be accomplished by different groups within the firm. The
following outlines how responsibilities would be delineated:
Top Management:
(1) External communication and image marketing within the firm (in the form of largescale
gatherings to communicate CIGNA's mission, focus, past performance, future goals, etc.)
32
(2) Diversification toward achieving a balanced business portfolio.
Staff (all levels):
(1) Internal communication
(2) Implement IT integration
(3) Seek product innovations
(4) Strive to achieve cost efficiency
(5) Provide professional, value-added service
Timeline for Implementation:
We set one year as short run target, and recommend progressively working toward a five-
year long timeframe (see exhibit 7).
At the corporate level, the major objectives are (1) to develop and market the new image
that will fit the company’s mission, and (2) to build a balanced portfolio of the business, by
reallocating resources to permit mergers and acquisitions, which would open up new markets in
the US. Also, joint ventures should be sought in emerging markets like China to establish an early
presence and to give CIGNA an opportunity to learn about the culture while making a minimal
investment.
At the business level, the major objective is to improve profitability and sales
performance by the introduction highly innovative products, such as customized services and
access to portfolio information via the web. In the global market, the overseas division will need
to maintain close contact with the home office in order to communicate market research needs
and receive information that will assist in developing strategies for penetrating the new market.
33
Being a first mover would give CIGNA an automatic advantage. Within a five year period, the
global marketing network should be well established and actively operating.
At the functional level, the core competencies must be simultaneously maintained and
leveraged. Continued IT integration, efforts to maintain a well-trained workforce, and the
integrated marketing and research approach will all require attention so they may be sustained. At
the same time, plans that address how previously-identified opportunities (i.e. cross-selling,
improvements in service) will be defined and acted upon. Within a five year timeframe, these and
other service enhancements should position CIGNA to expand into the global market with little
adjustment.
The keys to successful implementation involve communication and participation. When
the strategic moves affect employees and customers and other stakeholders, all who will be
affected must be kept well-informed throughout. To market the new image, communicating it
through a variety of media (including satellite conferences presented by upper management)
would be recommended. And in an effort to build a new balanced portfolio, it may be useful to
provide retraining opportunities for the existing staff. Employees who resist changes should be
given opportunities to transfer to other positions and/or divisions.
With newly acquired ventures, or joint venture in the other countries, the company's
culture must be studied and well-understood before decisions regarding communication are
finalized. Inviting the affected parties to participate in decision formulation is also
recommended. Since insurance company's, banks and financial services companies' success is
highly dependent on the firm's reputation, tackling these issues in new and/or joint ventures in a
gingerly fashion will usually do more good than harm to the long run.
Another issue is to address is evaluating and ensuring a good 'fit' between the structure
and the process. We recommend a flatter structure, which will enhance (and be enhanced by)
34
CIGNA's IT capabilities and yield cost savings. Middle managers can be reassigned, retrained,
and moved into emerging new accounts or manage new territories. Currently, CIGNA adheres to
an international-division structure, in which each division has its own General Manager,
functional level managers and first-line staff. Since EDI is possible and most divisions can be
linked through automation, CIGNA should move toward achieving a global-matrix structure,
where specialists at each level can easily interact with and learn from each other. Data can be
shared, products can be redesigned, and innovations can be achieved more easily. CIGNA's use
of information technology creates a climate that permits the company to perform more
effectively, is suitable for improving quality and innovation, and enhances it's ability to be be
more responsive to customers.
In terms of business process implementation, this is also facilitated by today's technology
infrastructure. Firms have access to lots of data and instant feedback which enables them to
reduce lag times and errors. It is therefore reasonable for CIGNA to make use of this planning
process. In terms of control, output control is particularly important in new territory acquisition
and new account acquisition.
Throughout implementation, it is vital that feedback is constantly fed back into the
process. Since the external environment is changing faster than ever, and the internal
environment requires constant monitoring, regular revisions will better enable processes to
function correctly. Maintaining continuity among the mission, objectives, and strategic decision
and implementation is difficult, but with real-time feedback and immediate responsiveness, the
vision of can CIGNA remain clear and its future bright.
35
BIBLIOGRAPHY Acunto, Stephen H., “E-Commerce Brings Extra Value to Customers,” Forum, spring 1999, pgs. 40-41. “Affordable Health Care for the Uninsured: The Time is Now,” January 1999. http://freedom.house.gov/library/healthcare/uninsured.asp. Anonymous, “OCR Scanning System Saves Time and Money, Insures Good Impression,” Health Management Technology, June 1999, pgs. 42-43. Brickley, Peg, “CIGNA Diversity Record Disputed,” Philadelphia Business Journal, April 18, 1997, pgs. 1-2. Caron, Raymond, “Be a Choice Employer,” InformationWeek, September 1998, pg. 299. CIGNA Annual Report 1998. “CIGNA Corporation Honored at C. Everett Koop National Health Awards,” PR Newswire, October 29, 1999. “CIGNA Named as Top Employer for Women; CIGNA Ranks in Top Ten on Working Mother 100 List,” PR Newswire, September 1, 1999. “CIGNA’s No-Choice Offer,” The Hartford Courant, August 6, 1998. “CIGNA Turns the Spotlight on Domestic Partner Violence,” PR Newswire, October 21, 1999.
36
Clark, Phillip, “Allstate Remains Most Recognized Insurance Brand,” Advertising Age, September 1999, pg 84. CNN Financial Online, “Congress OK’s Bank Reform”, November 5, 1999, cnnfn.com/1999/11/05/companies/wires/bank-reform-wg DePrince Jr., Albert E. & Ford, William F., “The Insurance Industry: Navigating the Sea of Change,” Business Economics, October 1997, pg. 9. Edgar Online, Annual Company Reports, http://www.edgar-online.com “EEOC Sues CIGNA Corp. for Disabilities Act Violation,” Buffalo News, January 19, 1998. Hann, Leslie Werstein, “CIGNA Has Created Tool for Integrated Benefits,” Best’s Review – Property-Casual Insurance Edition, November 1998, pg. 95. Higgins, Kelly Jackson, “Dare to Webify Your Back Office,” Internetweek, September 1, 1997, pgs. 83-88. Hill, Charles W.L., & Jones, Gareth R., Strategic Management Theory—An Integrated Approach, 4th Edition, Houghton Mifflin Company, 1998. Hoffman, Thomas, “I Can Quote That Price Right Now (CIGNA’s Use of Progress Software’s Appserver Telephony Software),” Computerworld, October 12, 1999, pg. 41. Hoopes, Linda L.& Jae, Steven L., “Facing the Challenge of Change” CPCU Journal, Summer 1999, pg. 90. Hoover’s Online, Company Capsules (Prudential, MetLife, Aetna, CIGNA), http://www.hoovers.com/co/capsule
Hoover’s Online, Industry Snapshots (Insurance, Banks and Savings, Financial Services, Healthcare), http://www.hoovers.com/industry/snapshot
http://www.cigna.com/working/atcigna/news.html
http://www.cigna.com/working/atcigna/benefits.html
http://more.abcnews.go.com/sections/politics/dailynews/poll990909.html
http://www.dismal.com
Jordan, Robert A., “Insurance Industry, Community Both Get a Break After All” Boston Globe, August 9, 1998.
37
Kertesz, Louise, “Quiet Giant: Among Managed-Care Plans, CIGNA HealthCare is the Biggest and Most-Often Overlooked,” Modern Healthcare, March 1997, pgs. 90-95. Krohm, Gregory, “A Survey of Insurance Industry and Regulatory Applications on the Internet,” Journal of Insurance Regulation, summer 1996: pg. 518. Larson, Jan, “Insurance at Risk” American Demographics, October 1995: pgs. 52-57. Levine, Michael, “CIGNA Links Three Divisions With New App,” Insurance & Technology, September 1999, pg. 13. Marlin, Steve, “Cigna’s Fast-Moving CIO,” Insurance & Technology, September 30, 1999, pgs 33-36. Mayo, Bob, “HMO Honor Roll Winners Build Up Customer Loyalty,” Managed Healthcare, June 1998, pgs. 26-30. McGoon, Cliff, “Cutting-Edge Companies Use Intergrated Marketing Communication,” Communication World, January 1999, pgs. 15-19. Pashner,Victoria, “CIGNA turns to P-C Agents to Market Pension Services,” National Underwriter Property & Casualty, December 23, 1999, pg 21. Pickett, Dan, “Taming Insurance Processing,” Mortgage Banking, June 1998, pgs. 75-81. Pruter, Robert, “Multiple Insurance Benefits Linked in One Voluntary Benefits Program,” Employee Benefit Plan Review, September 1999, pgs. 46-47. Rauber, Chris, “Disease Management Can Be Good for What Ails Patients and Insurers,” Modern Healthcare, March 1999, pgs. 48-52. Rindfleisch, Thomas C., “Privacy, Information Technology, and Health Care,” Communication of the ACM, August 1997. Riquier, Darlene, “Today’s Group Market Demands Bold Steps,” National Underwriter, September 20, 1999, pgs. 8-16. Schwartz, Susan, “Defining State-of-the-Art,” Insurance & Technology, January 1999, pgs. 28-33. SEC Form 10-K405 for CIGNA Corp, filed March 26, 1998 Somasundaram, Meera, “CIGNA Signals a Go-Slow Approach in Cui: But HMO Giant May Have to Join a Local Acquisition Race,” Crain’s Chicago Business, May 17, 1999, pg 4 Spinella, Mel, “The Insurance Industry: A Study of E-commerce,” Deloitte and Touche, July 1999.
38
Spragins, Ellyn E., “What Are They Hiding?” Newsweek, March 1, 1999, pg. 74. “Superfund Reform: Overview,” http://www.eia.org/grd/policy/superfund.html Taylor, Susan, “Getting Out Your Message,” Marketing Health Services, summer 1999, pg. 39. The ERISA Industry Committee: National Uniformity Issue Brief#1, July 30, 1999. http://www.eric.org/inssuebriefs/successdepends.htm. Volz, David, “The State of Managed Care,” Marketing Health Services, summer 1999, pgs. 31-33. Whitney, Sally, “Metamorphisis: CIGNA Recreates Its Business,” Best’s Review – Life/Health Edition, July 1999, pg. 28. Exhibit 1
Financial Services – 1997 Gross Domestic Product ($1.46T)
DepositoryInstitutionsInsurance
Security &CommodityNondepositoryInstitutionsReal Estate
39
Source: US Bureau of Economic Analysis (Chart does not include holding and investment firms, trusts, and miscellaneous investors such as patent owners and lessors.)
Type % Real Estate 60% Depostiory Institutions 17% Insurance 12.6% Security & Commodity 6.8% Nondepository Institutions 3.6%
Exhibit 2
CIGNA Profit Margin
0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%10.00%
12/
31/1
998
12/
31/1
997
12/
31/1
996
12/
31/1
995
12/
31/1
994
12/
31/1
993
12/
31/1
992
12/
31/1
991
12/
31/1
990
12/
31/1
989
40
Exhibit 3
Exhibit 4
Exhibit 5
CIGNA L.T. Debt to Equity
-
0.05
0.10
0.15
0.20
0.25
0.30
12/
31/1
998
12/
31/1
997
12/
31/1
996
12/
31/1
995
12/
31/1
994
12/
31/1
993
12/
31/1
992
12/
31/1
991
12/
31/1
990
12/
31/1
989
CIGNA L.T. Debt to Total Assets
-0.0020.0040.0060.0080.0100.0120.0140.0160.018
12/
31/1
998
12/
31/1
997
12/
31/1
996
12/
31/1
995
12/
31/1
994
12/
31/1
993
12/
31/1
992
12/
31/1
991
12/
31/1
990
12/
31/1
989
CIGNA Sales vs. Receivables
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
12/
31/1
998
12/
31/1
997
12/
31/1
996
12/
31/1
995
12/
31/1
994
12/
31/1
993
12/
31/1
992
12/
31/1
991
12/
31/1
990
12/
31/1
989
(000's)
Sales
Receivables
41
Exhibit 6
CIGNACash vs. L.T. Debt
-
500,0001,000,000
1,500,0002,000,000
2,500,0003,000,000
3,500,000
1
2/31
/199
8
1
2/31
/199
7
1
2/31
/199
6
1
2/31
/199
5
1
2/31
/199
4
1
2/31
/199
3
1
2/31
/199
2
1
2/31
/199
1
1
2/31
/199
0
1
2/31
/198
9
(000's)
Cash
L.T. Debt
42
Exhibit 7
Implementation timeline
Now Year 1 Year 5
New image marketing, build balanced portfolio, seek joint venture opportunities in emerging markets
•Data sharing
•Cross field selling
Corporate level
Business level
Functional level
•Profit & sales growth w/ highly innovative quality service
•IT integration w/cost reduction
•Legal workforce
•Global market penetration
•Establish global marketing network
•Global skill & investment transfer for higher quality service delivery
