Presentation is loading. Please wait.

Presentation is loading. Please wait.

Quarterly Alumni Review Call Business Acumen Learning Class

Similar presentations

Presentation on theme: "Quarterly Alumni Review Call Business Acumen Learning Class"— Presentation transcript:

1 Quarterly Alumni Review Call Business Acumen Learning Class
Cigna Q4 & Full Year 2013 Quarterly Alumni Review Call and Follow-up from Business Acumen Learning Class Keith Gulledge Consultant Acumen Learning, LLC February 28, 2014 1

2 4th Quarter 2013 Earnings Call Review
The intent of Cigna University is to help us understand the numbers in the context of our overall Business Acumen training and the 5 Business Drivers. My role is not to editorialize or speculate about business decisions, the sufficiency of communications to investors, or other business matters. The focus is to understand the quarterly earnings report, the highlights of the earnings call, and what Cigna’s financial results and 2014 outlook mean as related to the 5 Drivers and how Cigna makes money. Transcript from the Q Cigna Earnings call located at: or

3 Q4-2013–Earnings Call Review
In conjunction with Q4-2013–Earnings Call Review Thank you for joining us! Call will last approximately one hour. Preparation we hope you have made: Listen to or read the Transcript of the Q Earnings Call on February 7, 2014 Quarterly News Release Quarterly Financial Supplement Conference Call worksheet Navigating the Financials—FY 2013 (end of worksheet file) Keith Gulledge 3

4 Preparation Worksheets

5 My Preparation News Release Financial Supplement Transcript

6 Agenda – 1 Hour Introduction & Review 5 Drivers 10 min.
Key Messages & Financial Analysis 40 min. Overview Performance: Cash, Profit, Asset, Growth, People, other factors Analyst Questions & Discussion Outlook and Guidance for 2013 Wrap up – Q&A min. These and other workshop slides and materials available for .PDF or .PPT download at: Q Cigna Earnings Call Summary 6

7 Earnings Call Participants
David M. Cordani—Cigna President and CEO Thomas A. McCarthy—Cigna CFO and Executive VP Edwin J. (“Ted”) Detrick—Cigna VP of Investor Relations 13 analysts from: Goldman Sachs JPMorgan Chase Bank of America Merrill Lynch Barclays Capital Cowen and Company Citigroup Inc. Morgan Stanley & Co. Deutsche Bank Jefferies LLC Credit Suisse AG Susquehanna Financial Group UBS Investment Bank Leerink Swann & Company 7

8 Importance of Earnings Calls
Q Earnings Call—Oct. 31, 2013 8

9 Importance of Earnings Calls
Q Earnings Call—Feb. 7, 2013 Jan. 21 90.13 Feb. 7 85.37 5.3% Q3 Earnings Call Oct. 31 76.98 9.3% Q Earnings Call Feb. 7 77.47 9

10 MEET, EXCEED, then ANTICIPATE Customer Needs
5 Key Drivers: Review Growth is a MEASURE and a STRATEGY 2 Types of Growth: Organic & Inorganic Importance: Investors expect Employees energized Customers attracted Executives measured CEO’s #1 Job: Grow shareholder value Why is CASH important? Invest back into the business Pay Overhead Costs Acquisitions Capital Expenditures Return value to Shareholders Dividend payments Stock Repurchases Cash Balance and Cash Flow (NOT same as Profit) Employees & Customers, Clients MEET, EXCEED, then ANTICIPATE Customer Needs Strength Liquidity Equity to Assets Utilization ROA ROE ROI Asset Balance Profit = Revenue ▬ Expense Indicators: MCR Operating Profit Net Margin EPS “Financial Leverage” Profit is a calculation per GAAP for financial and tax reporting to match Revenue and Expense

11 Overview of Q4-2013 Earnings Call
13 analysts 26 questions plus follow-ups Dominant questions and discussion: PROFITABLE GROWTH driven by PEOPLE (Customers, Markets) + COST PRESSURES Analysts’ questions by topics (many questions addressed more than one Driver): 14 or 54% PROFIT – Costs, Revenue—in context of GROWTH & COST PRESSURES 8 or 31% GROWTH STRATEGY – context of COST PRESSURES, justification for Revenue and Profit assumptions including questions about Segment growth 2 or 7.5% CASH – Capital deployment priorities, dividends, stock buy-backs 2 or 7.5% PEOPLE – Exchanges, Customer segments, Medicare Advantage No direct questions on ASSETS other than CASH use

12 Initial SEC Disclaimers
Formality: Ted Detrick ― standard financial disclaimers per SEC regulations: Non-GAAP financial measures Primary measures of performance: “adjusted income from operations” “adjusted earnings per share” Reconciliation with GAAP measures “Forward looking comments”—risk factors. “Guidance” or “outlook” not “forecasts” or “projections” Management is accountable for its outlook

13 Summary: Cigna’s 2013 Performance
“Our strong full year 2013 results has been outstanding track record of financial performance and marks Cigna's fourth consecutive year of competitively attractive financial results. All of our business segments contributed meaningfully to our results for the year with each segment delivering earnings and revenue growth.” ─ David Cordani, CEO Q Earnings Call Strategic accomplishments: Exit run-off business, Buffett deal improves financial flexibility Catamaran deal, improves PBM capabilities & financial benefits Deepen global footprint, growth markets: Turkey, India, China Advanced capital health, strengthened balance sheet, significant free cash flow

14 Summary: Cigna’s 2013 Performance
“Cigna's operating performance in 2013 was strong, driven by the continued effective execution of our strategy which resulted in improved health outcomes and productivity for our customers and clients. “In the midst of an environment undergoing rapid change and disruption, our focused strategy and differentiated capabilities will enable us to deliver continued future growth.” ─ David Cordani, CEO Q News Release

15 Overview of Q4 & FY 2013 Cigna FY 2013 performance Cigna 2014 Outlook
Revenues: UP 11% to $32.4 billion Adjusted Income from Operations: UP 11% to $1.93 billion Adjusted Income from Operations per share: UP 13% to $6.79 Premiums and Fees: UP 11% to $28.87 billion Q4 Revenues: UP 7% to $8.15 billion Q4 Adj. Inc. from Ops.: DN 14% to $387 million Cigna 2014 Outlook Revenue—UP 4% to 7% over 2013 Adjusted Income from Operations — $1.9 B to $2.0 B – UP 0% to 3.5% Adjusted Earnings per Share from Ops.— $6.80 to $7.20 – UP 0% to 6% Primary Q Earnings Call Themes Profitability in 2013 and Outlook for 2014 Impact of Costs on future Growth Analysis of assumptions underlying Growth Outlook

16 Segment Review: FY 2013 Global Health Care: 79.9 % Rev.-On. Ops; 76% Profit Premiums and fees UP 9% to $23 billion Adj. Income fr. Ops: UP 6% to $1.6 billion— Strong revenue growth in specialty; operating expense efficiencies; good medical costs in Commercial GHC Operating Exp. Ratio: 21.7% − DN 90 bps US Commercial: Cost trend below 5% 85% of US Commercial customers are ASO US Commercial Risk: Reflects strong pricing; MCR = 81.5% GAAP; % X-PCD; Q higher than Q4 2012—within normal range Seniors business: MCR for MA—84.8% (or 85.2% X-PCD)−revenue pressure, higher medical costs, lower gov’t. reimbursements; claims pressure continues

17 Segment Review: FY 2013 Global Supplemental Benefits: 8.3% Rev. On. Ops.; 8.7% Profit Attractive Growth and Profitability Premiums & fees UP 27% to $1.984 B Acquisitions: Great American Supplemental Benefits; Turkey—Finansbank JV; also customer retention and new business growth Adj. Inc. fr. Ops: $183 mill. UP 24% Continue to fund strategic investments for future Growth Group Disability and Life: 11.8% Rev. On. Ops % Profit Premiums & fees UP 10% to $3.425 billion Adj. Inc. fr. Ops: UP 11% to $311 million Remaining Operations Run-off Reinsurance, Other & Corporate: ($134) M loss after tax Overall: Strong revenue & earnings, significant Free Cash Flow

18 CASH Performance Consolidated from all Segments GROWTH
1 Special Item is cash paid to Berkshire Hathaway to effectively exit the Run-off Reinsurance business.

19 CASH – Capital Deployment Priorities
“Our capital deployment strategies and priorities have not changed.” These priorities are: Growth of our ongoing operations; M&A activity to further grow in our targeted areas of focus; and Return capital to shareholders—primarily through share repurchase. ─ Tom McCarthy, CFO — Q Earnings Call

20 CASH: Discussion Points
Two questions: dividends, M&A, stock repurchase Pension funding: In 2014 about $100 million funding (DN from $250) No change in capital deployment priorities No change in dividend policy

21 CASH: Capital Management Report
“Overall, we continue to have good financial flexibility. Our subsidiaries remain well capitalized and are generating significant free cash flow to the parent, with strong return on capital in each of our ongoing businesses.” ―Tom McCarthy, CFO Capital Deployment: 2013 & 2014 2013: Year-end Parent Company Cash $ 760 M 2013: Repurchased 13.6 mill. shares of stock $ 1.0 B 2014: Dividends to Parent from Subsidiaries $ 1.6 B 2014: Set-aside for liquidity needs $ 250 M 2014: Available for Capital deployment* $ 1.8 B* *Jan-Feb 2014: Repurchased 2.6 mill. Shares of stock $ 225 M* Pension Funding 2014—Expect $100 million, down from $250 million

22 PROFIT Performance Earnings per Share (EPS) are diluted GROWTH

23 PROFIT & GROWTH: Discussion Points
Tom McCarthy: Q4 organizational efficiency plan―$40 mill. Special Charge. Annual $45 M after-tax savings, $30 M in 2014 Explanation for 2013 margins Guidance explanation for 2014 margins Medicare Advantage MCR or MLR trends MA costs—Different physician engagement models Explanations for margins, medical costs Public and private exchanges—profitability Margins in and costs in each Segment Catamaran effect on PBM profitability ASO / stop-loss / risk-based business—costs and margins CACs—impact on cost-sharing performance

24 ASSETS Performance GROWTH Equity Ratio = Equity ÷ Assets
1 Liabilities adds redeemable non-controlling interests of Finansbank 1 Equity Ratio = Equity ÷ Assets ROE uses Adj. Inc. fr. Operations When Analysts talk about Cigna’s Assets, they are usually referring to the business portfolio of products and services, or to the business units, such as HealthSpring.

25 ASSETS: Questions & Discussion
No direct questions about ASSETS except regarding CASH, M&A Strategy, Catamaran Exec comments re strength of our Balance Sheet Investment portfolio: $141 M gain; pleased— quality and diversification

26 Overall Long-term Strategy: GROWTH
“Cigna's businesses have the strategic direction, focus and core capabilities to anticipate, adapt and win in the global market. Our core strategy of Going Deep, Going Global and Going Individual continues to guide our company around the world. And by executing this strategy in our target markets and in new ones when we see opportunities, our capabilities are delivering differentiated values for our customers, clients and shareholders.” ― David Cordani, Q Earnings Call

27 GROWTH & PEOPLE Performance by Segments for Full Years:
Policies & Lives in 000’s Medical customers up by 172,000 in Favorable prior year reserve development. PEOPLE PEOPLE PEOPLE * Adjusted Margin After Tax = Adj. Inc. fr. Ops. After Tax ÷ Segment Revenues


29 GROWTH: Discussion Points
Almost all questions linked to Growth. Analysts concerned about assumptions sustaining Growth outlook Growth outlook for Global Supplemental Benefits M&A future strategy—capital deployment Explanation of Cigna’s 2014 Growth Outlook—industry flat Global Health Care as a slow-growth business Regional and Select Segment growth outlook Growth of risk-based vs. ASP/self-insured Need new markets with well-developed physician engagement

30 PEOPLE: Discussion Points
2013: CAC relationships increased customers by 50% or 400,000 86 CACs—up from 52 end of 2012 Public exchange business—enrollment experience Private exchange business—early stages of innovation Cigna has launched proprietary private exchange Modest MA membership Growth for 2014

31 EXTERNAL FACTORS “Challenging marketplace.” Disruptive market forces
Changing client & customer needs Aging population Growing middle class Rising chronic illness levels Affordability pressures Uncertain Medicare Advantage reimbursements Cost pressure Reduction in hospital reimbursements—gov’t. cuts Public exchange implementation challenges Changing physician reward structures

32 EXTERNAL FACTORS: Global Strategy
David Cordani: Three KEY AREAS to focus on to succeed in Global Markets: Customer insights and engagement: Identify customer needs Determine proper distribution channels Consultative distribution: Brokers and consultants for employers Affinity partners: banks, financial institutions Individual direct: internet, TV, direct response Proprietary private exchanges Care delivery and physician engagement: Differentiated approach: care extenders, actionable information 86 CAC initiatives, 1.2 million customers

33 2014 Outlook AIO = Adjusted Income from Operations
Revenue Growth: UP 4% to 7% over 2013 Adjusted Inc. from Operations: $1.9 to $2.0 B (2013 = $1.932 B) UP 0% to 3.5% Adjusted Inc. fr. Ops. EPS: $6.80 to $7.20 (2013 Adj. EPS = $6.79) UP 0% to 6% Global Health Care―AIO: $1.58 B to $1.64 B (2013 = $1.57 B: UP 5%-9% X-PCD) Medical Customers UP 1% to 2% Medical Cost trend—US Commercial UP 5% to 6% MCR—US Commercial guaran: 80% to 81% (2013 = 81.5% GAAP/82.3% X-PCD) Seniors—Medicare Advantage: MCR—84% to 85% (2013 = 84.8% GAAP/85.2% X-PCD) Operating Expense Ratio: Same—22.5% to 23.5% (130 bps indus. fee & tax impact―2013 = 21.7%) Global Supp. Benefits―AIO: $195 to $215 M (2013 = $183 M, UP 7% to 17%) Group Disability & Life―AIO: $305-$325 M (2013 = $311 M, DN 2% to UP 5%)

34 2013 Summary “Our outstanding performances are made possible by the passion and focus of our 35,000 colleagues who are deployed around the world. And our Go Deep, Go Global, Go Individual strategy has enabled us to grow over the long- term in the midst of environment that continues to undergo considerable change and disruption.” “By leveraging our flexible and transferable capabilities across the globe which include our ability to have a deep understanding of our customers, use of complicated distribution and physician capabilities, we will continue to compete and win in the global markets for the benefit of our customers, clients and shareholders.” ― David Cordani, CEO Q Earnings Call

35 2014 Outlook: David Cordani
2014—Grow US and Global Health Care and Global Supplemental businesses Strengthen Group Disability and Life Will offset market disruption in US Seniors business Global markets will continue to be disrupted “…we will successfully execute our focused strategy and leverage our differentiated capabilities…with the objective of delivering differentiated value for our customers and clients. “…we are confident in achieving our full year outlook for And we remain committed to our long-term EPS growth outlook of 10% to 13%.” ― David Cordani, CEO Q Earnings Call

36 Prepare for Q1-2014 Alumni Review Call: May 16
2 hrs. Each Quarter Review These Slides Prepare for Q Alumni Review Call: May 16

37 Encouragement & Challenge
Quarterly review of Cigna’s financial performance Investor Relations section of 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 Growth Teach your teams QUESTIONS & COMMENTS?

38 2014 Business Acumen Events Cigna University
A recording will be available after this call. Block your calendars for Quarterly Alumni Review Calls May 16th (Q1 2014) ; August 22nd (Q2 2014); November 20th (Q3 2014) Start time either 1 pm or 2 pm EST Review each month’s e-newsletter: Published the last week of each month Use these concepts and ideas to drive team discussions As of today, you all have subscriptions! Nominate managers and leaders for the 2-day Business Acumen Learning class (through HRGs) April 8-9: Phoenix, AZ, Norterra April 22-23: Bloomfield, CT, Cigna University Training Center April 24-25: Bloomfield, CT, Cigna University Training Center September 9-10: Bloomfield, CT, Cigna University Training Center October 7-8: Nashville, TN, 1000 Corporate Center Drive, Franklin

Download ppt "Quarterly Alumni Review Call Business Acumen Learning Class"

Similar presentations

Ads by Google