Keith GulledgeConsultantAcumen Learning, LLC

February 28, 2014

Cigna Q4 & Full Year 2013 Cigna Q4 & Full Year 2013 Quarterly Alumni Review CallQuarterly Alumni Review Call

and and

Follow-up fromFollow-up fromBusiness Acumen Learning ClassBusiness Acumen Learning Class

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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.

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• 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.

In conjunction with

Keith Gulledge

Q4-2013–Earnings Call Review

• Preparation we hope you have made:

1. Listen to or read the Transcript of the Q4-2013 Earnings Call on February 7, 2014

2. Quarterly News Release

3. Quarterly Financial Supplement

4. Conference Call worksheet

5. Navigating the Financials—FY 2013 (end of worksheet file)

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• Thank you for joining us!

• Call will last approximately one hour.

Preparation WorksheetsPreparation Worksheets

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My PreparationMy Preparation News Release Financial

Supplement Transcript

Agenda – 1 HourAgenda – 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 10 min.

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Q4-2013 Cigna Earnings Call Summary

Earnings Call ParticipantsEarnings 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

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Importance of Earnings CallsImportance of Earnings Calls

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Q3-2013 Earnings Call—Oct. 31, 2013

Importance of Earnings CallsImportance of Earnings Calls

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Q4-2013 Earnings Call—Feb. 7, 2013

Feb. 7

85.37

9.3%

Jan. 21

90.13

5.3%

Q4-2013 Earnings

Call Feb. 7

77.47

Q3 Earnings Call

Oct. 31

76.98

5 Key Drivers: Review5 Key Drivers: Review

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)

Profit = Revenue ▬ ExpenseIndicators:•MCR•Operating Profit•Net Margin•EPS

Profit is acalculation perGAAP for financial and tax reporting to match Revenue and Expense

MEET, EXCEED, then ANTICIPATE Customer Needs

Strength•Liquidity•Equity to Assets

Utilization•ROA•ROE•ROI

Asset Balance

Employees&

Customers,Clients

Growth is a MEASURE and a STRATEGY2 Types of Growth:

Organic & Inorganic

Importance:• Investors expect• Employees energized• Customers attracted• Executives measured

CEO’s #1 Job:Grow shareholder value

“Financial Leverage”

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13 analysts asked @ 26 questions plus follow-ups Dominant questions and discussion:

PROFITABLE GROWTH driven by PEOPLE (Customers, Markets) + COST PRESSURES

Overview of Q4-2013 Earnings CallOverview of Q4-2013 Earnings Call

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

Analysts’ questions by topics (many questions addressed more than one Driver):

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Initial SEC DisclaimersInitial SEC Disclaimers

1. Non-GAAP financial measures

2. Primary measures of performance: “adjusted income from operations” “adjusted earnings per share”

3. Reconciliation with GAAP measures

4. “Forward looking comments”—risk factors. • “Guidance” or “outlook” not “forecasts” or

“projections”• Management is accountable for its outlook

Formality: Ted Detrick ― standard financial disclaimers per SEC regulations:

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“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 Q4-2013 Earnings Call

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Summary: Cigna’s 2013 PerformanceSummary: Cigna’s 2013 Performance

Strategic accomplishments:

1.Exit run-off business, Buffett deal improves financial flexibility

2.Catamaran deal, improves PBM capabilities & financial benefits

3.Deepen global footprint, growth markets: Turkey, India, China

4.Advanced capital health, strengthened balance sheet, significant free cash flow

Summary: Cigna’s 2013 PerformanceSummary: Cigna’s 2013 Performance

─ David Cordani, CEO Q4-2013 News Release

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“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.”

Cigna FY 2013 performanceRevenues: UP 11% to $32.4 billionAdjusted Income from Operations: UP 11% to $1.93 billionAdjusted Income from Operations per share: UP 13% to $6.79Premiums and Fees: UP 11% to $28.87 billionQ4 Revenues: UP 7% to $8.15 billionQ4 Adj. Inc. from Ops.: DN 14% to $387 million

Overview of Q4 & FY 2013Overview of Q4 & FY 2013

Cigna 2014 OutlookRevenue—UP 4% to 7% over 2013Adjusted 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 Q4-2013 Earnings Call ThemesProfitability in 2013 and Outlook for 2014Impact of Costs on future GrowthAnalysis of assumptions underlying Growth Outlook

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Segment Review: FY 2013Segment Review: FY 2013

1. Global Health Care: 79.9 % Rev.-On. Ops; 76% Profit

a. Premiums and fees UP 9% to $23 billion

b. Adj. Income fr. Ops: UP 6% to $1.6 billion—Strong revenue growth in specialty; operating expense efficiencies; good medical costs in Commercial

c. GHC Operating Exp. Ratio: 21.7% − DN 90 bps

d. US Commercial: Cost trend below 5%

f. 85% of US Commercial customers are ASO

g. US Commercial Risk: Reflects strong pricing; MCR = 81.5% GAAP; 82.32% X-PCD; Q4 2013 higher than Q4 2012—within normal range

h. Seniors business: MCR for MA—84.8% (or 85.2% X-PCD)−revenue pressure, higher medical costs, lower gov’t. reimbursements; claims pressure continues

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Segment Review: FY 2013Segment Review: FY 2013

2. Global Supplemental Benefits: 8.3% Rev. On. Ops.; 8.7% Profit

a. Attractive Growth and Profitability

b. Premiums & fees UP 27% to $1.984 B Acquisitions: Great American Supplemental Benefits; Turkey—Finansbank JV; also customer retention and new business growth

c. Adj. Inc. fr. Ops: $183 mill. UP 24%

d. Continue to fund strategic investments for future Growth

3. Group Disability and Life: 11.8% Rev. On. Ops.- 15.1% Profit

a. Premiums & fees UP 10% to $3.425 billion

b. Adj. Inc. fr. Ops: UP 11% to $311 million

4. Remaining Operations

a. Run-off Reinsurance, Other & Corporate: ($134) M loss after tax

5. Overall: Strong revenue & earnings, significant Free Cash Flow

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CASH PerformanceCASH Performance

GROWTHGROWTHConsolidated from all Segments

1 Special Item is cash paid to Berkshire Hathaway to effectively exit the Run-off Reinsurance business.

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As of: 12-31-13 12-31-12 CHG

Cash & Cash Equivalents $2,795 $2,978 -6%

Short-Term Investments $631 $154 310%

Bonds (fixed maturities) $16,486 $17,705 -7%

Stocks (equity securities) $141 $111 27%

Total Liquidity $20,053 $20,948 -4%

Full Year: 2013 2012 CHG

CF fr. Ops.-Bef. Special Item $2,915 $2,350 24%

Special Item1 ($2,196) -- --

Cash Flow from Operations $719 $2,350 -69%

CASH – CASH – Capital Deployment PrioritiesCapital 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 — Q4-2013 Earnings Call

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CASH: Discussion PointsCASH: Discussion Points

1. Two questions: dividends, M&A, stock repurchase

2. Pension funding: In 2014 about $100 million funding (DN from $250)

3. No change in capital deployment priorities

4. No change in dividend policy

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CASH: Capital Management ReportCASH: Capital Management Report

Capital Deployment: 2013 & 2014

2013: Year-end Parent Company Cash $ $ 760 M760 M

2013: Repurchased 13.6 mill. shares of stock $ $ 1.0 B1.0 B

2014: Dividends to Parent from Subsidiaries $ 1.6 B $ 1.6 B

2014: Set-aside for liquidity needs $ 250 M $ 250 M

2014: Available for Capital deployment* $ 1.8 B*$ 1.8 B*

*Jan-Feb 2014: Repurchased 2.6 mill. Shares of stock $ 225 M*$ 225 M*

“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

Pension Funding

2014—Expect $100 million, down from $250 million

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Full Year: 2013 2012 CHG

Total Revenues $32,380 $29,119 11%

Tot. Benefits & Exp. $30,204 $26,642 13%

Adj. Inc. from Ops. $1,932 $1,734 11%

S/H Net Income $1,476 $1,623 -9%

S/H Net Inc.—DEPS $5.18 $5.61 -8%

Adj. Inc. fr. Ops.—DEPS $6.79 $5.99 13%

PROFIT PerformancePROFIT Performance

Earnings per Share (EPS) are diluted GROWTHGROWTH

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Q4-2013 Q4-2012 CHG

Total Revenues $8,151 $7,620 7%

Tot. Benefits & Exp. $7,615 $7,001 9%

Adj. Inc. from Ops. $387 $452 -14%

S/H Net Income $361 $406 -11%

S/H Net Inc.—DEPS $1.29 $1.41 -9%

Adj. Inc. fr. Ops.—DEPS $1.39 $1.57 -11%

PROFIT & GROWTH:PROFIT & GROWTH:Discussion PointsDiscussion Points

1. Tom McCarthy: Q4 organizational efficiency plan―$40 mill. Special Charge. Annual $45 M after-tax savings, $30 M in 2014

2. Explanation for 2013 margins

3. Guidance explanation for 2014 margins

4. Medicare Advantage MCR or MLR trends

5. MA costs—Different physician engagement models

6. Explanations for margins, medical costs

7. Public and private exchanges—profitability

8. Margins in and costs in each Segment

9. Catamaran effect on PBM profitability

10. ASO / stop-loss / risk-based business—costs and margins

11. CACs—impact on cost-sharing performance23

As of: 12-31-13 12-31-12 CHG

Assets $54,336 $53,734 1.1%

Liabilities $43,659 $43,851 -0.4%

Non-Cont. Int. $96 $114 -15.8%

Total Equity $10,581 $9,769 8.3%

Equity Ratio 19.5% 18.2% 130 bps

ROE 18.3% 17.8% 50 bps

Adj. Inc.-Op. $1,932 $1,734 11.4%

ASSETS PerformanceASSETS Performance

Equity Ratio = Equity ÷ AssetsROE uses Adj. Inc. fr. Operations

GROWTHGROWTH

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.

1Liabilities adds redeemable non-controlling interests of Finansbank

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ASSETS: Questions & DiscussionASSETS: Questions & Discussion

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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

Overall Long-term Strategy: GROWTHOverall Long-term Strategy: GROWTH

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

― David Cordani, Q4-2013 Earnings Call26

Group Disability and Life 2013 2012 CHGPremiums & Fees $3,425 $3,109 10%

Adj. Inc. fr. Ops. After Tax $311 $281 11%Adjusted Margin* 8.3% 8.2% 10 bps

Covered Lives (est.) 13,600 12,100 12%Total Customer Relationships 82,560 78,759 5%

Global Supplemental Benefits 2013 2012 CHGPremiums & Fees $2,513 $1,984 27%

Adj. Inc. fr. Ops. After Tax $183 $148 24%Adjusted Margin* 6.9% 7.1% (20 bps)

Global Supple. Benefits Pols. 11,869 11,436 4%

Global Health Care 2013 2012 CHG Premiums & Fees $22,933 $20,973 9%

Adj. Inc. fr. Ops. After Tax $1,572 $1,480 6%Adjusted Margin* 6.2% 6.4% (20 bps)

Tot. Medical Customers 14,217 14,045 1%

GROWTH & PEOPLEGROWTH & PEOPLE

* Adjusted Margin After Tax = Adj. Inc. fr. Ops. After Tax ÷ Segment Revenues

Performance by SegmentsPerformance by Segments for Full Yearsfor Full Years::Policies & Lives in 000’s

PEOPLEPEOPLE

Medical customers up by 172,000 in 2013.

Favorable prior year reserve development.

PEOPLEPEOPLE

PEOPLEPEOPLE

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GROWTH: Discussion PointsGROWTH: Discussion Points

1. Growth outlook for Global Supplemental Benefits

2. M&A future strategy—capital deployment

3. Explanation of Cigna’s 2014 Growth Outlook—industry flat

4. Global Health Care as a slow-growth business

5. Regional and Select Segment growth outlook

6. Growth of risk-based vs. ASP/self-insured

7. Need new markets with well-developed physician engagement

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• Almost all questions linked to Growth.

• Analysts concerned about assumptions sustaining Growth outlook

• Almost all questions linked to Growth.

• Analysts concerned about assumptions sustaining Growth outlook

PEOPLE: Discussion PointsPEOPLE: Discussion Points

1. 2013: CAC relationships increased customers by 50% or 400,000

2. 86 CACs—up from 52 end of 2012

3. Public exchange business—enrollment experience

4. Private exchange business—early stages of innovation

5. Cigna has launched proprietary private exchange

6. Modest MA membership Growth for 2014

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EXTERNAL FACTORSEXTERNAL FACTORS

1. Disruptive market forces

2. Changing client & customer needs

3. Aging population

4. Growing middle class

5. Rising chronic illness levels

6. Affordability pressures

7. Uncertain Medicare Advantage reimbursements

8. Cost pressure

9. Reduction in hospital reimbursements—gov’t. cuts

10. Public exchange implementation challenges

11. Changing physician reward structures

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““Challenging marketplace.”Challenging marketplace.”

EXTERNAL FACTORS: Global StrategyEXTERNAL FACTORS: Global Strategy

1. Customer insights and engagement:

a. Identify customer needs

b. Determine proper distribution channels

2. Consultative distribution:

a. Brokers and consultants for employers

b. Affinity partners: banks, financial institutions

c. Individual direct: internet, TV, direct response

d. Proprietary private exchanges

3. Care delivery and physician engagement:

a. Differentiated approach: care extenders, actionable information

b. 86 CAC initiatives, 1.2 million customers32

David Cordani: Three KEY AREAS to focus on to succeed in Global Markets:

2014 Outlook 2014 Outlook AIO = Adjusted Income from Operations

1. Revenue Growth: UP 4% to 7% over 2013

2. Adjusted Inc. from Operations: $1.9 to $2.0 B (2013 = $1.932 B) UP 0% to 3.5%

3. Adjusted Inc. fr. Ops. EPS: $6.80 to $7.20 (2013 Adj. EPS = $6.79) UP 0% to 6%

4. 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%)

4. Global Supp. Benefits―AIO: $195 to $215 M (2013 = $183 M, UP 7% to 17%)

5. Group Disability & Life―AIO: $305-$325 M (2013 = $311 M, DN 2% to UP 5%)

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2013 Summary2013 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.”

― David Cordani, CEO Q4-2013 Earnings Call

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“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.”

2014 Outlook: David Cordani2014 Outlook: David Cordani

“…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 2014. And we remain committed to our long-term EPS growth outlook of 10% to 13%.”

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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

― David Cordani, CEO Q4-2013 Earnings Call

Encouragement & ChallengeEncouragement & 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?QUESTIONS & COMMENTS?

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2014 Business Acumen Events 2014 Business Acumen Events Cigna UniversityCigna 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

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