With a significant position in the US health insurance market, CIGNA covers some 14 million Americans with its various medical plans. The firm's offerings include PPO, HMO, point-of-service (POS), indemnity, and consumer-directed products, as well as specialty coverage in the form of dental, vision, pharmacy, and behavioral health plans. It also sells group accident, life, and disability insurance. Customers include employers, government entities, unions, Medicare recipients, and other groups and individuals in North America. Internationally, CIGNA sells life, accident, and health insurance in parts of Europe and Asia, and it provides health coverage to expatriate employees of multinational companies.
CIGNA's subsidiaries include Connecticut General Life Insurance, Cigna Health and Life Insurance, Life Insurance Company of North America, and Cigna Life Insurance Company of New York.
To better align service and distribution resources, CIGNA implemented a new segment reporting structure in 2012. The largest segment is composed of its global health care operations, which account for about 80% of revenues and provide full health plan benefits for multinational, local, and organizational groups in North America and internationally. The division also provides behavioral health, employee assistance, pharmacy, and utilization review services to employer groups and benefit administrators.
CIGNA's disability and life insurance segment, which accounts for about 10% of sales, offers long- and short-term disability, group life, and accident insurance, among other products. The company covers about 5.6 million lives with its group life insurance policies and about 6.5 million individuals with its group disability policies.
A third segment, global supplemental benefits, provides supplemental health, accident, and life policies in the US and about 20 other countries.
Other operations include a mail-order pharmacy business, which works in partnership with its health care services segment, and an operator of onsite health clinics for large employer groups. CIGNA also still receives revenue from two inactive business lines: Its runoff retirement benefit business and its runoff reinsurance business. (These segments service existing policies but don't issue new policies.)
In addition its domestic operations -- which account for 90% of revenues and cover all 50 US states plus Washington, DC; Canada; Puerto Rico; and the Virgin Islands -- CIGNA sells supplemental life, accident, and health insurance to some 7 million members in international markets (about 30 countries). South Korea is the firm's largest foreign market. CIGNA is also one of the world's largest providers of expatriate health insurance, which covers the overseas employees of multinational corporations. The company serves more than 1.2 million expatriate members.
In all, CIGNA operates in about 20 countries in North America, Europe, the Middle East, and the Asia/Pacific region.
Sales and Marketing
CIGNA does much of its health plan business with large employer groups, mainly through direct sales representatives and independent consultants. The company is working to expand its customer base to include more select (50 to 250 employees) and midsized (250 to 5,000 employees) businesses, government entities, and individuals.
The disability and life segment markets policies to employer groups and other professional associations through a network of brokers and consultants, while international health and life policy and supplemental benefit sales are conducted via independent distributors. Some supplemental products are marketed via direct telemarketing efforts.
The company's supplemental health, life, and accident policies sold abroad are generally marketed through distribution partnerships. These products are typically sold through direct marketing efforts such as telemarketing.
In 2014 the company took a minority stake in a joint venture which will offer CIGNA's products and services in India. In the US, it introduced a partnership with Cornerstone Health Care to provide improved services in North Carolina. Other new agreements signed that year include collaborations with Regional HealthPlus, Skylands Medical Group, and The Austin Diagnostic Clinic.
CIGNA has maintained a healthy balance between growth and cost-control efforts in recent years, leading to steady increases in revenues. In 2013 revenues rose 11% to $32.4 billion due to increased premiums and fees (driven by the acquisition of HealthSpring in 2012 and organic growth across all benefit segments), as well as sales growth in mail-order and other operations. Investment revenues, primarily related to real estate sales and gains on sales of fixed maturities, also helped boost revenues that year.
Profits fell in 2013, though, taking a 9% dip to $1.5 billion as benefits and other expenses -- including some related to the HealthSpring acquisition -- rose.
Cash flow from operations declined 69% to $719 million in 2013, primarily due to payments totaling $2.2 billion made to Berkshire Hathaway. That year the two companies sealed a deal through which Berkshire will reinsure CIGNA's risk related to two run-off guaranteed minimum death benefit businesses (CIGNA reports that it had exposure for up to $4 billion in future claims). Also impacting cash flow were such factors as an increase in funds used in deferred policy acquisition costs and other expenses and liabilities.
While it continues to pursue new corporate accounts, CIGNA is trying to grow its domestic health care segment by offering new and innovative products for individuals. For instance, the company is launching trendy consumer-directed programs such as low-deductable plans with health savings accounts (CIGNA Choice Fund), incentive programs, health risk assessments, and online tools (such as Choicelinx and HealthEview) for comparing coverage options and making sound health care decisions. CIGNA also collaborates with health care providers and regional health plans to lower medical costs and improve access to quality care. In 2014 the company launched its proprietary private retail exchange in new markets and expanded in existing markets.
CIGNA is also working to mitigate rising health care costs through means such as entering favorable reimbursement contracts with providers and enhancing operating and administrative efficiencies. Pending health care reform measures and CMS reimbursement cuts have also prompted CIGNA to exit some of its health plan market segments, while pursuing growth in areas it perceives to be more profitable under new laws. For instance, the company has recently withdrawn its small group (2 to 50 employees) offerings in certain states.
Internationally, the company is working to expand its geographic footprint, especially in emerging markets. In late 2012 the company formed a joint venture with Saudi Arabian Insurance Company, enhancing an existing partnership between the companies to establish health and wellness offerings in the Middle East.
Mergers and Acquisitions
To expand in the attractive individual marketplace for seniors, in 2012 the company acquired HealthSpring, a major Medicare Advantage provider, for some $3.8 billion. The purchase strengthened CIGNA's presence in the individual seniors market by adding a Medicare Advantage business that covers 340,000 members in 11 states, as well as a Medicare prescription drug plan covering 800,000 customers.
CIGNA also expanded internationally through the purchase of a majority stake in Turkish insurer Finans Emeklilik for $116 million; the purchase expanded services provided to middle-class customers in emerging markets.