Anthem and Cigna: Combination Creates Premier Health Services Company 1 Filed by Anthem, Inc. (Commission File No. 001-16751) pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Subject Company: Cigna Corporation Commission File No. 001-08323 |
Safe Harbor Statement (1 of 2) Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995:
This document, and oral statements made with respect to information contained
in this communication, contain certain forward- looking
information about Anthem, Inc. (Anthem), Cigna Corporation (Cigna) and the combined businesses of Anthem and Cigna that is intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are
statements that are not generally historical facts. Words such as
expect(s),
feel(s),
believe(s),
will,
may,
anticipate(s),
intend,
estimate,
project
and similar expressions (including the negative thereof) are intended to identify forward-looking statements, which generally are not historical in nature. These
statements include, but are not limited to, statements regarding
the merger between Anthem and Cigna; Anthems financing of
the proposed transaction; the combined companys expected future
performance (including expected results of operations and
financial guidance); the combined companys future financial condition,
operating results, strategy and plans; statements about
regulatory and other approvals; synergies from the proposed transaction; the
combined companys expected debt-to-capital ratio
and ability to retain investment grade ratings; the closing date for the
proposed transaction; financial projections and estimates and
their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain known and unknown
risks
and uncertainties, many of which are difficult to predict and generally beyond Anthems and Cignas control, that could cause actual results and other future events to differ materially from those expressed in, or implied or projected by, the forward-looking
information and statements. These risks and uncertainties
include: those discussed and identified in Anthems and Cignas public filings with the U.S. Securities and Exchange Commission (the SEC); those relating to the proposed transaction, as detailed from time to time in Anthems and Cignas filings with the SEC; increased government participation in, or regulation or taxation of
health benefits and managed care operations, including, but not
limited to, the impact of the Patient Protection and Affordable
Care Act and the Health Care and Education Reconciliation Act of 2010, or
Health Care Reform; trends in health care costs and utilization
rates; our ability to secure sufficient premium rates including regulatory approval for and implementation of such rates; our participation in the federal and state health insurance exchanges under Health Care Reform, which have experienced and
continue to experience challenges due to implementation of initial and
phased-in provisions of Health Care Reform, and which entail
uncertainties associated with the mix and volume of business, particularly in Individual and Small Group markets, that could negatively impact the adequacy of our premium rates and which may not be sufficiently offset by the risk apportionment
provisions of Health Care Reform; our ability to contract with providers
consistent with past practice; competitor pricing below market
trends of increasing costs; reduced enrollment, as well as a negative change in our health care product mix; risks and uncertainties regarding Medicare and Medicaid programs, including those related to non-compliance with the complex
regulations imposed thereon and funding risks with respect to revenue received
from participation therein; our projected consolidated revenue
growth and global medical customer growth; a downgrade in our financial strength ratings; litigation and investigations targeted at our industry and our ability to resolve litigation and investigations within estimates; medical malpractice
or professional liability claims or other risks related to health
care services provided by our subsidiaries;
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Safe Harbor Statement (2 of 2) Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995 Continued:
our ability to repurchase shares of its common stock and pay dividends on
its common stock due to the adequacy of its cash
flow and earnings and other considerations; non- compliance by any party with the Express Scripts, Inc. pharmacy benefit management services agreement, which could result in financial penalties; our inability to meet customer demands, and
sanctions imposed by governmental entities, including the Centers for Medicare
and Medicaid Services; events that result in negative publicity
for us or the health benefits industry; failure to effectively maintain and modernize our information systems and e-business organization and to maintain good relationships with third party vendors for information system resources;
events that may negatively affect Anthems licenses with the
Blue Cross and Blue Shield Association; possible impairment of the value of our intangible assets if future results do not adequately support goodwill and other intangible assets; intense competition to
attract and retain employees; unauthorized disclosure of member
or employee sensitive or confidential information, including the
impact and outcome of investigations, inquiries, claims and litigation related
to the cyber attack Anthem reported in February 2015; changes in
the economic and market conditions, as well as regulations that may negatively affect our investment portfolios and liquidity; possible restrictions in the payment of dividends by our subsidiaries and increases in required minimum
levels of
capital and the potential negative effect from our substantial amount of
outstanding indebtedness; general risks associated with mergers
and acquisitions; various laws and provisions in Anthems governing documents that may prevent or discourage takeovers and business combinations; future public health epidemics and catastrophes; and general economic downturns.
Important factors that could cause actual results and other future events to
differ materially from the forward-looking statements made in
this communication are set forth in other reports or documents that Anthem and/or Cigna may file from time to time with the SEC, and include, but are not limited to: (i) the ultimate outcome of the proposed transaction, including the ability to
achieve the synergies and value creation contemplated by the
proposed transaction, (ii) the ultimate outcome and results of
integrating the operations of Anthem and Cigna, (iii) disruption from the
merger making it more difficult to maintain businesses and
operational relationships, (iv) the risk that unexpected costs will be incurred in connection with the proposed transaction, (v) the timing to consummate the proposed transaction, (vi) the possibility that the proposed transaction does not close,
including, but
not limited to, due to the failure to satisfy the closing conditions, including the receipt of required regulatory approvals and the receipt of approval of both Anthems and Cignas shareholders and stockholders, respectively, and (viii) the risks and
uncertainties detailed by Cigna with respect to its business as
described in its reports and documents filed with the SEC. All
forward-looking statements attributable to Anthem, Cigna or any person
acting on behalf of Anthem and/or Cigna are expressly qualified
in their entirety by this cautionary statement. Readers are cautioned not to place undue reliance on these forward- looking statements that speak only as of the date hereof. Except to the extent otherwise required by federal securities law,
neither Anthem nor Cigna undertake any obligation to republish
revised forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events or the receipt of new information. Readers
are also urged to carefully review and consider the various disclosures in Anthems and Cignas SEC reports. 3 |
Non-GAAP Measures Non-GAAP Measures: This presentation includes certain non-GAAP financial measures. These non-GAAP measures may be different from
non-GAAP financial measures used by other companies. The presentation of
this financial information, which is not prepared under any
comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with GAAP. This data should
be read in conjunction with previously published company reports on Forms
10-K, 10-Q and 8-K. We refer you to the Appendix of
these presentation materials for reconciliations to the most directly comparable GAAP financial measures and related information. 4 |
This communication does not constitute an offer to sell or a solicitation of an
offer to sell or a solicitation of an offer to buy any securities
or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No
offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law. The proposed transaction between Anthem, Inc. (Anthem) and Cigna Corporation (Cigna) will be submitted to
Anthems and Cigna's shareholders and stockholders (as
applicable) for their consideration. In connection with the transaction, Anthem and Cigna will file relevant materials with the U.S. Securities and Exchange Commission (the SEC), including an Anthem registration
statement on Form S-4 that will include a joint proxy
statement of Anthem and Cigna that also constitutes a prospectus of Anthem, and each will mail the definitive joint proxy statement/prospectus to its shareholders and stockholders, respectively. This communication is not a
substitute for the registration statement, joint proxy
statement/prospectus or any other document that Anthem and/or Cigna may file with the SEC in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS OF ANTHEM AND CIGNA ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND
OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. Investors and security holders will be able to obtain free copies of the registration statement containing the joint proxy statement/prospectus and other documents filed with the SEC by Anthem or
Cigna (when available) through the web site maintained by the SEC
at http://www.sec.gov. Copies of the documents filed with the
SEC by Anthem will be available free of charge on Anthems internet
website at http://www.antheminc.com or by contacting Anthems
Investor Relations Department at (317) 488-6168. Copies of the documents
filed with the SEC by Cigna will be available free of charge on
Cignas internet website at http://www.cigna.com or by contacting Cignas Investor Relations Department at (215) 761-4198. Anthem, Cigna and their respective directors and executive officers and other members of management and employees may be
deemed to be participants in the solicitation of proxies in respect of the
proposed transaction. You can find information about
Anthems executive officers and directors in Anthems annual report
on Form 10-K for the year ended December 31, 2014 and its
definitive proxy statement filed with the SEC on April 1, 2015. You can find information about Cignas executive officers and directors in Cignas annual report on Form 10-K for the year ended December 31, 2014 and its definitive proxy statement filed with the SEC on March 13, 2015. Additional information regarding the interests of such potential participants will be included in the joint proxy
statement/prospectus
when it is filed with the SEC. You may obtain free copies of these documents using the sources indicated above. Important Information for Investors and Shareholders 5 |
Participants 6 Joseph Swedish Anthem President and Chief Executive Officer David Cordani Cigna President and Chief Executive Officer Wayne DeVeydt Anthem EVP and Chief Financial Officer Doug Simpson Anthem VP Investor Relations |
Transaction Summary 7 * Calculated as of Anthems and Cignas closing stock price on May 28, 2015; stock consideration based on a fixed exchange
ratio of 0.5152x
$188.00 per share in the form of ~55% funded through cash and
~45% funded through Anthem stock 38.4% premium to Cignas unaffected stock price* Anthem shareholders to own ~67% and Cigna shareholders to own ~33% of the combined company Cash portion financed through cash on hand and new
debt issuance; equity portion through
issuance of Anthem shares to Cigna shareholders Pro forma debt-to-cap approximately 49% at closing projected to decline to low 40% two years post-close Committed to retaining investment grade debt ratings Shareholder vote required for both companies Regulatory approvals including Hart-Scott-Rodino, state departments of insurance and other regulators Anticipated closing in the second half of 2016 |
Expanded Footprint Enhances Ability to Compete 8 Source: Company Filings. Note: Medical membership data as of 1Q 2015. Revenue projection based on the most recent 2015 outlook publicly reported by both
companies. +
38.5M
Members 53.2M Members Combined Company Generates Over $115 Billion in Annual Revenue Combined Company Generates Over $115 Billion in Annual Revenue Leading Position Commercial Risk Commercial ASO Government Individual Specialty International Leading Position Commercial Risk Commercial ASO Government Individual Specialty International Commercial- Risk 15% ASO 66% Medicare 4% Medicaid 11% FGS 3% International 1% Commercial- Risk 17% ASO 61% Medicare 4% Medicaid 14% FGS 4% |
Innovative Solutions Driving Affordability & Choice Leadership position in advancing provider collaboration and new payment models Proven health and wellness programs Local focus advancing affordability Technology centric investments across industrys largest base of membership Enhanced administrative efficiency Comprehensive product and funding offerings Serving employer-sponsored, individual, state and federal government and international customers Breadth of served segments addresses evolving needs of consumers over their lifetime Diverse value based specialty products Affordability Choice 9 |
Combination of Complementary Businesses Most recognizable brand Local focus A leading Commercial franchise Strong Public Exchange execution A leading and growing Medicaid franchise A leading Medicare Supplement and improving Medicare Advantage business Well-positioned for Dual Eligible opportunity Anthem Strong Commercial player with broad geographic coverage Middle Market ASO/Stop Loss solutions A leading Specialty capability (Behavioral Health, Dental, Pharmacy, Disability & Life) Proven wellness programs Medicare position with leading physician-engagement model Differentiated International businesses Diversified and Complementary Platforms 10 Cigna |
Three Pillars to Benefit Combined Entity Provider Collaboration 11 Managing Total Cost of Care Consumer Centricity Data and Insights Talent Affordability Quality Choice/ Personalization |
Affordability Driven By Provider Collaboration and Connected Care 12 CUSTOMER Provider Collaboration Enhanced Personal Health Care Program Realized Outcomes Select Models Fewer acute inpatient admissions Decrease in outpatient surgery costs Fewer inpatient days per 1,000 Reduction in admission of high risk patients Reduction in ER visit costs Decrease in ER utilization PROVIDER Both companies are aligned in their goals to drive better health, choice and long-term affordability |
Total Cost of Care Advantage 13 Demonstrated ability to drive medical cost savings for the nation's leading companies Company A 150,000+ members 6%+ in Year 1 savings Company B 200,000+ members 15%+ in Year 1 savings Discounts alone do not capture the full value Healthy Healthy at Risk Chronic Acute Broad and Proven Health, Wellness & Engagement Capabilities Serving: |
Consumer-centric Approach Caters to Member Needs 14 1 2 Choice & Control Ease & Affordability Feeling confident you are covered and will be taken care of in the event of a health issue Understanding your costs and coverage so there arent any negative surprises when you need to use your benefits Minimal interaction with your insurer, except when you have a question or an issue arises then high engagement through personalized, effortless service is demanded Extensive research has identified the primary drivers of great consumer experiences
Confidence in coverage Clarity in coverage Ease of getting help Health & Wellness Focus 3 Keys to a successful retail-oriented approach Leading Data Analytics 4 |
Compelling Financial Rationale 15 Synergies Confidence in ability to capture run-rate synergies approaching $2 billion pre-tax within two years post-close Expected PBM synergies have not been included in assumptions Balance sheet Committed to retaining investment grade debt ratings Pro forma debt to cap of approximately 49% at closing with intent to decline to low 40% two years post-close Expect to maintain our dividend Will maintain flexibility with regards to share repurchases Adjusted EPS Approaching 10% accretion to Adjusted Earnings per Share in first year post-close Accretion more than doubles in year two * Transaction expected to close in the second half of 2016; 2018 estimate assumes transaction close on 12/31/2016
$17.00+ Adjusted Earnings per Share in 2018*
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Identifiable and Achievable Synergies Administrative structure Operational efficiencies Network efficiencies and medical management Cross leverage best in class capabilities Leverage Cigna Specialty capabilities across Anthem Unique capabilities to serve growing Dual Eligible population Potential PBM synergies have not been included One-time implementation costs estimated to be ~$600 million spread over two years
Precedent transactions comfortably affirm
a synergy level approaching $2 billion Confidence in ability to achieve annual synergies approaching $2 billion 16 |
Value Creation for Both Sets of Shareholders + Adjusted Earnings per Share Greater than + + * 2015 Adjusted EPS guidance excludes greater than $0.25 per share of net unfavorable items. See appendix for the GAAP reconciliation
table.
** Transaction expected to close in the second half of 2016; 2018
estimate assumes transaction close on 12/31/2016
Strong growth from
Medicaid, Individual /
Exchange, Medicare
Advantage, Dual Eligible,
and Specialty Confidence in ability to achieve annual run-rate synergies approaching $2 billion by year 2 + $17.00+ Adjusted Earnings per Share in 2018**
17 $10.00 $14.00 $3.00 $17.00 2015* 2018 |
A Clearly Defined Financing Plan ($ in billions) Available cash $6 Term loans and public debt $22 Equity issued to Cigna shareholders $21 Total $49 Financing considerations Anticipated financing sources Received committed financing for the transaction Permanent financing anticipated to include combination of term loans, public debt and equity portion of the merger consideration issued to Cigna shareholders Debt-to-cap at close will be approximately 49% Committed to de-levering and project to decline to low 40% debt- to-cap two years post-close Committed to retaining investment grade debt ratings 18 |
Continues Anthem's and Cigna's Strong Track Records of Value Creation Source: FactSet data as of unaffected date of 5/28/15 Note: Share price performance over two years prior to unaffected date of 5/28/15
19 Anthem and Cigna Management teams have delivered on their promises Both Management teams have an established track record of execution in this dynamic environment
Industry leading execution in several end markets Anthem 109% Cigna 97% 75% 100% 125% 150% 175% 200% 225% 250% 05/13 09/13 01/14 05/14 09/14 01/15 05/15 Anthem Cigna Successfully integrated and continue to outperform with Amerigroup and HealthSpring platform
acquisitions
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Compelling Transaction for Cigna Shareholders Unaffected Price on 5/28/15: $135.87 Acquisition Price: $188.00* 10-day Trading Average as of 5/28/15: $133.82 Median WS Target Price on 5/28/15: $145.00 38.4% Premium 40.5% Premium Source: Bloomberg Cigna shareholders to participate in significant upside of combined company
Approaching $2 billion of annual run-rate synergies + potential upside from PBM optionality
Anthems industry leading capital deployment track record Will participate in the significantly enhanced value of the combined company 20 * Calculated as of Anthems closing stock price on May 28, 2015 $80 $100 $120 $140 $160 05/14 07/14 09/14 10/14 12/14 02/15 03/15 05/15 Cigna 29.7% Premium |
21 Consideration Mix and Value Creation Given stock component, Cigna shareholders will share in the synergy value Total consideration Cash consideration Stock consideration $188.00 per share*
$103.40
per share $84.60 per share* * Calculated as of Anthems closing stock price on May 28, 2015 |
Summary 22 Diverse well positioned global growth platform with over $115 billion in combined annual revenue and 53 million medical members Enhances ability to advance health care access, affordability and quality for our customers Meaningful opportunities to improve operational efficiency and lower health care costs Approaching 10% accretion to Adjusted EPS in year 1; more than doubling in year 2 Anthem and Cigna Boards unanimously support the transaction Anthem and Cigna are highly confident in the ability to consummate the transaction Anthem is committed to leading the change in health care delivery as a trusted partner for consumers |
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*Estimated based on projections as of 7/24/15.
Full Year 2015
Outlook*
Net income per diluted share
Greater than $9.75
- net of related tax effects: Net realized gains on investments ($0.33) Other-than-temporary impairment losses on investments $0.08 Loss on extinguishment of debt $0.00 Amortization of other intangible assets Greater than $0.50 Greater than $0.25 Adjusted net income per diluted share Greater than $10.00 GAAP Reconciliation 24 We have referenced "Adjusted Net Income Per Diluted Share" (or Adjusted EPS), a non-GAAP measure, in this
document. This non- GAAP measure is intended to aid
investors and analysts when comparing our financial results among periods. Management also uses this measure as a basis for evaluating performance, allocating resources, forecasting future operating periods and setting incentive
compensation targets. A reconciliation of this measure to
the most directly comparable measure calculated in accordance with GAAP is presented below. For additional details, refer to our earnings results press releases and SEC filings, including but not limited
to our Annual Report on Form 10-K for the year ended December
31, 2014, and our Quarterly Report on Form 10-Q for the three months ended March 31, 2015, available at www.antheminc.com. |