netrashetty
Netra Shetty
Cal-Maine Foods (CALM) is the largest producer and marketer of shell eggs in the United States. Cal-Maine is primarily engaged in the production, grading, packing, and sale of fresh shell eggs. The company provides over 15% of the total U.S. consumption of eggs.
Cal-Maine operations are fully integrated. Their facilities hatch chicks, grow pullets, manufacture feed, and produce, process, and distribute shell eggs. Shell eggs accounted for approximately 96% of Cal-Maines net sales in fiscal 2007 and 94% in fiscal 2006. Egg products accounted for approximately 2% of the net sales in fiscal 2007 and 2% in fiscal 2006. Shell eggs are sold directly by Cal-Maine primarily to national and regional supermarket chains.
Cal-Maine also produces specialty egg products such as cholesterol free, free range chicken, and organic eggs. In the specialty category, Cal-Maine has exclusive rights to use the Egg-Land's Best and Farmhouse brands.
The company sells egg products in 29 states across the southwest, southeast, mid-Atlantic, and midwest portions of the United States.
Cal-Maine currently use contract producers for approximately 10% of their total egg production. Contract producers operate under agreements with Cal-Maine for the use of their facilities in the production of shell eggs by layers owned by Cal-Maine. Cal-Maine owns the eggs produced. Also, shell eggs are purchased, as needed, for resale by Cal-Maine from outside producers.
Cal-Maine operating income was $58.2 million for fiscal 2007, as compared to operating income of $4.5 million for fiscal 2006. The operating income as a percent of sales for fiscal 2007 was 9.7%, as compared to operating income of .9% for fiscal 2006.
Cal-Maine sold 679 million dozen shell eggs in fiscal 2008 (ending May), 685 million dozen in fiscal 2007 and 683 million dozen in fiscal 2006.
Growth Strategy
Since 1989, Cal-Maine has acquired 14 companies with 600,000-7,500,000 layers. Despite significant consolidation, the market in which Cal-Maine operates in remains highly fragmented with 65 producers that has more than 1 million layers and the 10 largest producers own 43% market share.
Recent acquisitions by the Company include Zephyr Egg ($27 million in cash; 2 million layers), George's Inc ($11 million in cash; 1 million layers), Green Forest Foods (50% interest for $2 million in cash; the Company owns 50%; 1 million layers) and Hillandale LLC ($49 million in net cash)
Pricing and Costs
The pricing of shell eggs in the US has been increasing due to food price inflation. In fiscal 2008, the Company's average selling price for a dozen of its shell eggs was $1.260 compared to $0.832 in fiscal 2007 and $0.428 in fiscal 2006. Due to the current recession, selling prices decreased to $1.206 for the quarter ended February 28, 2009, compared with $1.480 for the quarter ended March 1, 2008.
Other than increases in average selling prices, the Company's principal feed ingredients, corn, soybean and other gains, have also increased significantly due to food price and energy price inflation. Feed cost, which represents the largest component of production cost, for fiscal year was $0.334 per dozen in fiscal 2008, compared to $0.252 per dozen in fiscal 2007 and $0.206 per dozen in fiscal 2006. Feed cost increased to $0.370 per dozen for the quarter ended February 28, 2009, compared with $0.347 per dozen for the quarter ended February 28, 2008.
CIGNA Corporation (NYSE:CI) is a health insurance company - sort of. For one, three-quarters of Cigna's health insurance business isn't really insurance - Cigna manages health plans for companies who self-insure, agreeing to pay employee's health care costs. Employees get Cigna cards and access to Cigna's negotiated rates with doctors, and Cigna handles billing, but the employer bears the risk of paying for care when employees get sick. This arrangement means less risk for Cigna, but also smaller premiums. The majority of CIGNA's revenues come from these so called self-funded administrative-only plans.
Cigna also differs from its competitors in that the majority of the company's pretax operating income comes from investment income- 50% higher than its next most-invested competitor, Aetna, and almost four times that of other large national health account providers.[1] [2] This reliance on investment income makes the company much more vulnerable to market conditions than most other health insurance companies.
The company’s Medicare membership comprises only 0.3% of its total coverage, shielding CIGNA from legislation like the 2006 Deficit Reduction Act, which aims to cut Medicare funding by over $4.8 billion before 2011 and threatens competitors’ profit margins.
Company Overview
Business Financials
CIGNA earned total revenues of $18.4 billion in 2009, a slight decrease from its 2008 total revenues of $19.1 billion.[3] Despite this decrease in revenues, CIGNA was able to substantially increase its net income from $288 million in 2008 to $1.3 billion in 2009.[3] This was largely the result of CIGNA realizing a run off reinsurance gain of $185 million in 2009 as opposed to a $674 million loss the previous year.
Contents
1 Company Overview
1.1 Business Financials
1.2 Business Segments
1.2.1 The Health Care Segment (61.8% of 2009 revenue)[4]
1.2.2 The Disability and Life Segment (16.2% of 2009 revenue)[5]
1.2.3 The International Segment (10.7% of 2009 revenue)[6]
1.2.4 Run Off Reinsurance
1.2.5 Other Operations (3.2% of 2009 revenue)[8]
2 Trends and Forces
2.1 Decline in proportional Medicare membership allows CIGNA to maintain margins in wake of funding cuts
2.2 Heavy reliance on self-funded accounts mediates risks, but dampens revenue growth potential
3 Competition
4 References
Business Segments
CIGNA breaks its operations into five major business segments: i) Health Care, ii) Disability and Life, iii) International, iv) Run-off Reinsurance, and v) Other Operations.
The Health Care Segment (61.8% of 2009 revenue)[4]
The health care segment provides health insurance through a variety of forms such as health maintenance organizations (HMOs), point of service (POS) plans, preferred provider (PPO) plans, and more limited voluntary plans primarily to national, regional, and small-business employers. They also offer specialty plans such as dental insurance and prescription drug plans. The division offers three pricing schemes: a guaranteed cost scheme, where CIGNA takes on all medical cost risk in exchange for a monthly premium; a retrospectively experience-rated scheme, where the premium includes a margin that can be adjusted based on each individual or employers medical history; and a self-funded administrative services only (ASO) scheme, in which the customer pays a smaller fee in exchange for CIGNA taking on all administrative costs, but the customer incurs their own medical costs up to a "stop-loss" amount. In 2009, this segment earned $13.1 billion in total revenues.[4]
The Disability and Life Segment (16.2% of 2009 revenue)[5]
This segment provides group life insurance, long and short-term disability insurance, workers’ compensation, and accident insurance to national and regional employers and employees through its subsidiaries. For disability insurance, CIGNA acts for both the employer and employee, providing a fixed level of income to the employee, assisting the employee in his/her return to work, and assisting the employer in managing the cost of employee disability. All services in this division are contracted under a guaranteed cost scheme. In 2009, this segment earned $2.99 billion in total revenues.[5]
The International Segment (10.7% of 2009 revenue)[6]
This segment includes revenues from life, accident, and health insurance services offered by CIGNA’s foreign subsidiaries. These services are offered to foreign employers, as well as multinational companies. In 2009, this segment posted total revenues of $1.97 billion.[6]
Run Off Reinsurance
Prior to 2000, this segment offered to reinsure part or all of the risks written off by other insurance companies under life, accident, or health insurance policies. In 2000, CIGNA sold these subsidiaries, but still generates revenue from previously invested income and incurs contractual payments as a “run-off” to these policies. In 2009, the segment had a negative revenue of $141 million.[7]
Other Operations (3.2% of 2009 revenue)[8]
This segment includes the sale of corporate-owned life insurance (COLI) plans, or employers’ life insurance on certain employees; deferred revenue from the 1998 and 2004 sales of their life insurance, annuity, and retirement benefits businesses; and their settlement annuity business, or liability settlements for non-guaranteed payments. In 2009, this segment posted total sales of $583 million.[8]
Trends and Forces
Decline in proportional Medicare membership allows CIGNA to maintain margins in wake of funding cuts
Under Medicare and Medicaid plans, a health insurance company takes on medical cost risk for a customer in exchange for monthly premiums paid by the government. The 2006 Deficit Reduction Act, however, included a plan to cut Medicaid funding by $4.8 billion before 2011.[9] This bill, along with any additional legislation of this form, would lead to decreased profit margin for any customer under a Medicaid or Medicare plan. As this funding is cut, CIGNA increasingly low exposure to government payments offers it a competitive advantage over competitors providing a large proportion of Medicare plans. Medicare customers represented only 0.3% of CIGNA’s coverage, helping keep CIGNA insulated from this development.
Heavy reliance on self-funded accounts mediates risks, but dampens revenue growth potential
Under self-funded accounts, customers pay a smaller premium in exchange for administrative services, but incur their own medical costs up to a given "stop-loss" amount. While this prevalence of self-funded accounts eliminates some inherent risks of medical costs, it dampens revenue growth by generating smaller premiums per member. For example, Medical Membership in CIGNA's Health Care Segment grew by over 8% in 2007, but the total premiums generated by this segment grew only 7% in this same time period.[10]
Competition
CIGNA’s Health Care services face a highly competitive industry that competes on the prices and comprehensiveness of benefits, location and choice of health care providers, quality of customer service, and reputation of financial strength. Its greatest competition comes from other national account companies such as Aetna (AET), UnitedHealth Group (UNH), and WellPoint Health Networks (WLP).
Cal-Maine operations are fully integrated. Their facilities hatch chicks, grow pullets, manufacture feed, and produce, process, and distribute shell eggs. Shell eggs accounted for approximately 96% of Cal-Maines net sales in fiscal 2007 and 94% in fiscal 2006. Egg products accounted for approximately 2% of the net sales in fiscal 2007 and 2% in fiscal 2006. Shell eggs are sold directly by Cal-Maine primarily to national and regional supermarket chains.
Cal-Maine also produces specialty egg products such as cholesterol free, free range chicken, and organic eggs. In the specialty category, Cal-Maine has exclusive rights to use the Egg-Land's Best and Farmhouse brands.
The company sells egg products in 29 states across the southwest, southeast, mid-Atlantic, and midwest portions of the United States.
Cal-Maine currently use contract producers for approximately 10% of their total egg production. Contract producers operate under agreements with Cal-Maine for the use of their facilities in the production of shell eggs by layers owned by Cal-Maine. Cal-Maine owns the eggs produced. Also, shell eggs are purchased, as needed, for resale by Cal-Maine from outside producers.
Cal-Maine operating income was $58.2 million for fiscal 2007, as compared to operating income of $4.5 million for fiscal 2006. The operating income as a percent of sales for fiscal 2007 was 9.7%, as compared to operating income of .9% for fiscal 2006.
Cal-Maine sold 679 million dozen shell eggs in fiscal 2008 (ending May), 685 million dozen in fiscal 2007 and 683 million dozen in fiscal 2006.
Growth Strategy
Since 1989, Cal-Maine has acquired 14 companies with 600,000-7,500,000 layers. Despite significant consolidation, the market in which Cal-Maine operates in remains highly fragmented with 65 producers that has more than 1 million layers and the 10 largest producers own 43% market share.
Recent acquisitions by the Company include Zephyr Egg ($27 million in cash; 2 million layers), George's Inc ($11 million in cash; 1 million layers), Green Forest Foods (50% interest for $2 million in cash; the Company owns 50%; 1 million layers) and Hillandale LLC ($49 million in net cash)
Pricing and Costs
The pricing of shell eggs in the US has been increasing due to food price inflation. In fiscal 2008, the Company's average selling price for a dozen of its shell eggs was $1.260 compared to $0.832 in fiscal 2007 and $0.428 in fiscal 2006. Due to the current recession, selling prices decreased to $1.206 for the quarter ended February 28, 2009, compared with $1.480 for the quarter ended March 1, 2008.
Other than increases in average selling prices, the Company's principal feed ingredients, corn, soybean and other gains, have also increased significantly due to food price and energy price inflation. Feed cost, which represents the largest component of production cost, for fiscal year was $0.334 per dozen in fiscal 2008, compared to $0.252 per dozen in fiscal 2007 and $0.206 per dozen in fiscal 2006. Feed cost increased to $0.370 per dozen for the quarter ended February 28, 2009, compared with $0.347 per dozen for the quarter ended February 28, 2008.
CIGNA Corporation (NYSE:CI) is a health insurance company - sort of. For one, three-quarters of Cigna's health insurance business isn't really insurance - Cigna manages health plans for companies who self-insure, agreeing to pay employee's health care costs. Employees get Cigna cards and access to Cigna's negotiated rates with doctors, and Cigna handles billing, but the employer bears the risk of paying for care when employees get sick. This arrangement means less risk for Cigna, but also smaller premiums. The majority of CIGNA's revenues come from these so called self-funded administrative-only plans.
Cigna also differs from its competitors in that the majority of the company's pretax operating income comes from investment income- 50% higher than its next most-invested competitor, Aetna, and almost four times that of other large national health account providers.[1] [2] This reliance on investment income makes the company much more vulnerable to market conditions than most other health insurance companies.
The company’s Medicare membership comprises only 0.3% of its total coverage, shielding CIGNA from legislation like the 2006 Deficit Reduction Act, which aims to cut Medicare funding by over $4.8 billion before 2011 and threatens competitors’ profit margins.
Company Overview
Business Financials
CIGNA earned total revenues of $18.4 billion in 2009, a slight decrease from its 2008 total revenues of $19.1 billion.[3] Despite this decrease in revenues, CIGNA was able to substantially increase its net income from $288 million in 2008 to $1.3 billion in 2009.[3] This was largely the result of CIGNA realizing a run off reinsurance gain of $185 million in 2009 as opposed to a $674 million loss the previous year.
Contents
1 Company Overview
1.1 Business Financials
1.2 Business Segments
1.2.1 The Health Care Segment (61.8% of 2009 revenue)[4]
1.2.2 The Disability and Life Segment (16.2% of 2009 revenue)[5]
1.2.3 The International Segment (10.7% of 2009 revenue)[6]
1.2.4 Run Off Reinsurance
1.2.5 Other Operations (3.2% of 2009 revenue)[8]
2 Trends and Forces
2.1 Decline in proportional Medicare membership allows CIGNA to maintain margins in wake of funding cuts
2.2 Heavy reliance on self-funded accounts mediates risks, but dampens revenue growth potential
3 Competition
4 References
Business Segments
CIGNA breaks its operations into five major business segments: i) Health Care, ii) Disability and Life, iii) International, iv) Run-off Reinsurance, and v) Other Operations.
The Health Care Segment (61.8% of 2009 revenue)[4]
The health care segment provides health insurance through a variety of forms such as health maintenance organizations (HMOs), point of service (POS) plans, preferred provider (PPO) plans, and more limited voluntary plans primarily to national, regional, and small-business employers. They also offer specialty plans such as dental insurance and prescription drug plans. The division offers three pricing schemes: a guaranteed cost scheme, where CIGNA takes on all medical cost risk in exchange for a monthly premium; a retrospectively experience-rated scheme, where the premium includes a margin that can be adjusted based on each individual or employers medical history; and a self-funded administrative services only (ASO) scheme, in which the customer pays a smaller fee in exchange for CIGNA taking on all administrative costs, but the customer incurs their own medical costs up to a "stop-loss" amount. In 2009, this segment earned $13.1 billion in total revenues.[4]
The Disability and Life Segment (16.2% of 2009 revenue)[5]
This segment provides group life insurance, long and short-term disability insurance, workers’ compensation, and accident insurance to national and regional employers and employees through its subsidiaries. For disability insurance, CIGNA acts for both the employer and employee, providing a fixed level of income to the employee, assisting the employee in his/her return to work, and assisting the employer in managing the cost of employee disability. All services in this division are contracted under a guaranteed cost scheme. In 2009, this segment earned $2.99 billion in total revenues.[5]
The International Segment (10.7% of 2009 revenue)[6]
This segment includes revenues from life, accident, and health insurance services offered by CIGNA’s foreign subsidiaries. These services are offered to foreign employers, as well as multinational companies. In 2009, this segment posted total revenues of $1.97 billion.[6]
Run Off Reinsurance
Prior to 2000, this segment offered to reinsure part or all of the risks written off by other insurance companies under life, accident, or health insurance policies. In 2000, CIGNA sold these subsidiaries, but still generates revenue from previously invested income and incurs contractual payments as a “run-off” to these policies. In 2009, the segment had a negative revenue of $141 million.[7]
Other Operations (3.2% of 2009 revenue)[8]
This segment includes the sale of corporate-owned life insurance (COLI) plans, or employers’ life insurance on certain employees; deferred revenue from the 1998 and 2004 sales of their life insurance, annuity, and retirement benefits businesses; and their settlement annuity business, or liability settlements for non-guaranteed payments. In 2009, this segment posted total sales of $583 million.[8]
Trends and Forces
Decline in proportional Medicare membership allows CIGNA to maintain margins in wake of funding cuts
Under Medicare and Medicaid plans, a health insurance company takes on medical cost risk for a customer in exchange for monthly premiums paid by the government. The 2006 Deficit Reduction Act, however, included a plan to cut Medicaid funding by $4.8 billion before 2011.[9] This bill, along with any additional legislation of this form, would lead to decreased profit margin for any customer under a Medicaid or Medicare plan. As this funding is cut, CIGNA increasingly low exposure to government payments offers it a competitive advantage over competitors providing a large proportion of Medicare plans. Medicare customers represented only 0.3% of CIGNA’s coverage, helping keep CIGNA insulated from this development.
Heavy reliance on self-funded accounts mediates risks, but dampens revenue growth potential
Under self-funded accounts, customers pay a smaller premium in exchange for administrative services, but incur their own medical costs up to a given "stop-loss" amount. While this prevalence of self-funded accounts eliminates some inherent risks of medical costs, it dampens revenue growth by generating smaller premiums per member. For example, Medical Membership in CIGNA's Health Care Segment grew by over 8% in 2007, but the total premiums generated by this segment grew only 7% in this same time period.[10]
Competition
CIGNA’s Health Care services face a highly competitive industry that competes on the prices and comprehensiveness of benefits, location and choice of health care providers, quality of customer service, and reputation of financial strength. Its greatest competition comes from other national account companies such as Aetna (AET), UnitedHealth Group (UNH), and WellPoint Health Networks (WLP).
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