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Operator
Ladies and gentlemen, thank you for standing by for CIGNA's first-quarter 2011 results review.
At this time all callers are in a listen-only mode.
We will conduct a question-and-answer session later during the conference and review procedures on how to enter the queue and ask questions at that time.
(Operator Instructions).
As a reminder, ladies and gentlemen, this conference, including the Q&A session, is being recorded.
We will begin by turning the conference over to Mr.
Ted Dietrich.
Please go ahead, Mr.
Dietrich.
Ted Detrick - VP of IR
Good morning, everyone, and thank you for joining today's call.
I am Ted Detrick, Vice President of Investor Relations, and with me this morning are David Cordani, our President and Chief Executive Officer and Tom McCarthy, CIGNA's acting Chief Financial Officer.
In our remarks today David will begin by briefly commenting on CIGNA's first-quarter results.
He will also profile CIGNA's domestic health service business, which will include a discussion of our consultative selling approach and our self-funded product offerings.
Next, Tom will review the financial results for the first quarter and provide an update on CIGNA's financial outlook for full year 2011.
We will then open the lines for your questions.
And following our question-and-answer session David will provide some brief closing remarks before we end the call.
Now as noted in our earnings release, CIGNA uses certain non-GAAP measures when describing financial results.
A reconciliation of these measures to the most directly comparable GAAP measure is contained in today's earnings release which was filed this morning unformed 8-K with the Securities and Exchange Commission and is posted in the Investor Relations section of CIGNA.com.
In our remarks today we will be making some forward-looking comments.
We would remind you that there are risk factors that could cause actual results to differ materially from our current expectations and those risk factors are discussed in today's earnings release.
Now before turning the call over to David, I will cover a few items pertaining to our first-quarter results and disclosures.
Regarding our results, I note that in the quarter we recorded an after-tax gain of $24 million, or $0.09 per share, related to the completion of an IRS examination which we reported as a special item.
I would remind you that special items are excluded from adjusted income from operations in today's discussion of our first-quarter 2011 results and full-year 2011 outlook.
Relative to our Run-Off operations, our first-quarter shareholders net income included an after-tax non-cash gain of $13 million or, $0.05 per share related to the Guaranteed Minimum Income Benefits business, otherwise known as GMIB.
I would remind you that the impact of Financial Accounting Standards Board fair value disclosure and measurement guidance on our GMIB results is for GAAP accounting purposes only.
We believe that the application of this guidance is not reflective of the underlying economics as it does not represent management's expectations of the ultimate liability payout.
Because of application of this accounting guidance CIGNA's future results for the GMIB business will be volatile as any future change in the exit value of GMIB's assets and liabilities will be recorded in shareholders net income.
CIGNA's 2011 earnings outlook, which we will discuss in a few moments, excludes the results of the GMIB business and therefore any potential volatility related to the prospective application of this accounting guidance.
Now regarding our disclosures, beginning this quarter we have made some reporting enhancements to our quarterly financial supplement.
Specifically we have included a new financial highlights page at the beginning of the supplement to provide investors and analysts with an executive level view into the revenues and earnings for each of our ongoing businesses, as well as provide a more comprehensive breakdown of the 66 million customer relationships we service across our ongoing businesses.
In addition, we have reorganized the supplement to get more prominence to the business segment income statement and related financial metrics.
We are making these reporting enhancements to provide investors and analysts with improved transparency into our diversified portfolio of global health service businesses.
And with that I'll turn it over to David.
David Cordani - President & CEO
Thanks, Ted, and good morning, everyone.
Before Tom reviews our results and outlook I'm going to take a few minutes to briefly comment on our first-quarter performance and then I'll spend some time profiling our US business.
More specifically I'll focus on how our approach to the market and how our capabilities position us for sustained profitable growth in the future.
So let's dive in.
Overall we're pleased with the results we delivered for the first quarter.
By way of backdrop, we delivered strong results in 2010, we set competitively attractive targets for 2011 and for the first quarter we've exceeded those targets.
We reported consolidated adjusted income of $375 million, or $1.37 per share, with earnings growth in each of our ongoing businesses and revenue growth of approximately 8%.
Our results continue to reflect strong execution of our growth strategy which, as you know, is to go deep, go global and go individual.
In delivering on our strategy we continue to demonstrate an ongoing commitment to drive value for our customers, clients and shareholders.
A common theme this quarter was growth, focused targeted growth across each of our ongoing businesses, using our go deep approach to drive crisp execution and deliver attractive results.
I would highlight very importantly that we grew while executing on the fundamentals of our business, including maintaining pricing discipline and providing strong clinical and service excellence.
I'm proud of the CIGNA team for delivering and our commitment again this quarter and we remain focused on delivering for 2011 as well.
(Technical difficulty) create value on a sustained basis, at CIGNA we put the customer front and center.
We recognize that the individual is the end-user of our programs and services regardless of how we access them.
Whether it's an individual in Seoul, Korea who has a hospital cash policy or it's a New York-based employee who has a medical plan through his or her work place.
CIGNA's clinical programs and service standards are all created and delivered with the individual in mind.
At our Investor Day in March we discussed the concept of enduring customer value.
This business opportunity, which we seek to own, will focus on the individual's customer needs.
And we will rise to meet those needs as they change throughout various life stages.
Now as I previously said, make no mistake -- our intent is not to be all things to all people; rather we will seek to meet individual's changing needs by going deep in targeted geographies and market segments, and by leveraging our growing global capabilities.
I'll come back to enduring customer value in a few minutes, but let me first set the foundation by highlighting two major aspects of our US business that allows us to win in the marketplace, provide differentiated value to our clients and that we believe will drive sustainable growth in the future.
The first piece is our consultative sales approach which is at the core of how we partner with our clients.
It's through this partnership that we deliver meaningful value to our clients and customers over time.
We recognize that to best serve our clients we must first listen to and understand their needs and then tailor solutions to meet those needs using our full range of medical, specialty, and productivity programs.
Today we have unique set of capabilities that we offer across all of our targeted employer segments.
And as I noted before, we match these with our clients' and customers' goals as they evolve over time.
This matching process is fairly intuitive, but I can assure you it's one that's not easy to replicate.
Consultative selling is not just a matter of having the right products, network, wellness programs or funding options.
These represent baseline capabilities today.
What truly sets us apart as a health service company from health insurance companies is aligning those capabilities with the specific needs of our clients.
For us the keys are -- our people, actionable information, our health and productivity programs and our commitment to service and clinical excellence.
Our approach is moving from selling products to engaging the clients to design programs to improve health and productivity, many of which are dynamic in nature.
I'll highlight just two components that I mentioned.
First, actionable information.
We excel at analyzing data on clients and prospective clients.
Their health profiles, productivity profiles, employee engagement levels, the effectiveness of communication programs, and the impacts of the incentives and disincentives.
We then match up utilization, quality and outcome indicators.
And now with all of that in hand we design, manage and evolve specific programs to generate superior service, quality and cost outcomes.
Let me provide an example to bridge to a second component of our success, our health and productivity programs.
CIGNA's Your Health First chronic care program is an industry breakthrough, moving from silo'd fractured engagement to whole person partnership, consultation and coaching.
As you know, chronic disease continues to grow.
Today up to 30% of the population are impacted by diseases including asthma and diabetes.
Our new program is a great example of innovation and consultation for the benefit of our customers and clients.
Early results indicate tremendous demand from clients and truly outstanding engagement and outcome levels for the most innovative customers and clients.
And by the end of the year we expect participation in this program to more than triple to over 1 million members.
We believe that this consultative partnership approach is especially critical in the current environment where several dynamics, including growing demand for personalized services, regulatory changes, continued economic and cost pressures, eroding health status and heightened transparency, will continue to shift the focus from sick care insurance to high-value health and productivity programs.
So in summary, our approach to consultative selling, coupled with our health, productivity and wellness programs, enables us to engage employers, individuals and healthcare professionals to drive better health, improve productivity and therefore lower costs.
The second major aspect of our US business success is our commitment to choice, transparency and quality.
As an example, I'll use our broad and proven experience with ASO, or self-insured programs, to demonstrate how we leverage choice, transparency and quality to deliver differentiated results over time.
I would note that when we harness the power of our consultative selling approach our ASO programs have consistently benefited from very good adoption rates with our specialty healthcare programs, including pharmacy, behavioral and dental.
And over the last few years we're seeing more and more interest in programs that lever information, integration and incentives to take customer engagement to a higher level.
As a result the individual takes even more ownership in driving improvements in his or her health.
For example, take our CIGNA Choice Fund offering, which represents our consumer directive programs, most of which are fully transparent ASO programs.
Here levels of employer participations have doubled over the past two years.
And we've demonstrated that these programs deliver results.
As we've discussed before, results from our five-year Choice Fund study show that when individuals are more engaged levels of preventive care go up, many gaps in care are closed and costs come down.
That's right, health improves and costs come down.
I'll give you another example of our innovative clinical solutions that set CIGNA apart.
Our integrated Personal Health Team is a program that combines all clinical management resources for the needs of the healthy, the healthy at risk, the chronic and those with acute conditions to the needs of those who are actively employed to those who are disabled, and it combines them into one single team so that our customers have one point of contact.
Powered by the right programs, staffed with the right people and enabled by transparent information and incentives we've been able to increase individual engagement through personalized coaches that leverage touch points between the individual customers and their healthcare professionals.
This engagement is all about connecting individuals to the right programs that will meet their specific health needs.
For example, within this program 72% of individuals with chronic conditions were identified for additional health improvement opportunities -- 72%.
As for clinical results, participation in CIGNA's integrated Personal Health Team is improving health outcomes and resulting in lower costs.
In these programs we're seeing a 12% reduction in specialty office visits, a 2% decline in overall hospital admissions, and better clinical compliance.
For example, a 10% improvement in blood glucose testing for obese individuals.
Not to recap, to appreciate the power of our ASO or self-funded model one has to recognize that our model is not just a financing vehicle, it's a value delivery system anchored in integrated programs and services.
As a result we continue to drive retention levels of approximately 90% across all our segments.
We're delivering good organic membership growth in targeted geographies and market segments and we continue to drive attractive cross-selling results.
More broadly, our ASO model has been tested and has delivered solid results in times of accelerating and decelerating medical cost trends, in thriving economies and in weaker economies, and in environments of revelatory change.
Looking forward we see even more demand for ASO programs with advanced engagement and incentive programs along with very targeted integrated specialty and productivity programs.
As employers respond to economic pressures and regulatory changes the commercial marketplace will continue to evolve.
Employers will continue to switch from less transparent fully insured programs to more transparent ASO arrangements.
We've already seen a healthy appetite for this shift.
For example, within our Select segment the proportion of sales in self-funded arrangements has increased substantially and now represents over 50% of our new business.
In this environment we continue to seize on the opportunity given our philosophical commitment to choice, transparency and quality, our unique capabilities and differentiated approach to consultative selling across all of our customer segments.
So overall we have a proven track record of success in the US businesses.
Our customer centric model is anchored by a consultative sales approach and an integrated solution set that is focused on improving health and productivity.
And this approach will remain key to our current business segments.
As we look to the future we will continue to expand on the very personal relationships we are building with our customers and we will further accelerate our focus on providing enduring customer value.
We believe this will be an important differentiator as individuals continue to assume more responsibility and as exchanges are offered in 2014 and beyond.
At CIGNA we fully recognize that the development of the exchanges is currently a fluid process and several items remain unclear including the breadth of adoption in states, the business models, and the subsidy levels given the state and federal budget pressures and deficit challenges just to name a few.
Now a perfect clarity around these items does not exist; at CIGNA we continue to actively build and leverage our growing individual relationships and global capabilities, particularly in our health, life and accident business, which gives us significant experience in direct to consumer distribution as evidenced with almost 7 million policies in force.
Product and distribution innovation is at the core of this business and we believe it will serve us well in the US in a post-2014 environment.
Now before I turn it over to Tom I want to reiterate just a few points.
Our first-quarter results are strong and reflect continued affected execution of our growth strategy and they build on a strong 2010.
I'm proud of what the CIGNA team has delivered and how we work every day to improve the health, well-being and sense of security of the individuals we serve.
I'm confident in our ability to achieve our full-year 2011 strategic financial and operating goals.
And finally, our company is positioned for sustained profitable growth over the long term as we seek to provide enduring customer value in this very dynamic marketplace.
With that I'll turn the call over to Tom.
Tom McCarthy - Interim CFO
Thanks, David.
Good morning, everyone.
In my remarks today I will review CIGNA's first-quarter 2011 results, link these results to our growth strategy, and provide an update to our full-year outlook.
In my review of consolidated and segment results I will comment on adjusted income from operations, this is shareholders net income excluding realized investment results, GMIB results and special items.
This is also the basis on which I will provide our earnings outlook.
Our first-quarter consolidated revenues grew to $5.4 billion.
This is an increase of 8% over the first quarter of 2010 after excluding the impact of our planned exit from the individual Medicare private fee-for-service business and reflects solid growth in each of our targeted market segments.
Our first-quarter consolidated earnings were $375 million, or $1.37 per share, which represents an increase of 33% and 36% respectively over the first quarter of 2010.
These results reflect the strength of our global diversified portfolio of businesses and continued solid execution of our growth strategy.
In healthcare first-quarter 2011 premiums and fees grew 6% on a quarter-over-quarter basis, excluding the impact of the exited business.
This reflects continued membership growth in our targeted customer segments and increased specialty penetration.
First-quarter earnings for healthcare were $246 million including the impact of favorable prior-year claim development and sustained growth.
We reported year-to-date membership growth of approximately 1% adjusting for the planned nonstrategic exits reflecting strong demand for our ASO products and continued growth in the targeted middle market and select customer segments.
In these segments, as David mentioned, we also benefit from integrated sales of our specialty products which deliver a strong integrated value proposition to our customers and also contribute attractive margins.
Turning now to medical costs, in the quarter we continued to deliver attractive medical costs and sustained clinical quality for our clients and customers.
Medical costs also reflect the impact of the sector-wide low level of medical utilization trends.
Across our risk book of business our first-quarter medical costs included favorable prior-year claim development of $22 million after-tax.
Specific to guaranteed costs, our medical care ratio, or MCR, was 77.3% on a reported basis or 80.2% excluding prior-year claim development.
This includes the effect of recording the first-quarter rebate accrual related to the minimum loss ratio requirements.
Results to date in our risk businesses continue to reflect good pricing and underwriting discipline.
ASO results in the quarter reflect continued mentorship growth, particularly in the targeted middle market and select segments, and strong contributions from our specialty businesses with ASO fees up 6%.
Our alternative funding solutions are receiving increased interest from clients and we expect they will be attractive to a growing share of the employer market.
We also believe our consultative selling approach combined with our diversified portfolio and focused on choice, transparency and service and clinical quality positions us well to meet the evolving health needs of customers and clients.
As part of our long-term strategy, we continue to focus on improving our operating expenses through a combination of expense efficiencies and business growth while maintaining our commitment to strong service levels and clinical excellence and funding strategic investments.
For the first quarter of 2011 medical operating expenses were slightly down versus the first quarter of 2010.
We reported a total operating expense ratio in the quarter of 27.1%, which is 20 basis points lower than in the same period of 2010 after excluding the exited business.
Now I will discuss the results of our other segments.
Within the group Disability and Life segment results in the quarter were strong overall as this business continues to deliver attractive margins while providing value to our customers and clients through our differentiated disability management model.
Premiums and fees grew 4% quarter over quarter including 9% growth in our disability business, a key area of focus in our growth strategy.
First-quarter earnings in our group business were $77 million.
This includes the impact of favorable life and accident claims experience as well as a net favorable impact of $6 million after-tax related to a reserve study completed during the quarter on our group life business.
Turning now to the International segment, this business continues to deliver very attractive growth and strong margins as we continue to execute our strategy and capitalize on both the expanding global middle-class and the increasing market for expatriate benefits.
Premiums and fees grew 32% quarter over quarter driven by strong customer retention and solid new sales within the health, life and accident and expatriate benefits businesses, including contributions from Vanbreda International.
This top-line growth drove very strong earnings of $77 million in the first quarter.
I would note that our first-quarter 2010 results included a favorable adjustment of $5 million after tax related to the implication of a capital management strategy.
Results for our remaining operations, including Run-Off Reinsurance, Other Operations and Corporate, totaled to loss of $25 million for the quarter.
This includes breakeven results for Run-Off Reinsurance.
To recap, our first-quarter results were strong reflecting solid revenue and earnings growth from each of our ongoing businesses.
Turning to our investment portfolio, results in the quarter included a strong net investment income result and net realized investment gains of $17 million after tax.
There were no investment impairments recorded in the quarter and our commercial mortgage loan portfolio continues to perform well.
Overall we continue to be pleased with the quality and diversification of our investment portfolio.
Our strong investment management capabilities and disciplined approach to risk management have delivered attractive risk-adjusted returns for our clients and shareholders.
Before I shift to our earnings and capital management outlook I would note that operating cash flows for the first quarter were impacted by a few items including claim run out from the exited private fee-for-service business and an accelerated pension plan contribution.
Now turning to our outlook.
Based on the strength of our first-quarter results we now expect full-year 2011 consolidated adjusted income from operations of $1.275 billion to $1.365 billion.
This range is $75 million to $85 million higher than our previous expectations and reflects an increase in outlook for each of our ongoing businesses.
We now expect full-year earnings per share in the range of $4.65 to $5.00 per share, which is an improvement of $0.30 to $0.35 per share over our previous expectations.
This earnings per share outlook does not include the impact of future share repurchase activity.
I will now discuss the components of our 2011 outlook starting with healthcare.
We now expect full-year healthcare earnings in the range of $860 million to $900 million which is an improvement of $40 million to $60 million from our previous expectations.
This improvement reflects the favorable prior-year claim development recognized in the first quarter and continued effective execution of our growth strategy.
We remain on track to deliver a full year total healthcare operating expense ratio of 26.5% to 27% and medical operating expenses of $235 to $240 per member per year while continuing to invest in technology and service capabilities to support ongoing growth.
Relative to medical membership, we expect full-year 2011 membership growth of 1% to 3% excluding the non-planned -- the planned nonstrategic market exits.
I would also reinforce that new business pricing and the renewal rate actions we are obtaining as we grow business are consistent with our expectations.
Turning to medical costs, for our guaranteed cost book of business we now expect the full-year MCR to be in the range of 81% to 82%, which is 100 basis points lower than our previous expectations and includes the benefit of the first-quarter prior year claim development.
We expect our full-year medical cost trend for our total book of business to be in the range of 6% to 7% which is 100 basis points lower than our previous range.
Now moving to the other components of our outlook, we expect full-year earnings from International to be in the range of $275 million to $295 million, which is a $15 million increase over our previous range.
Regarding Disability and Life business, we expect full-year earnings to also be in the range of $275 million to $295 million, which is $5 million higher than our previous expectations.
The outlook for our remaining operations, including Run-Off Reinsurance, Other Operations and Corporate, is expected to be a loss of approximately $125 million to $135 million.
This assumes breakeven results for the full year for VADBe.
So all in, for full-year 2011 we now expect consolidated adjusted income from operations of $1.275 billion to $1.365 billion and consolidated earnings per share in the range of $4.65 to $5.00 per share.
I will now discuss our capital management position and outlook.
We continue to have a strong balance sheet and good financial flexibility.
Our subsidiaries are generating significant free cash flow to the parent reflecting the strong return on capital in each of our ongoing businesses.
Regarding parent company liquidity, we ended the quarter with cash and short-term investments at the parent of $790 million.
During the first quarter we repurchased 3.9 million shares of CIGNA's common stock and we subsequently repurchased an additional 1 million shares through May 4.
Year to date we have repurchased 4.9 million shares of stock for approximately $210 million.
As discussed at our Investor Day, during the first quarter we funded an incremental $150 million to capitalize our Arbor subsidiary in support of our Run-Off Reinsurance business.
This brings our year-to-date capital deployment to $360 million.
For full-year 2011, after considering subsidiary dividends, pension contributions and other sources and uses, we continue to expect to have approximately $1.1 billion available for capital deployment to deliver sustainable value for the benefit of customers and shareholders.
This provides us with $740 million for deployment over the balance of the year after considering the $360 million already deployed.
Our capital deployment strategy remains unchanged.
We will prioritize our capital to -- first, provide the capital necessary to support the growth of our ongoing operations, our pension plan funding and our Run-Off Reinsurance business.
Second, we would consider M&A activity with a focus on acquiring capabilities and scale.
And finally, after considering these first two items, we would return capital to investors primarily through share repurchase.
As we look to the future we will continue to evaluate each of these levers to ensure we deliver sustainable value for the benefit of our customers and shareholders.
Overall our capital position and outlook remain positive.
Now to recap -- our first-quarter 2011 consolidated results reflect the strength of our global diversified portfolio of businesses, our focus on enduring customer value and continued effective execution of our growth strategy with solid revenue growth in our targeted customer segments.
We are focusing on improving our financial flexibility through ongoing cost reduction efforts and effective capital deployment.
We have a healthy capital position and our investment portfolio is delivering strong results.
Finally, we are confident in our ability to achieve our full-year 2011 earnings outlook.
With that we will turn it over to the operator for the Q&A portion of the call.
Operator
(Operator Instructions).
Matt Borsch, Goldman Sachs.
Matt Borsch - Analyst
Thanks, guys; good morning.
Could you just talk about what you see in the pricing environment to the extent you can separate both the risk side and the ASO side?
And specifically your own pricing, which a couple of competitors seem to feel is aggressive, although frankly on the risk side the enrollment results wouldn't suggest that.
David Cordani - President & CEO
Matthew, good morning, it's David.
From a broad standpoint, from a pricing environment we don't see any change -- any material change in the environment.
So it is indeed a competitive marketplace, it remains a competitive marketplace, and we think the real premium in the marketplace is really on focus and discipline.
My second point would be if you look over the last two to three years our pricing discipline and the consistency of our retention, pricing execution and rate execution has been quite good.
And my third point would be around the notion of focus.
Our progress heretofore has been really around the go deep strategy which is focusing on key geographies and buying segments.
And overall from a CIGNA standpoint, we're pleased with both the rate execution, the success of our cross-selling initiatives and the resulting retention rates and new business sales we've been able to secure.
So the overall marketplace from our point of view is competitive and the quality of what we've been able to secure is quite good.
Matt Borsch - Analyst
Okay, great.
And just as a follow-up on the cost side, where did you see the utilization or unit price lower than expected in the first quarter?
And are you carrying any of that through to your outlook for the back nine months of the year?
David Cordani - President & CEO
Matthew, it's David.
I'll start broadly and ask Tom to embellish more specifically.
From the -- going to the medical cost side and the cost contracting utilization side.
First and foremost from a, I'll call it, contracting standpoint, the contracts we've been able to secure thus far for 2011 are in line with our expectations.
And I see that more again of a consistency of what we were able to secure in 2010.
Our ability to focus, our ability to partner with physicians and hospital systems, our ability to lever information and incentive alignment is working for us in the marketplace.
To your more specific question, I will ask Tom to embellish on, yes, there is again continuation of a slight dampening of the overall utilization trend.
And I will ask him to embellish upon that a little bit.
Tom McCarthy - Interim CFO
Yes.
So, Matt, as David mentioned, the medical services utilization trend did remain low in the first quarter.
There was some normalization of flu activity.
Again, first-quarter 2010 was extraordinarily low, so we got to generally more normal levels there.
But we are anticipating that normalization -- that utilization would normalize, begin to normalize, over the balance of the year.
So I would expect to see some uptick there, but the first quarter continued at the low trend level that we saw earlier.
Matt Borsch - Analyst
Thank you.
Operator
Josh Raskin, Barclays Capital.
Josh Raskin - Analyst
Hi, thanks.
Good morning.
Question relates to the outlook in the healthcare segment.
Just looking at the first quarter, healthcare earnings were up almost 50%.
And even if you take out the development, it was still almost 35%, and yet the guidance for the full year is sort of flat to up maybe 5%.
So I was wondering what are some of the drivers of that seasonality.
And maybe you could touch on, has there been -- was there sort of outsized impact or is there an expected impact of rebates being larger in the second half?
And I guess I'd be surprised just based on the accounting you guys are choosing for the rebates.
Tom McCarthy - Interim CFO
It's Tom, Josh.
Yes, so first your last observation; I wouldn't point to the rebate dynamic as a factor in that.
First, there are a lot of moving pieces and, again, we have provided a range and you could annualize the results and get close into that range.
But really there are two major drivers that I'd point to in considering the balance of the year.
One we've already talked about a little bit and that's we are expecting a little uptick in the utilization trend, so that would put some pressure in the last half of the year.
And second, we do expect some seasonality from the detectable impact on the book of business.
And again, we've had more sales of the types of products that have higher deductibles so we'd expect to see a little bit more of that in the last half of the year.
That said, this is a range of results and we hope to end up at the higher end, but it's a little early to be making a call on that.
Josh Raskin - Analyst
Well, I guess maybe let me ask another question.
The expectation around seasonality or even the uptick in utilization.
If you take the first-quarter run rate, you take out development, you assume a full-year, it's almost $900 million.
And if you look historically the first quarter has been a weaker quarter.
So is there something that's changed or is this just really more around we're expecting normal utilization in the next three quarters?
David Cordani - President & CEO
I don't think there's anything fundamental that's changed.
I think it really is just the moving pieces in the dynamics for the business.
And obviously medical trend has been a key factor over the last few quarters.
Josh Raskin - Analyst
Right, right.
And I'm sorry, just on the rebates, just to follow-up.
Are you guys still accruing sort of as experienced or sort of actual as opposed to sort of a year-to-date method?
David Cordani - President & CEO
Yes.
Josh Raskin - Analyst
And was that material in the quarter or --?
David Cordani - President & CEO
Well, in the first quarter we accrued $10 million based on the actual results and that's generally -- $10 million after-tax, and that's generally in line with our expectations.
And going forward we're not really anticipating any significant surprises.
I probably would rather not get into commenting on the full-year outlook given there are so many moving pieces, but again, we're not expecting any surprises.
Josh Raskin - Analyst
Okay, that's perfect.
Thanks.
Operator
John Rex, JPMorgan.
John Rex - Analyst
Thanks.
I just wanted to come back again to the percent of self-funded fees that are [risk].
It's just one of these persistent market commentary factors that we can't seem to kill, so your competitors talking about this.
So can you maybe approach it this way -- is there some way that you think is distinct/unique about how you're approaching new business that perhaps the market is misperceiving?
Just because you have a [five], like the percent of your fees at risk, I think you said 12% and that's kind of in line with what we had seen in general in the market.
I'm trying to understand why this thing stays alive so consistently.
David Cordani - President & CEO
Good morning, John.
Well, let me -- a few comments here.
First and foremost, as you very well know, the bulk of our business, 80% of our business is ASO.
We understand that business, we've understood it for quite some time and we expanded the capabilities through the Great-West acquisition to be very successful in the Select segment with that portfolio.
Two, as you know, a key part of our strategy has been and continues to be to lever a very broad suite of specialty programs and services and go to the market with a bundled offering.
And third, to my prepared remarks, we tried to tease out really a bit of a differentiator here and that's the consultative selling.
So it's not an environment where you go through and try to push product, rather you try to use information specifically tailored to that customer's experiential set, business strategy, understanding their culture and make targeted recommendations on which subset of a specialty product suite makes sense.
And it's when you put that package of offerings together that we believe we're able to demonstrate a very good value proposition for the client and their employees, our customers, and then engender a good return from the shareholder perspective.
To your specific points, you're correct, you have a great memory.
Our percent of fees at risk have been and continue to range in the 10% to 15% range.
Being a long-standing player in the ASO space there have always been fees at risk ranging from basic service and client management to clinical engagement to medical trend components and I'll put the number back out there.
Our fees at risk as a percentage of total fees on medical trend are about 1%.
So we're comfortable with where we are for this portfolio.
It is a dynamic marketplace, but we believe our focus and the diversity of our both funding solutions and specialty products are servicing us well and will in the future.
John Rex - Analyst
Okay, and when you -- you spiked out the Select segment, so I think it was the 50 to 250 segment in terms of where 50% of your new sales are ASO.
Can you tell me -- so when you get down to that level, that small of a case size, does it really behave much differently than an at-risk, a full at-risk product?
I would assume at that point that these stop-loss PMPMs that you're selling through also, you get to a point where kind of the premium, the at-risk component for -- the average premium is not that different than a fully insured product.
Is it that different?
David Cordani - President & CEO
Well, first and foremost, when you look at that segment, you hear me say over and over we're not trying to be all things to all people.
Number one, we're not pretending that the ASO stop-loss solution is the perfect solution for every employer in the 50 to 250 space.
So focus and segmentation is very important there.
And a part of that is partnering with the right brokers in a market to identify those employers who are oriented around these types of solutions who want transparency and want to more align incentives.
Now to your more specific question, on an all-in basis when you look at the revenue contribution to us, the revenue contribution is slightly less but not acutely less than a guaranteed cost piece of business.
When you look at the margin and the return, the margin and the return is attractive and, very importantly, to the employer and then to their employees.
It's a better overall kind of price point and more transparency in terms of what's moving the medical cost.
So again, we understand the funding mechanism, we understand that market, we're focused on key geographies and we're seeing increased progress in that 50 -- 51 to 250 life employer segment.
John Rex - Analyst
Great, thank you.
David Cordani - President & CEO
Thanks, John.
Operator
Justin Lake, UBS.
Justin Lake - Analyst
Thanks, good morning.
First, just wanted to talk about the experience rate book, see if you can give us any color on what the MLR looked like in the quarter and maybe compared to the previous year?
And then given the decline in trend, I thought it might be helpful [on this book] to get an update in terms of maybe the percentage of accounts and deficit position and total dollars of deficits versus the year ago period.
Tom McCarthy - Interim CFO
Sure, Justin, it's Tom.
Just a couple of things.
We don't generally disclose the specific loss ratio and experience rated, but I can tell you that, like the rest of the book, it is down a little bit, so there are no surprises there.
To your more specific questions, we continue to have a little less than 40% of the accounts in deficit, that's consistent with what we've had over the last few quarters.
And the deficit amounts actually declined a little bit; they were $138 million at year end and they're now down to $126 million.
Justin Lake - Analyst
Okay, great.
Tom McCarthy - Interim CFO
(multiple speakers) with our expectations.
Justin Lake - Analyst
Great.
And then just a quick follow-up on the question around fees at risk.
Would it be fair to say that the -- where you are willing to maybe put fees at risk around medical cost trends, that typically in the large end of the national account segment?
David, maybe you could just give us an idea -- what I hear from consultants is that there is a kind of dividing line between the true -- the larger side of national accounts where they might be able to negotiate those fees at risk around medical cost trends and then kind of the more middle-market or smaller end of national accounts.
Is that right?
David Cordani - President & CEO
Good morning, Justin.
For us really the dividing line in the limited number of cases where we would do that is less size -- I'll come back to size in a moment -- and it's more the philosophy and the comprehensiveness of the programs, the transparency of the information, our understanding of the case and then the kind of commitment to a multi-year approach.
So let me just expand on that for a moment.
So if you have an employer, and I'll give you two examples, whether it's a 20,000 life employer or a 150,000 life employer, there is an opportunity, if necessary, to put in place a more sophisticated guarantee.
As I noted before, they're very limited in our portfolio.
But if you have good visibility, whether it's an incumbent account or a new prospect, in terms of their underlying health profile, utilization trends and adequate access to all the levers necessary to generate a superior outcome, engagement, incentive, communication, network configuration, etc., that presents the opportunity.
Now to your hypothesis, that typically would take place with a larger on average case.
But I would just limit you not to think, it's not just a 250,000 life employer who might approach you with something like that.
It's an employer who again is much more sophisticated looking at a multi-year run going forward.
Most importantly for us, it's a very limited use tool and it would be employers that we have a deep intimacy of knowledge of.
Justin Lake - Analyst
Maybe a different way to put a number on the question would just be to say maybe you could give us the number, or the percentage, I should say, of your ASO membership that has an explicit guarantee around medical cost trends?
David Cordani - President & CEO
Yes, Justin, I'm not going to frame it that way because to my mind it's not as relevant of a data point, in all due respect.
As I noted, it's about 1% and has been about 1% of total fees at risk, number one.
Number two, we've been in this business for a very long period of time.
Three, you would assume that they're designed with kind of corridors and parameters.
And finally, knock on wood, we have a track record and a history of limited impact to us of those programs.
So what's important about that is it means we're delivering on our promise to our clients, which is what the objective is.
A client does not want to collect on a guarantee, [unless] we want to pay out on a guarantee, we want to deliver on that promise.
But I would anchor you back to it's a small portion of the portfolio as best measured in 1% of total fees at risk.
Justin Lake - Analyst
Okay, great.
Thanks.
Operator
Scott Fidel, Deutsche Bank.
Scott Fidel - Analyst
Thanks.
I wanted to see if you can give us an update on how the M&A pipeline is looking at this point?
You've got $740 million of capital remaining here for deployment and now you're probably pretty deep into the integration of Vanbreda.
So clearly there's been some commentary in the market of increased interest among some of the smaller and midsize plans in both the ASO and risk side in terms of looking to -- for profits for consolidation.
So just in that context if you can talk about the M&A pipeline and where your priorities for acquisitions would rest at this point?
David Cordani - President & CEO
Good morning, Scott, it's David.
First and foremost by way of backdrop, as we've said before, we expect the marketplace to continue to have consolidation opportunities.
And two, we approach that environment with a view that we actually like our current portfolio, the diversity and breadth of our portfolio.
Having said that, as you recall, part of our strategy when we rolled out our strategy at Investor Day a couple years ago, was to drive acute focus through the go deep part of our strategy, but also to identify additional growth opportunities.
And we would be open to M&A to support that.
By way of types of acquisitions we'd be attracted to, you could put them in two camps.
One would be scale, so further scale to support our go deep strategy.
The second would be capabilities.
In capabilities we think about product capabilities or segment capabilities.
Product capabilities could be further broadening our supplemental suite of offerings or further broadening the breadth of product solutions within our health, life and accident portfolio abroad.
By way of segments you could think about broader capabilities for seniors.
I would note that over the past year, several years we have a good track record of being very focused and very targeted.
Whether they be smaller acquisitions like some of the tuck-in health advocacy acquisitions we've been able to secure, what we would call medium-size acquisitions like the very attractive Vanbreda asset, or the targeted large-size acquisitions like our successful integration in building on of a Great-West.
So we do see a consolidating marketplace out there and we do see opportunities both in the scale and capability space.
Scott Fidel - Analyst
Okay.
And then just wanted to ask a follow-up question just on the pharmacy business.
It looks like enrollment declined by around 5% year over year and enrollment in the overall book of business expanded by around 1% and you did have growth in all your other specialty businesses.
So just wanted to get a sense of how confident you are that you can think you can get the pharmacy business back to growth in 2012.
And if not, are you still willing to consider strategic options for the PBM at this point?
David Cordani - President & CEO
Scott, it's David again.
So relative to the PBM, we continue to view it as a very valuable asset and an important part of our ongoing integrated value proposition.
We have seen good success and expect to continue to see good success with our Select segment customers, with our middle-market customers.
And for the larger employers, those oriented around incentive and engagement-based capabilities.
Now we do believe that there are some additional value creators here, for example, in the space of specialty pharmaceuticals and the ability to both coordinate that specific to specialty, but also increasingly within the medical benefit portfolio.
And we're open to targeted opportunities to further accelerate our ability to capture that value.
My final comment would be, to your broad point, as we repositioned our national account portfolio, the expected loss in national account medical life has also correlated to a somewhat directional loss in the PBM lives.
And looking forward as we are oriented around Select, middle and those national account customers that orient around engagement and incentive, we think you'll see a little different pattern in the PBM life on a go forward basis.
Scott Fidel - Analyst
Okay, thank you.
David Cordani - President & CEO
Thanks, Scott.
Operator
Charles Boorady, Credit Suisse.
Charles Boorady - Analyst
Thanks, good morning.
My question, like a few others, relates to the self-funding of small employers with stop-loss.
You've been accused by competitors of under pricing in that product and we heard a few questions today related to that.
But when I talk to brokers about it who actually sell the product, they say it's actually apples and oranges because it's inherently a less expensive product and that's why it can be priced lower.
So is that correct?
Is it inherently a less expensive product?
And if so, where is that savings or arbitrage coming from?
Is it that the employer is basically accepting more risk in those arrangements?
David Cordani - President & CEO
Charles, I'll start and see if Tom wants to add.
Good morning.
First and foremost I think you hit the nail on the head broadly.
At the end of the day, let's leave the Select segment for a moment and go into the history of the bread and butter middle market segment.
An apples-to-apples comparison of a guaranteed cost offering versus an ASO stop-loss offering has a different aggregate price point, it fundamentally does.
And inherent in that it's a more transparent product, it has a little different risk sharing protocol.
Now as you go down-market the risk sharing shifts a little bit, but the employer is taking on a bit more accountability for that risk, which is why, to my prior answer, this product is not all things to every employer in the Select segment.
That consultative selling, that working very collaborative with a broker and making sure we're pinpointing those employers that it indeed makes sense for is very important.
But what you're doing is you're taking a bit of the risk premium out of the equation.
And for us, we like the overall return on that product portfolio because, number one, we understand how to do ASO and stop-loss; but number two, it's highly packaged with our broad portfolio of specialty capabilities.
So on an all-in basis we get a good value proposition for the employer, we feed it with ongoing transparency of information, even for a 100-150 life employer that historically they would not see and you treat that portfolio of services in a bit more dynamic way going forward, but your macro-conclusion is the right one.
Charles Boorady - Analyst
All right, great.
Tom McCarthy - Interim CFO
I'd just pile on a couple things there, Charles, just to state the obvious.
Obviously with the employer taking more risk that means less risk for us, that means less capital deployed against the business.
And in fact the dynamics at work here are the risk charge in dollars is less because we're taking less risk, so that's a benefit to the employer, of course they're taking a risk.
But the margins and the return on capital are actually higher.
So it's an attractive opportunity for us.
The other thing I would point out, that customers that select this kind of program tend to be the kind of customer that are willing to try and attack medical costs.
So it, again, aligns our interest and positions people to want to take advantage of the capabilities we offer and that doesn't always happen in this segment.
So we, again, have a good alignment of interests.
Charles Boorady - Analyst
Your competitors, by the way, are less vocal about your under pricing and one of them just announced an acquisition to get into this business as a testament to how well you're doing and the strategy.
My second question is, are there any -- then are there any statutory or regulatory limits to the amount of stop-loss you can provide before an insurance commissioner would say this quacks like a duck and therefore it's an insured product and starts to regulate it as such?
David Cordani - President & CEO
Charles, the broad answer is yes.
And again, this product portfolio which we've built on off of the Great West acquisition is a state-by-state approach.
The important framework is it's state-by-state, it feeds up against our go deep strategy and, most importantly, it's highly transparent.
So the overall nature of the program, both with the regulators as well as with the employers, is highly transparent.
And we treat it as a dynamic portfolio.
But the broad answer to that is yes.
Charles Boorady - Analyst
Okay, terrific.
Thanks and congrats on great execution on that strategy.
David Cordani - President & CEO
Thank you, Charles.
Operator
Ana Gupta, Sanford Bernstein.
Ana Gupta - Analyst
Hi, thanks, good morning.
Just again to follow up on the (inaudible).
When you saw the Prodigy acquisition can you give us your perspective?
You did one way at back when; compared to Great West what were your thoughts at the time you acquired Great West and then after Aetna did?
David Cordani - President & CEO
Good morning, Ana.
Well first, on the broad topic of consolidation, as I referenced I think to Scott's prior question, we think the marketplace is going to continue to consolidate.
So before I get to more specifics, the capabilities necessary to compete and deliver a health improvement, a productivity improvement, deal with regulatory compliance, invest in the technology, etc., we think are all going to be fuel to further consolidation, number one.
Number two, not to speak about a different asset, but to speak more specifically about what we did with Great West, I would not compare Great West to a TPA in any way, shape or form.
Our attraction to Great West was we saw a well run highly focused business that had deep and broad talent that was based on a model that we believe was correct, which was information based, consultative and highly transparent.
So our orientation around Great West was we did not see, nor do see it as a TPA.
We saw it as a set of capabilities that was successful in the lower end of the middle market, clearly it had some success in the higher end of the middle market.
But also in the Select segment by doing what we were doing in national accounts in the higher end of the middle-market which was to use information, to be very targeted, to be very consultative, to partner with brokers and try to deliver value.
And that infrastructure, the information infrastructure, the talent, the products, the distribution was what was attractive to us.
And those types of assets don't come along every day.
So our select segment's success I think demonstrates that we're able to successfully build on that.
And as we look to future acquisitions we will look to capabilities like that that we believe we can build upon.
Ana Gupta - Analyst
And then looking forward into 2012, are you seeing an uptick in interest?
There seems to be a lot of controversy.
The brokers tell me that there is a fair bit of uptick in employer's interest to try to avoid the excise taxes and so on getting into 2014.
But your peers are not all aligned on that.
David Cordani - President & CEO
Yes, just broadly on 2012.
So our view into 2012 right now is both I would say tone and posture in direction with brokers and more of the middle-market employer and early dialogue with Select segment employers.
And clearly we're in the early innings of the national account buying season.
Ana, I wouldn't put it in the category of excise tax.
I don't think that is the fuel that drives the current market posture.
The fuel that's really driving the market posture is no matter how we slice it we have an environment where there's a lack of affordability for employers, for state governments, for the federal government, and for individuals.
And more than ever we see buyers, and in this case employers, more open to different solutions that will help to mute or dampen the rate of medical cost acceleration and they're approaching the conversation with much more openness to different tools, it could be ASO where ASO didn't exist, it could be incentives where incentives didn't exist, it could be incentives and disincentives, on-site clinician, etc., that's really the environment we see.
And if you look at, for example, I'll end with the emergence of our national account pipeline for 2012, the percent of the business we're looking at that has incentive-based engagement-based wellness- and productivity-based solutions is much higher than we've ever seen before.
So we think that's the continuum of what's happening in the marketplace as we're able to post success with good value there.
Ana Gupta - Analyst
Just to wrap it up then, to your earlier commentary around exchanges, you are now a year into Reform, are you seeing a change in employers?
Do they feel more empowered to address all those affordability concerns with things like Great West?
Or are they just throwing the towel and saying, hey, I'm just waiting for 2014 and I'll dump my workers in there?
David Cordani - President & CEO
Yes, Ana, relative to the exchange environment, clearly a dynamic environment and a lot happening in the marketplace.
As I noted in my prepared comments, there's also a lot of uncertainty that remains as each individual state goes through their own preparatory process to configure exchanges.
Secondly, I think what employers are doing broadly speaking is recognizing that there are very few silver bullets in life.
And in the case of healthcare costs, exchanges as well don't present per se a silver bullet.
I might exempt from that under 50 life employers where you might see a broader appetite relative to the exchanges.
So what we do see is a broader appetite to learn what a post exchange environment would look like.
A broader appetite to put in place a multi-year benefit strategy, to afford employers options, options to broaden their incentive-based programs, options to potentially look at more defined contribution-based strategies over time, options to be in position to consider exchanges down the road to the extent they're vibrant.
But I've seen less of an interest or desire to unilaterally view that 2014 is an immediate step-out function for large- and medium-sized employers.
Operator
Christine Arnold, Cowen and Company.
Christine Arnold - Analyst
Hi, there.
As we continue to kind of go downstream, and some of these products look a little bit more like fully insured, even though they're self insured.
Can you help us understand what you look at in order to predict medical trend?
It seems like you're anticipating an uptick in trend but not seeing it, so confirm that.
And what are your leading indicators here?
And also could you give us the prior period development by product?
David Cordani - President & CEO
Christine, let me start on the macro and then I'll ask Tom to talk about some of what we look at, the prior period development, etc.
I heard your question two different ways in terms of what we look at to predict trend down market and then what we look at to predict the utilization indicators.
I'm going to go more broadly, as we work with employers as I referenced in my prepared remarks, we look at a lot of information.
When we have dedicated teams around our national account book of business or middle-market book of business and our Select book of business that are mining data on a regular basis to understand what are the utilization patterns, what are the health risk profiles, what are the network-based consumption profiles and how do they align with our forward-looking projections.
Our ability to project that over the recent few years has been pretty good, pretty consistent.
And our rate execution that supported that has also been pretty good and pretty consistent.
As it relates to looking forward from a utilization standpoint, I'll transition to Tom, but what we have seen is a -- throughout 2010 and early 2011 a little bit more of a dampening of the rate of acceleration and utilization and we've just been cautious relative to that, not being able to pinpoint any one cause as to why it will remain there.
So our forward-looking projections are assuming a little bit of an uptick.
And with that I'll transition to Tom.
Tom McCarthy - Interim CFO
Yes, Christine, the question was really focused on how we price the lower level accounts, I'd just point out that in our typical ASO model starting at the largest accounts we rely heavily on the accounts experience.
And as we continue understanding -- the account loss experience -- and as we continue to move down in size we've given a blend of understanding the account loss experience and our overall book of business.
So when you get to smaller accounts you can't necessarily rely on their experience as much, but it's still a factor.
So it's a wide range of things that we would look at.
And again, it reinforces back to the transparent model, understanding the results, understanding what the client might have been in, what networks are they coming to and all that kind of stuff.
As far as what we look to for indicators of the future in utilization trend, well that's a really interesting question.
Obviously we have an awful lot of data that we can track in the recent past and we certainly mine that to try and understand what dynamics we're seeing and, again, looking at the components inpatient/outpatient pharmacy professional.
More likely though we're going to be looking -- we're going to be making judgments on whether in fact some of this impact was related to the economy or just a change in consumption pattern and be looking for indications along those lines either to validate or refute any of those theories.
And as we pointed out, our expectation is that we would expect utilization to continue -- to start to get back to a more normal trend, but we'll continue to watch that through the balance of the year.
Christine Arnold - Analyst
And has acuity increased?
Some of your competitors suggested it did.
David Cordani - President & CEO
Pardon me?
Christine Arnold - Analyst
Has acuity increased?
Like fewer admits, longer stays?
David Cordani - President & CEO
I don't know that we've seen anything that particular there.
Christine Arnold - Analyst
Okay and then the (inaudible) development, please?
David Cordani - President & CEO
Yes, the only thing I would add on the acuity over time, so as we've talked over the last couple years we've reference that acuity has increased.
So Tom's point is right in the quarter.
But as inpatient days have more moderated and outpatient services have continued to evolve your rule of thumb, I think, is correct.
But that's taken place over time.
To Tom's point, we wouldn't pinpoint it as a first-quarter phenomenon on PYD.
Tom McCarthy - Interim CFO
Yes and PYD I'd keep simple.
Essentially all of it was in the guaranteed cost block.
There was a little bit of put and take in the other blocks, but it essentially ended up all in the guaranteed cost block.
Christine Arnold - Analyst
Perfect.
And it looks like you didn't release reserves for the Medicare Advantage book and you're keeping that elevated until the run out is complete?
David Cordani - President & CEO
Yes, we've continued -- we'd expect to follow that through the normal pattern.
Christine Arnold - Analyst
Okay, thanks.
Operator
Doug Simpson, Morgan Stanley.
Doug Simpson - Analyst
Good morning, everyone.
Just looking at the operating expense number, that tracked by our math at just under 28% in the quarter.
That's sort of looking at consolidated OpEx as a percent of revenue if you peal out the investment income.
And that's about in line with where it's been over the last eight, nine years and obviously there are mix shift issues between fee and risk during that timeframe.
But just if you look out a couple of years, given the initiatives you've got going on and the mix as you see it, how do you expect that to trend over the next few years?
What's the potential magnitude that we could see on that line?
Tom McCarthy - Interim CFO
Doug, it's Tom.
I view this as a little bit of a difficult question to answer.
As we pointed out, our expense ratio is a function of the mix of business that we're in.
Again, we have a heavy weighting towards ASO business, more proportionally there than our competitors.
And by the nature of that, with that just being fee-based without the loss cost premium, it tends to have a high expense ratio.
So we've got two dynamics going on here.
We are becoming more efficient so we're expecting both through business growth and operating expense efficiencies to report a more efficient result.
But whether that shows up as a lower expense ratio really will depend on what the mix of business does.
And we just talked about (multiple speakers) anticipating ASO to be a growing portion of our business.
So on a reported basis that would tend to push the expense ratio up.
My view is we really need to understand on a mix adjusted basis what kind of progress are we making and are we becoming more efficient and put that in the context of the expense ratio for our investors and the analysts so that they can understand whether we're making progress on our expense goals or not.
Doug Simpson - Analyst
Okay.
And then maybe just any updated thoughts on the distribution side in the smaller end of the market, any update in what you're seeing in terms of competitive responses to the new reform rules?
David Cordani - President & CEO
Good morning, Doug, it's David.
Well, my comments will be for 50 life employers and above.
As you know, we don't really play in the under 50 life space.
And maybe consistent with some of the prior dialogue, what we've seen and continue to see is an increasing demand and appetite for ASO programs down market.
What we also see is increasing openness to some broader wellness solutions.
Now you have to be really pinpointed to how you secure a wellness program for a 60 life employer versus a 600 life employer.
But the broad theme we've seen is a much higher appetite for ASO solution.
I commented in my prepared remarks that for example in the Select segment which is 250 down to 50 life employers, our first-quarter new business sales were up about 50% in terms of -- or about 50% of that was ASO sales which is up meaningfully from the first quarter of 2010 to reinforce that trend.
Operator
Carl McDonald, Citigroup.
Carl McDonald - Analyst
Great, thanks.
These are my number, so I realize your projections may have been a little bit different.
But if I look at the commercial risk business, loss ratios are about 450 basis points better than what I was expecting, the overall loss ratio is down 130 basis points versus what I'm expecting.
Taking your comment that experience rate loss ratio was down, should I read that there was some pressure somewhere else in the business, either specialty or Medicare, or that just the experience loss ratio was down but just down very minimally?
Tom McCarthy - Interim CFO
Carl, it's Tom.
I think it is just a little bit of a seasonality and mix of business.
First we have the Part D loss ratio which of course we'd expect to be high in the first quarter.
And the expansion rate of loss ratio tends to be higher, so in your observation that it -- higher than the average, that is.
So it's down but it's still higher than the average.
And I really can't give you any more context on that.
I tried to understand more of those dynamics and those were really the only observations I'd have that, yes, the experience loss ratio is higher than average, but it is down.
And yes, we do have a -- as we would expect, a high first-quarter Part D ratio.
Carl McDonald - Analyst
Okay.
And then, Dave, can you put a little bit more quantification around the ASO plus stop-loss revenue differential?
So if we're thinking about just a base commercial risk product that's 300 a month and a base ASO product that's $20 a month, so basically a, whatever it is, 90% hit to revenue.
As you said, it's lower for the select segment, the ASO fee plus stop-loss.
But should we think about 10% lower, 50% lower, what's the right magnitude there?
David Cordani - President & CEO
Carl, I think that might be a good question to follow up with Ted and the IR team.
But that kind of dynamic is going to really depend on an awful lot of things -- the attachment point, the coverage a client buys --.
So it's not a simple answer, and maybe some follow-up with the IR team would make some sense.
Carl McDonald - Analyst
Thank you.
Operator
Kevin Fischbeck, Bank of America-Merrill Lynch.
Kevin Fischbeck - Analyst
Great, thanks.
You talked a bit about the specialty business kind of adding to the growth in the commercial business this quarter.
It seems like a lot of companies are focused on that aspect.
I just want to get your sense of kind of where we are on a competitive basis in that business.
Are you seeing any pressure on margins in that business?
David Cordani - President & CEO
Kevin, good morning, it's David.
That business, like any other business, has to continue to evolve and innovate.
So we've been able to -- I'll give you two examples -- evolve and innovate our dental offering pretty significantly in terms of the network configurations as well as the clinical coordination programs.
And as a result we saw tremendous growth in traction in the dental portfolio in 2011.
A second example of evolving and innovating solutions, I referenced Your Health First program, which is a fully integrated whole person coaching module around chronic conditions which is different than what's existed in the marketplace in the past.
Through doing that and matching it up against what we talk about our consultative selling we continue to see good traction and support for packaged or targeted cross-selling.
What we have seen is without that -- without the very targeted consultative selling you see pressure, you either see commoditized price pressure or the pressure to not purchase certain services as the economic pressures are confronting employers.
Fortunately for us we've been able to achieve our cross-selling goals and objectives by using the very targeted consultative selling and continue to innovate our solutions.
Kevin Fischbeck - Analyst
Okay.
So we should think about the specialty business the same way that we think about the health plan business, which is some people focus on discounts, but you guys are able to shine with the customers who value a more holistic view to cost trends, things like that?
David Cordani - President & CEO
Kevin, that's a good comparator.
Kevin Fischbeck - Analyst
Okay.
And then talk a little bit about the International business.
Obviously the revenue growth was quite strong with acquisition and the margins were done.
Is there anything going on there on the margin side besides just maybe some integration cost (inaudible)?
Is there anything else we should be thinking about as far as product mix shift or anything going on there?
David Cordani - President & CEO
Kevin, no, there really isn't anything of note.
As you pointed out, the margins by product are different and the especially in the early years of Vanbreda have an impact on that.
But nothing unusual or out of expectations.
Kevin Fischbeck - Analyst
Okay, great.
Thanks.
Operator
Chris Rigg, Susquehanna Financial Group.
Chris Rigg - Analyst
Okay, yes, no, I have sort of a follow-up on the last question.
So in the International segment is there any reason in particular why we would expect further margin erosion over the balance of the year?
Is there seasonality in that business, anything worth pointing out?
David Cordani - President & CEO
I don't think there's any particular call-out there.
I would point out we had very strong persistency results and that does support margin and there could be some normalization of that over the balance of the year which is why our outlook doesn't take the first quarter and multiply it by four.
But there's not an important underlying dynamic.
Chris Rigg - Analyst
Okay.
Can you give us a sense for -- revenue is now steady-state, no new acquisitions that -- what is the longer-term margin profile of your current book in the International business if possible.
David Cordani - President & CEO
Chris, it's David.
What we've said for our International portfolio of businesses, we see the ability for sustained double-digit top-line growth.
And people challenge does double-digit mean are you (technical difficulty) lower end of the double-digit?
The answer to that is no.
So midteens and above top-line growth for that business over time.
The business has performed with very strong margins.
You've seen the margins bounce around a little bit.
We spiked out last year some one-timers.
So I would draw your attention back to those one timers that I would encourage you to think about.
The first quarter of 2011 is even that much more exciting for us because it can benefit from one timers comparable to last year.
More importantly for the business, what's driving the opportunity going forward is in the health, life and accident portfolio the continued and rapid growing middle class in a variety of countries around the world presents a tremendous growth opportunity for us going forward.
Tom highlighted persistency and retention which is rightful.
That is a critical part of our strategy to secure individual relationships and then expand on them with cross-selling and then feed them with new relationships.
And then as we continue to build on our expatriate and globally mobile portfolio, both the revenue growth there and margin growth is quite attractive.
So over time, save acquisitions to your point, we see very attractive top-line and bottom-line growth opportunities for that business portfolio.
Chris Rigg - Analyst
Okay, thanks.
Operator
David Windley, Jefferies & Co.
Dave Windley - Analyst
Hi, thanks for taking the question.
I want to stick with the International.
Your revenue growth for the year I believe is around 19% for International and you exceeded that pretty dramatically in the first quarter.
Was that seasonality or just upside surprise in the first quarter?
David Cordani - President & CEO
Dave, I would say first underlying the revenue good news and I appreciate you putting a spotlight on that for International.
A lot of consistency taking place throughout retention, etc.
There was a big step function of revenue as well.
The team had an outstanding January for the expatriate portfolio of business.
So in addition to very strong retention that's been consistent, the new business sales within that portfolio were just outstanding for January 1.
You'll see that in our financial settlement relative to covered lives growing, as well outpacing even the acquisition contribution from Vanbreda.
So that would be the additional item I'd highlight, consistency relative to the strong retention, ongoing fundamentals of cross-selling and new business sales.
But also for the first quarter of the year a really significant and attractive step function, just reinforcing the power of the value prop we have for the expatriate and the globally mobile business.
Dave Windley - Analyst
Super.
And David, are those sales that you highlight outside of Vanbreda or are those -- are you including the efforts within Vanbreda to shift the customer base from more of the TPA to a fully insured?
David Cordani - President & CEO
Yes, my comments were exclusive of -- broadly speaking, exclusive of the Vanbreda contribution.
So many of the sales -- our early traction with Vanbreda is in line with our expectations.
Holding that aside, many of the sales that were secured for January of 2011 were secured throughout the summer months of 2010.
So it's reinforcement of the value prop that CIGNA expatriate benefits had in the marketplace and we see that as expanding further now as we go forward to build off of Vanbreda and CIGNA expatriate benefits together.
Dave Windley - Analyst
Okay.
And so, no reason to believe that that sales benefit to the revenue line would not persist through the balance of the year?
David Cordani - President & CEO
Well, as I noted, the first quarter was truly outstanding.
So since I'm sure my International team is listening we won't take any pressure off of them.
But accordingly, Tom noted we took up the earnings outlook for International business for the full year and in part it's because of the traction from the early part of the year.
And again, we do see this as a very robust opportunity for us going forward.
Dave Windley - Analyst
Okay, thank you.
Operator
Thank you, Mr.
Windley.
And at this time I'd like to turn the call back to David Cordani for any additional or closing remarks.
David Cordani - President & CEO
Thank you, everybody.
Before we conclude I just want to reinforce a few key themes.
First and foremost, we delivered strong results in 2010, we set competitively attractive targets for 2011 and we've exceeded those targets in the first quarter and we expect it for the full year now.
Secondly, our first-quarter results reflect continued effective execution of our growth strategy as we remain focused on delivering on our mission which is to improve the health, well-being and sense of security of the individuals we serve.
I am confident in our ability to achieve our full-year 2011 strategic, financial and operating goals.
And I believe our company is well positioned to deliver on sustained profitable growth over the long term as we seek to provide enduring customer value in what is a very dynamic marketplace.
We thank you for joining us on the call and we look forward to talking to you in the future.
Have a great day.
Operator
Ladies and gentlemen, this concludes CIGNA's first-quarter 2011 results review.
CIGNA Investor Relations will be available to respond to additional questions shortly.
A recording of this conference will be available for 10 business days following this call.
You may access the recorded conference by dialing 888-203-1112 or 719-457-0820.
The pass code for the replay is 910-8522.
Thank you for participating.
We will now disconnect.