Chief executive officer, president, and chairman, CIGNA Corporation
Education: Loyola College of Baltimore, BA, 1974; Widener University, MBA, 1984.
Family: Married Ellen (maiden name unknown); children: three.
Career: Insurance Company of North America, 1978–1980, assistant controller, special risk division; 1980–1982, assistant vice president; CIGNA, 1982–1985, manager; 1985–1986, senior vice president of finance and planning; 1986–1989, vice president; CIGNA International, 1989–1996, president; CIGNA Health Care, 1996–1999, president; CIGNA International, 1999–2000, president and chief operating officer; 2000–, chief executive officer, president, and chairman.
Awards: Outstanding Alumnus Award, Loyola College of Baltimore, 2002.
Address: CIGNA, 1 Liberty Place, 1650 Market Street, Philadelphia, Pennsylvania 19192-1550; http://www.cigna.com.
■ In slightly more than two decades H. Edward Hanway rose through the ranks of CIGNA Corporation to become its CEO, president, and chairman in 2000. CIGNA was formed in 1982 through the combination of the Insurance Company of North America (INA), where Hanway worked at the time, and Connecticut General Corporation. The company eventually became one of the largest investor-owned U.S. employee benefits organizations and a provider of various insurance, retirement, and investment products. After taking over the company's leadership, Hanway made numerous strategic moves to counteract the company's disappointing results in the face of a troubled economy and rising health care costs. Industry analysts described Hanway as a good business strategist who took a highly analytical approach to management.
Hanway attended Loyola College in Maryland and was graduated in 1974 with a bachelor of arts degree. In a 2003 commencement address to the graduating class of Clarke College, Dubuque, Iowa, Hanway recalled that his priorities after college were "finding a job, getting an apartment, driving to the New Jersey shore for some well-earned decompression at the beach" (May 10, 2003). Hanway eventually joined INA, a CIGNA predecessor company, in 1978. He began as an assistant controller in the company's special risk division and rose through the ranks taking on management and finance roles of increasing responsibility. He was named assistant vice president of INA in 1980. In 1982 CIGNA Corporation was formed through the merger of INA and Connecticut General. In 1985 Hanway was made senior vice president of finance and planning for one of CIGNA's main divisions and the following year became vice president of CIGNA Corporation. Hanway became president of CIGNA International in 1989 and oversaw the company's expansion into other countries.
During his seven-year tenure as president of CIGNA International, Hanway played a vital role in fostering economic cooperation across national borders. Although his primary focus was on the international insurance and financial services industries, Hanway also generally promoted U.S. business interests abroad as an advocate of free trade and through his close work with the U.S. Department of Commerce and the office of the U.S. Trade Representative. Hanway's work with these government offices helped to formulate the financial services provisions of such landmark pacts as the North American Free Trade Agreement, for which Hanway actively lobbied in 1993, and the United States–Japan Framework Agreement on Insurance.
Hanway served as chairman of the International Insurance Council from 1993 to 1995 and later as vice chairman for trade policy. While president of CIGNA's international divisions, Hanway served as a trustee and member of the executive committee of the U.S. Council for International Business and a member of the board of directors of the U.S. National Committee for Pacific Economic Cooperation. One of the countries Hanway was most interested in was China, where he established CIGNA representative offices in 1994. Later Hanway urged the U.S. Congress to give China permanent normal trade relations status.
In 1996 Hanway was appointed president of CIGNA HealthCare, the corporation's largest division, which was responsible for providing health, dental, vision, pharmacy, and behavioral health coverage to the employees of various companies and their families. Three years later, Hanway was named president and chief operating officer of CIGNA Corporation and was in charge of all of the company's divisions. In 2000 he was named CEO, president, and chairman of the corporation.
Hanway's appointment to CIGNA's top posts was partially the result of his close work with the former CEO William H. Taylor in reorganizing CIGNA from a multiline insurer to an employee benefits specialist. The two reached their goal primarily by shedding other businesses, such as CIGNA's property and casualty businesses in a $3.45 billion sale to ACE Limited. In a news release in CIGNA Archives , Taylor noted, "Ed is eminently qualified to lead CIGNA. He has extensive knowledge of our operations, a record of success in managing both our health care and international divisions, and a strong commitment to customer service" (December 11, 2001).
In his new role as CEO, president, and chairman of CIGNA, Hanway focused CIGNA's efforts on building each of the company's businesses in healthcare, retirement and investment services, and group insurance. He wanted to emphasize customer service and deploy technology service capabilities to help customers and consumers better manage their benefits. Another area Hanway continued to emphasize was the need to build foreign business and to urge the United States to grant China permanent normal trade relations status. Hanway met in Beijing with Chinese premier Zhu Rongji to let the Chinese leader know that CIGNA was willing to assist China in developing a full range of healthcare, employee benefits, and financial services products. As noted in Insurance Journal , Hanway commented, "We believe that normalizing trade with China will help give U.S. companies—including CIGNA—greater access to the rapidly expanding Chinese marketplace while bringing China and its people the advantages of increased international commerce" (June 6, 2000).
Hanway and other U.S. business leaders were successful in their entreaties when the U.S. Senate voted to grant permanent normal trade relations status to China, paving the way for CIGNA and others to establish full and normal fair trade with that country. Because China had also entered into the World Trade Organization, Hanway predicted that the Chinese insurance market would develop rapidly. He established offices in Beijing, Shanghai, and Guangzhou to engage in various insurance businesses.
Through his meetings with Premier Zhu Rongji, Hanway had also helped engineer the 2002 decision by the Chinese Insurance Regulatory Commission to allow CIGNA to enter the country's life insurance market. According to an article in Insurance Finance & Investment , Hanway said, "Now, we are looking forward to re-entering China's insurance marketplace as a full participant" (October 1, 2002). Later that year Hanway and CIGNA developed a joint venture with China to market life insurance in Shenzhen.
Despite the advances in China, Hanway and CIGNA were encountering a tough insurance market, initially fueled by the downturn in the American economy starting in late 2000. The World Trade Center and the Pentagon attacks by terrorists on September 11, 2001, cost the company approximately $215 million in claims. Rising medical costs were also hitting the insurer hard. Hanway nevertheless remained positive and pointed out to Bill Griffeth of the CNBC program Power Lunch that CIGNA had a wide array of products that would allow the company to respond to employers' changing needs in the insurance and finance sector.
In the fourth quarter of 2001 CIGNA reported that its net income had decreased 31 percent owing to restructuring charges. On the other hand, the company, which was the number three health insurer in the United States at the time, had earned $1.92 a share, which surpassed estimates by analysts. Hanway pointed to rising medical costs and the economy as major factors in the company's overall struggles. He also predicted, however, that the company would prosper as it continued to grow its retirement and other businesses. In an interview on the CNNfn program Money Gang , as reported in CIGNA Archives , Hanway said, "We've been very actively developing what we call retail strategies to deal with the individual consumer, within the large employers, and increase our name recognition and our brand recognition" (February 21, 2002).
Despite Hanway's optimism the company's outlook continued to decline. In November 2002, CIGNA stock had reached a low of $36.27 a share, down two-thirds since May 2002, when the value had been $111. According to Hanway, much of the problem had to do with service and computer glitches and customers' defecting from CIGNA HealthCare because they were displeased with CIGNA's financial troubles. Furthermore, more than $1.5 billion in pretax charges from old worker compensation and annuity insurance contracts had hit the company hard.
Analysts were calling CIGNA a company in trouble because of its weak sales and earnings reports. In addition, Hanway and his company were consistently being beaten out by competitors. In an interview with Joseph N. DiStefano of the Philadelphia Inquirer distributed by the Knight-Ridder/Tribune News Service, Hanway said, "I view our results as unacceptable and clearly below our potential. We fully intend to return to industry-leading [profit levels]" (November 10, 2002).
Hanway set out to put CIGNA back on course in several ways. He replaced some of his top management team and scrambled to reshuffle various business units. Hanway eventually assumed direct control of CIGNA HealthCare after what some analysts believed was the ouster of the division's president as the result of sluggish sales and profits within the division. Hanway also hoped to improve profits somewhat by spending more on raising insurance prices and cutting overhead.
Hanway's plan included focusing more on billing and information systems. He had already made CIGNA a part of the Coalition for Affordable Quality Healthcare in an effort to simplify the administrative burden for physicians and their office staffs, who often had to deal with 15 or 20 insurance companies and health plans. The coalition included a collaboration of approximately 25 of America's largest health plans. These various insurance providers were identifying initiatives to make changes in the overwhelming bureaucracy connected with health insurance. Hanway saw the collaboration as being good for business as the group worked to create a standardized grid outlining all the benefits of each member's plans using plain language, thus making it easier for consumers to compare plans. As Hanway wrote in Health Leaders , "All of us realize that to be successful as individual businesses, we have to change the image of our industry. We think this is a way to demonstrate to people that we really do care about a number of factors that are important to both physicians and consumers" (May 1, 2002).
Despite all his efforts Hanway was feeling the heat. For example, in 2002 Hanway was not granted a bonus because of CIGNA's disappointing results. Jill Brown, the managing editor of Managed Care Week , told Tracey Walker of Managed Healthcare Executive , "As an incentive to turn things around, Hanway was granted stock options at a relatively high price point, which will not be of any value to him until such time as the company's stock price is higher than the price of Hanway's options" (November 1, 2003).
In his 2003 commencement address at Clarke College, Hanway said that he believed CIGNA's troubles were not caused by any wrongdoing on the company's part but rather that he and his management team had not done enough to execute what he continued to believe were sound business strategies. He told the graduating class, "I found myself staring at the ceiling on many sleepless nights agonizing over what we could have done or should have done to keep the ship on course" (May 10, 2003).
Hanway's problems continued into 2004 as he announced in an internal company memo that the company would have to lay off workers. CIGNA faced many problems, including a health insurance business hobbled as the result of pricing mistakes and computer problems dating to 2002. Furthermore, health coverage plans covering 30 to 40 percent of the company's approximately 11 million members were up for renewal in 2004, and analysts were concerned that CIGNA would take a further hit if some subscribers did not renew. For example, if the Arizona state government decided to take a self-insurance approach, CIGNA would lose 140,000 members. In the previous year CIGNA had lost large accounts, including Dade County, Florida, DaimlerChrysler, and Campbell Soup Company.
Hanway had already made moves to save what many analysts saw as a leaking if not sinking ship. In November 2003 he continued downsizing of the company by selling CIGNA's retirement services business to Prudential for $2.1 billion. He also began to conduct a top-to-bottom study of the company's costs and spending. Hanway told company employees that CIGNA had no choice but to streamline its operations. As reported by Todd Mason of the Philadelphia Inquirer and distributed by Knight Ridder/Tribune Business News, Hanway wrote to employees, "Some of the changes I describe will be painful."
By the end of the first quarter of 2004 CIGNA's net income had slipped to $78 million, or 55 cents a share, from $236 million, or $1.68 a share, during the same period the previous year. Hanway announced that the company had completed the sale of its retirement benefits business and expected to gain approximately $675 million after taxes as the result of the sale. He also said he planned to focus the company's future efforts on healthcare and related benefits. Despite the company's lower new-business sales and retention of existing accounts, Hanway said CIGNA was moving in the right direction by lowering medical cost trends and administrative expenses while expanding its products and service capabilities. As reported by Marie Suszynski in BestWire , Hanway stated, "We feel we're taking appropriate action [to increase membership]" (April 30, 2004).
Considered by some analysts a strong strategist and highly analytical manager, Hanway also had a reputation for instilling a high level of company values. He emphasized that his view of business was to be a tough competitor but a competitor with a conscience who played a vital role in the health and wellbeing of its customers and clients.
As CIGNA's business operations and earnings declined, Hanway never shied away from personal accountability for the company's problems. In his 2003 commencement address at Clarke College, he said he found the criticism to be tough but in a way "redemptive." He also emphasized that if more of the company executives at Enron and other failed businesses had been willing to take responsibility early on, their companies may have made it through the bad times much better and that corporate America would have gained more public trust. As for his own experience in managing a company through tough times, he told the Clarke graduates that he "learned that there's something truly liberating about standing unprotected in the public eye and acknowledging one's shortcomings when that's what the situation demands" (May 10, 2003).
In an investor teleconference in 2004 Hanway outlined his strategic plan for the company's future and remained optimistic that CIGNA would see brighter days. He said that the company had made solid progress in the four key areas: reducing medical cost trends, delivering quality service, reducing operating expenses, and growing membership. Hanway said he believed the company was making strong progress in the areas of medical management, service, and expense reductions. He said that the company was positioning itself to seize future opportunities and to provide superior returns to shareholders. He emphasized that the company was in the process of reconnecting with middle-market brokers and producers to ensure that they saw the company's improvements and would become more confident in recommending CIGNA.
In addition to his duties at CIGNA, Hanway served as chairman of the board of MedUnite, an Internet-based utility designed to speed the processing of health care transactions. Hanway also was active in issues associated with children's health, education, and international trade. He served on the boards of trustees of Loyola College in Maryland and the Eisenhower Exchange Fellowships, the board of advisers of the March of Dimes Foundation, and the board of directors of the Philadelphia Orchestra and was an advocate for the Susan B. Komen Breast Cancer Foundation. Hanway was a member of the Pennsylvania and American institutes of certified public accountants and of the Business Roundtable, an association of CEOs committed to improving public policy.
See also entry on CIGNA Corporation in International Directory of Company Histories .
"CIGNA President Calls for Senate PNTR Approval," Insurance Journal , June 6, 2000, http://www.insurancejournal.com/news/international/2000/06/06/10334.htm .
"CIGNA to Start Life Insurance OPPS in China," Insurance Finance & Investment , October 1, 2002, p. 14.
DiStefano, Joseph N., "CIGNA's Long-Term Health Is in Doubt, Analysts Say," Knight-Ridder/Tribune Business News, ITEM02314017.
"Ed Hanway Named Chairman of CIGNA Corporation," CIGNA Archives , December 11, 2000, http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=105&STORY=/www/story/04-03-2001/0001461333 .
"H. Edward Hanway on Administrative Simplification," Health Leaders , May 1, 2002, http://www.healthleaders.com/magazine/feature1.php?contentid=33952 .
Hanway, H. Edward, "Commencement 2003 Address," Clarke College, Dubuque, Iowa, May 10, 2003, http://www.clarke.edu/academics/commencement/2003/address.htm .
"Interview between CIGNA Chairman and CEO H. Edward Hanway and CNNfn's Money Gang, Friday, February 8, 2002," CIGNA Archives , February 21, 2002, http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=105&STORY=/www/story/02-14-2002/0001669767 .
Mason, Todd, "CIGNA Warns of Upcoming Layoffs," Knight Ridder/Tribune Business News, January 17, 2004, ITEM04017135.
Suszynski, Mary, "CIGNA's Net Income Falls on Accounting Change," BestWire , April 30, 2004, http://www.insurancenewsnet.com/article.asp?a=top_lh&lnid=205426101 .
Walker, Tracey, "November DTR Analysis: Executive Stock Options," Managed Healthcare Executive , November 1, 2003, http://www.managedhealthcareexecutive.com/mhe/article/articleDetail.jsp?id=75799 .