Cigna 2008 Annual Report Download - page 43

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• The Invested Assets supporting the Run-off Reinsurance segment with respect to reinsurance provided for guaranteed minimum
death benefit contracts and guaranteed minimum income benefit contracts are structured to emphasize investment income, and
provide the necessary liquidity to meet cash flow requirements. For information about CIGNA’s use of derivative financial
instruments in the Run-off Reinsurance segment, see Notes 7 and 11 to CIGNA’s Consolidated Financial Statements beginning
on pages 100 and 110 of this Form 10-K.
• The Invested Assets supporting CIGNA’s Other Operations segment are associated primarily with fully guaranteed annuities
(primarily settlement annuities) and interest-sensitive life insurance (primarily corporate-owned life insurance products). Because
settlement annuities generally do not permit withdrawal by policyholders prior to maturity, the amount and timing of future
benefit cash flows can be reasonably estimated so funds supporting these products are invested in fixed income investments that
generally match the aggregate duration of the investment portfolio with that of the related benefit cash flows. As of December 31,
2008, the duration of assets that supported these liabilities was approximately 12.2 years. Invested Assets supporting interest-
sensitive life insurance products are primarily fixed income investments and policy loans. Fixed income investments emphasize
investment yield while meeting the liquidity requirements of the related liabilities.
Investment strategy and results are affected by the amount and timing of cash available for investment, competition for
investments, economic conditions, interest rates and asset allocation decisions. CIGNA routinely monitors and evaluates the status of
its investments in light of current economic conditions, trends in capital markets and other factors. Such factors include industry
sector considerations for fixed maturity investments and mezzanine and private equity partnership investments, and geographic and
property-type considerations for commercial mortgage loan and real estate investments.
International Portfolios – Investment Strategy
As of December 31, 2008 the International Portfolios had $1.4 billion in Invested Assets. The International Portfolios are
primarily managed by external managers with whom CIGNA’s subsidiaries contract.
The characteristics of these assets are generally managed to reflect the underlying characteristics of related insurance and
contractholder liabilities, as well as regulatory and tax considerations in the countries where CIGNA’s subsidiaries operate. CIGNA
International’s Invested Assets are generally invested in the currency of related liabilities, typically the currency in which the
subsidiaries operate and with an aggregate duration generally matching the duration of insurance liabilities and surplus. CIGNA’s
investment policy allows the investment of subsidiary assets in U.S. dollars to the extent permitted by regulation. CIGNA
International’s Invested Assets as of December 31, 2008 were held primarily in support of statutory surplus and liabilities associated
with the life, accident and supplemental health and healthcare products described in Section E on page 14.