Cigna 2009 Annual Report Download

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2009 CIGNA Annual Report
Health
Sense of
Security Well-Being
A WORLD OF OPPORTUNITY

Table of contents

  • Page 1
    2009 CIGNA Annual Report Health Sense of Security A WORLD OF OPPORTUNITY Well-B eing

  • Page 2
    P E R S O N A L H E A LT H C A R E TABLE OF CONTENTS Letter to Our Shareholders 2 Reinventing the Customer Experience 6 Supporting Communities Near and Far 8 Awards and Recognition 10 CIGNA in Perspective 12 Corporate and Board of Directors Information 14

  • Page 3
    ... businesses pursuing growth goals. We see cities and towns organizing to be places that people want to call home. And we see everyone seeking a more enjoyable life. That's why every decision we make - every product and service we offer - is based on seizing the moment to help improve health, well...

  • Page 4
    LETTER TO OUR SHAREHOLDERS David M. Cordani President and Chief Executive Officer 2

  • Page 5
    ... from our HealthCare, Group and International businesses continues to be key to our progressive global growth strategy. In 2009, we generated competitively attractive growth and earnings. * Adjusted income from operations is a non-GAAP financial measure used to describe the Company's financial...

  • Page 6
    ... medical care ratio in the guaranteed cost business due in part to H1N1 ï¬,u-related claims. • Full-year 2009 adjusted income from operations in our Group Disability and Life segment was $279 million, a modest year-over-year increase. This result reï¬,ects favorable accident and disability claims...

  • Page 7
    ... collectively volunteered more than 16,000 hours last year to serve the communities where we live and work to improve their health, well-being and sense of security. Between employee fundraising efforts and CIGNA's corporate giving, we have provided funds to fight breast cancer, to make clean...

  • Page 8
    ... a live representative, or use the self-service option, if they choose. Extended our service hours to become the first and only United States health service company available 24 hours a day, seven days a week - so we're here whenever customers need us. We're already seeing the impact, with changes...

  • Page 9
    ...CIGNA's stress management classes, enrolled in a program to help her better manage her weight, blood pressure and diabetes, and arranged for home delivery of her medications. Today, she's healthier and motivated to stay on the road to better health. with the help of his CIGNA disability case manager...

  • Page 10
    ...and Europe embarked on a corporate social responsibility program called "BE the Difference," an initiative designed to provide the "Basic Essentials" of life and health. Employees in 13 countries have been supporting clean water and safe shelter projects to help build sustainable communities around...

  • Page 11
    .... The Mobile Learning Lab visited communities from Florida to Michigan and will stay on the road throughout 2010 helping people across the country become aware of the major inï¬,uencers of health at the individual and community level. Community Caring More than 150 CIGNA employees across the...

  • Page 12
    ... our PPO and Open Access Plus plans nationwide - the highest rating possible under NCQA's PPO Accreditation program. • All 23 CIGNA HealthCare HMO and Point of Service Plans are NCQAaccredited, and 21 have earned "Excellent Accreditation" status. • We also earned NCQA Certification for Physician...

  • Page 13
    ... and Health Award. • CIGNA was named to the 2009 "Global Green 100" list by The Uptime Institute, which recognizes companies that have demonstrated a commitment to energy efficiency and carbon footprint reduction in IT and data center operations. • CIGNA's free online public learning program...

  • Page 14
    CIGNA IN PERSPECTIVE CIGNA HealthCare Medical 92% Dental 6% Life & Other 2% Premiums and Fees (in millions) $11,384 CIGNA Group Insurance Life 49% Disability 40% Accident & Other 11% Premiums and Fees (in millions) $2,634 CIGNA International Health Care 47% Life, Accident & Health 53% Premiums...

  • Page 15
    ...fits: medical, dental, behavioral, vision, pharmacy, personal accident, disability, business travel and life insurance, as well as wellness programs for expatriate employees • Health care: medical and related products provided through employer group benefits programs in select countries * Some...

  • Page 16
    ... & Publishing Group), a communications services company DAVID M. CORDANI President and Chief Executive Officer CIGNA Corporation JANE E. HENNEY, M.D. Professor of Medicine University of Cincinnati Academic Health Center, an educational institution PETER N. LARSON Retired Chairman and Chief Executive...

  • Page 17
    ...CORDANI President, Chief Executive Officer and Director CIGNA Corporation WILLIAM L. ATWELL President CIGNA International ANNMARIE T. HAGAN Executive Vice President and Chief Financial Officer CIGNA Corporation MATTHEW G. MANDERS President, CIGNA U.S. Service, Clinical and Specialty JOHN M. MURABITO...

  • Page 18
    ...payment date. For more information and an enrollment authorization form, contact BNY Mellon Shareowner Services at 800.760.8864 or outside the United States and Canada at 201.680.6535. You can access your account on the Internet through the BNY Mellon Shareowner services website at www.bnymellon.com...

  • Page 19
    ... by non-affiliates of the registrant as of June 30, 2009 was approximately $6.6 billion. As of January 30, 2010, 274,968,520 shares of the registrant's Common Stock were outstanding. Part III of this Form 10-K incorporates by reference information from the registrant's proxy statement to be dated on...

  • Page 20
    ... A. Description of Business...B. Financial Information about Business Segments...C. Strategy...D. Health Care...E. Disability and Life...F. International ...G. Run-off Reinsurance ...H. Other Operations ...I. Investments and Investment Income ...J. Regulation ...K. Ratings...L. Miscellaneous...Item...

  • Page 21
    ... 31, 2009 ("Form 10-K"). CIGNA's revenues are derived principally from premiums, fees, mail order pharmacy, other revenues and investment income. The financial results of CIGNA's businesses are reported in the following segments: x x x x x Health Care; Disability and Life; International; Run-off...

  • Page 22
    ... Company plans to improve its strategic and financial flexibility by driving further reductions in its Health Care operating expenses, improving its medical cost competitiveness in targeted markets and effectively managing balance sheet exposures. Also, in connection with CIGNA's long-term business...

  • Page 23
    ... and self-funded medical, dental, behavioral health, vision, and prescription drug benefit plans, health advocacy programs and other products and services that may be integrated to provide individuals with comprehensive health care benefit programs. CIGNA HealthCare also provides disability and life...

  • Page 24
    ... its experience-rated policies (discussed below). Shared Administration Services. CIGNA HealthCare provides Taft-Hartley trusts and other self-insured groups access to its national provider network and provides claim re-pricing and other services (e.g., utilization management). x x x x x x 4

  • Page 25
    ... network of participating behavioral health care providers and offers behavioral health care management services, employee assistance programs, and work/life programs to employer and other groups sponsoring health benefit plans, HMOs, governmental entities and disability insurers. CIGNA Behavioral...

  • Page 26
    ...Part D prescription drug program, CIGNA Medicare Rx®, provides a number of plan options as well as service and information support to Medicare and Medicaid eligible members. CIGNA Medicare Rx is available in all 50 states and the District of Columbia. Retail Pharmacies. CIGNA HealthCare operates 20...

  • Page 27
    ...; 24-hour help line; 24/7 call center; case management; disease management; pharmacy benefit management; behavioral health care management services (through its provider networks); or any combination of these services. The self-insured plan sponsor is responsible for self-funding all claims, but...

  • Page 28
    ...meets National Committee for Quality Assurance ("NCQA"), Employee Retirement Income Security Act of 1974 ("ERISA"), Utilization Review Accreditation Commission ("URAC") and/or applicable state regulatory requirements. CIGNA HealthCare's commitment to promoting quality care and service to its members...

  • Page 29
    ... the effectiveness of managed care clinical programs. CIGNA HealthCare's national results compare favorably to industry averages. Technology. CIGNA HealthCare understands the critical importance of information technology to the level of service the Company is able to provide to its members and...

  • Page 30
    ... for health care (unit costs and utilization), the adequacy of fees charged for administration and risk assumption and effective medical cost and utilization management. CIGNA HealthCare reduces its exposure to large catastrophic losses under group life, disability and accidental death contracts by...

  • Page 31
    ... to employers. CIGNA HealthCare also employs representatives to sell utilization review services, managed behavioral health care and employee assistance services directly to insurance companies, HMOs, third party administrators and employer groups. As of December 31, 2009, the field sales force for...

  • Page 32
    ... provider networks; effectiveness of medical care management; product responsiveness to the needs of customers and their employees; price; cost-containment services; technology; and effectiveness of marketing and sales. Financial strength of the insurer, as indicated by ratings issued by nationally...

  • Page 33
    ... markets group long-term and short-term disability insurance products and services. These products and services generally provide a fixed level of income to replace a portion of wages lost because of disability. CIGNA Disability and Life also provides assistance to the employee in returning to work...

  • Page 34
    .... The annual effective interest rate assumptions used in determining reserves for most of the long-term disability insurance business is 5% for claims that were incurred in 2009 and 4.75% for claims that were incurred in 2008. For group universal life insurance, CIGNA Disability and Life establishes...

  • Page 35
    ...CIGNA's group disability, life and accident businesses are other large and regional insurance companies that market and distribute these or similar types of products. As of December 31, 2009, CIGNA is one of the top five providers of group disability, life and accident insurance in the United States...

  • Page 36
    ... to offer employers programs that promote a healthy lifestyle, offer assistance in returning to work and integrate health care and disability programs. CIGNA believes it is well positioned to deliver integrated solutions that address these broad employer and employee needs. CIGNA also believes that...

  • Page 37
    ... in the United States, Canada, Europe, the Middle East, Hong Kong, China and other international locations. In addition, CIGNA International's health care businesses include medical products, which are primarily provided through group benefits programs to local employees in the United Kingdom and...

  • Page 38
    ... locations. In addition, CIGNA International's health care businesses include medical products, which are provided through group and individual benefits programs in the United Kingdom and Spain. For CIGNA International's life, accident and supplemental health insurance products, a significant...

  • Page 39
    ... are regional and local insurers, with CIGNA's market share at less than 5% of the premiums of the total local health care market. CIGNA International expects that the competitive environment will intensify as U.S. and Europe-based insurance and financial services providers pursue global expansion...

  • Page 40
    ... Principal Products and Services Until 2000, CIGNA offered reinsurance coverage for part or all of the risks written by other insurance companies (or "ceding companies") under life and annuity policies (both group and individual) and accident policies (workers' compensation, personal accident, and...

  • Page 41
    ...8 and 11 to CIGNA's Consolidated Financial Statements beginning on pages 121 and 132 respectively of this Form 10-K. For more information on the risk associated with Run-off Reinsurance, see the Risk Factors beginning on page 35 of this Form 10-K, and the Critical Accounting Estimates section of the...

  • Page 42
    ... business are issuance and administration of the insurance policies (e.g., maintenance of records regarding cash values and death benefits, claims processing, etc.) as well as oversight of the investment management for separate account assets that support the variable universal life product. Product...

  • Page 43
    ... of benefit plan liabilities. Competition The principal competitive factors that affect CIGNA's COLI business are pricing, service, product innovation and access to thirdparty distribution. For CIGNA's COLI business, competitors are primarily national life insurance companies, including insurance...

  • Page 44
    ... settlement annuities business is premium deficient, meaning initial premiums were not sufficient to cover all claims and profit. Liabilities are estimates of the present value of benefits to be paid less the present value of investment income generated by the assets supporting the product including...

  • Page 45
    ... life insurance, health care and disability and life products. Types of Investments CIGNA invests in a broad range of asset classes, including domestic and international fixed maturities and common stocks, commercial mortgage loans, real estate and short-term investments. Fixed maturity investments...

  • Page 46
    ... loan investments (19%); and policy loans, real estate investments, short-term investments and mezzanine and private equity partnership investments (15%). CIGNA generally manages the characteristics of these assets to reflect the underlying characteristics of related insurance and contractholder...

  • Page 47
    ... CIGNA's Disability and Life segment are also structured to emphasize investment income, and provide necessary liquidity to meet cash flow requirements. Invested Assets supporting longer-term group disability insurance benefits and group life waiver of premium benefits are generally managed...

  • Page 48
    ...their business operations, including, but not limited to: x the form and content of customer contracts including benefit mandates (including special requirements for small groups, generally under 50 employees); premium rates; the content of agreements with participating providers of covered services...

  • Page 49
    ... companies. In the United States, these associations levy assessments on member insurers licensed in a particular state to pay such claims. Several states also require HMOs to participate in guaranty funds, special risk pools and administrative funds. For additional information about guaranty fund...

  • Page 50
    ...the federal government requires Medicare and Medicaid providers to file detailed cost reports for health care services provided. These reports may be audited in subsequent years. CIGNA HMOs that contract to provide community-rated coverage to participants in the Federal Employees Health Benefit Plan...

  • Page 51
    ... care insurance products as part of federal health care reform initiatives, as well as other modifications of the Medicare program, and employee benefit regulation. The economic and competitive effects of the legislative and regulatory proposals discussed above on CIGNA's business operations will...

  • Page 52
    ... to meet the obligations of insurance policies. The principal agencies that rate CIGNA's insurance subsidiaries characterize their insurance rating scales as follows: • A.M. Best Company, Inc. ("A.M. Best"), A++ to S ("Superior" to "Suspended"); • Moody's Investors Service ("Moody's"), Aaa to...

  • Page 53
    ...subsidiaries to support financial strength ratings that meet customers' expectations, and to improving the earnings of the health care business. Lower ratings at the parent company level increase the cost to borrow funds. Lower ratings of CGLIC and LINA could adversely affect new sales and retention...

  • Page 54
    ... a few customers. No customer accounted for 10% or more of CIGNA's consolidated revenues in 2009. CIGNA and its principal subsidiaries are not dependent on business from one or a few brokers or agents. In addition, CIGNA's insurance businesses are generally not committed to accept a fixed portion of...

  • Page 55
    ... in long-term solutions that will enable it to meet customer expectations. CIGNA's success is dependent, in large part, on maintaining the effectiveness of existing technology systems and continuing to deliver and enhance technology systems that support the Company's business processes in a cost...

  • Page 56
    ... price its products and services, establish reserves, provide effective and efficient service to its customers, and to timely and accurately report its financial results also depends significantly on the integrity of the data in its information systems. If the information CIGNA relies upon to run...

  • Page 57
    ...health care coverage as an employee benefit or elect to offer this coverage on a voluntary, employee-funded basis as a means to reduce their operating costs. In addition, the economic downturn could negatively impact the Company's employer group renewal prospects and our ability to increase premiums...

  • Page 58
    ...Company expects to pay out for the guaranteed minimum income benefit business increases resulting in increased net liabilities and related losses. CIGNA currently has unfunded obligations in its frozen pension plan. A significant decline in the value of the plan's equity and fixed income investments...

  • Page 59
    ...funded status of the Company's pension plans and the Company's re-investment yield on new investments. Changes in interest rates may also impact the discount rate and expected long-term rate of return assumptions associated with the Company's guaranteed minimum death benefit liabilities. Significant...

  • Page 60
    ... and administrative costs including pension costs and capital requirements, take other actions such as changing its reserve levels with respect to certain reinsurance contracts, change business practices in disability payments and increase CIGNA's liability in federal and state courts for coverage...

  • Page 61
    ...resources, claims administration services and medical management programs, and quality and sufficiency of provider networks, CIGNA expects that price will continue to be a significant basis of competition. CIGNA's customer contracts are subject to negotiation as customers seek to contain their costs...

  • Page 62
    ... affect the markets for its products. Policy changes on the local, state and federal level, such as the expansion of the government's role in the health care arena and alternative assessments and tax increases specific to the health care insurance industry or health care insurance products as part...

  • Page 63
    ...area will continue to require significant resources. In addition, provider or member fraud that is not prevented or detected could impact CIGNA's medical costs or those of its selfinsured customers. Further, during an economic downturn, CIGNA's segments, including HealthCare, Disability and Life and...

  • Page 64
    ... 1B. UNRESOLVED STAFF COMMENTS None. Item 2. PROPERTIES CIGNA's headquarters, including staff support operations, along with CIGNA Disability and Life Insurance, the domestic office of CIGNA International, and portions of CIGNA HealthCare, are located in approximately 460,000 square feet of leased...

  • Page 65
    ... until May 2009; and Vice President and Chief Accounting Officer of CIGNA from March 2003 until July 2008. MATTHEW G. MANDERS, 48, President, CIGNA, US Service, Clinical and Specialty beginning January 2010; President, CIGNA HealthCare, Total Health, Productivity, Network & Middle Market from June...

  • Page 66
    ...options and the vesting of restricted stock granted under the Company's equity compensation plans. Employees tendered 220 shares in October, 1,879 shares in November, and 959 shares in December. (2) CIGNA has had a repurchase program for many years, and has had varying levels of repurchase authority...

  • Page 67
    ... DATA Highlights (Dollars in millions, except per share amounts) Revenues Premiums and fees and other revenues Net investment income Mail order pharmacy revenues Realized investment gains (losses) Total revenues Results of Operations: Health Care Disability and Life International Run-off Reinsurance...

  • Page 68
    ... Results of Operations Critical Accounting Estimates Segment Reporting Health Care Disability and Life International Run-off Reinsurance Other Operations Corporate Discontinued Operations Industry Developments and Other Matters Liquidity and Capital Resources Investment Assets Market Risk Cautionary...

  • Page 69
    ... Company plans to improve its strategic and financial flexibility by driving further reductions in its Health Care operating expenses, improving its medical cost competitiveness in targeted markets and effectively managing balance sheet exposures. Also, in connection with CIGNA's long-term business...

  • Page 70
    ... and related services; utilization patterns of medical and other services; employment levels; the tort liability system; developments in the political environment both domestically and internationally, including efforts to reform the U.S. health care system; interest rates, equity market returns...

  • Page 71
    ... review to reduce the operating expenses of its ongoing businesses ("cost reduction program"). As a result, the Company recognized severance-related and real estate charges in other operating expenses. Severance charges in 2008 and 2009 resulted from reductions of approximately 2,350 positions...

  • Page 72
    ... 511 1,123 3 1,120 10 1,110 Summarized below is adjusted income from operations by segment: (In millions) Adjusted Income (Loss) From Operations Health Care Disability and Life International Run-off Reinsurance Other Operations Corporate Total $ $ 2009 729 279 182 (24) 85 (154) 1,097 $ $ 2008 715...

  • Page 73
    ...equity market conditions in 2009. Also, in the aggregate, adjusted income from operations from the Company's ongoing operating segments (Health Care, Disability and Life, and International) improved slightly in 2009 over 2008. These favorable effects were partially offset by higher unallocated costs...

  • Page 74
    ... the Disability and Life segment, as well as growth and rate increases in the International segment. See segment reporting discussions for additional details. Net Investment Income Net investment income decreased by 5% in 2009, compared with 2008, primarily due to lower income from real estate funds...

  • Page 75
    ... Company had higher losses on sales of fixed maturities and equity securities. These losses were partially offset by higher gains on sales of real estate investments held in joint ventures. See Note 14 to the Consolidated Financial Statements for additional information. CRITICAL ACCOUNTING ESTIMATES...

  • Page 76
    ... fixed income mutual funds considers the expected market return over the life of the contracts. Volatility refers to the degree of variation of future market returns of the underlying mutual fund investments. The Company develops estimates for Health Care medical claims payable using actuarial...

  • Page 77
    ... including medical service utilization and unit costs and the Company's ability to manage these factors through benefit design, underwriting, provider contracting and the Company's medical management initiatives. These factors are affected by changes in the level and mix of medical benefits offered...

  • Page 78
    ... income, net of estimated amounts receivable from reinsurers, would be as follows: x 50 basis point decrease in interest rates (which are aligned with LIBOR) used for projecting market returns and discounting - $15 million 50 basis point decrease in interest rates used for projecting claim exposure...

  • Page 79
    ... is developed considering actual historical returns, expected long-term market conditions, plan asset mix and management's investment strategy. In addition, to measure pension costs the Company uses a market-related asset value method for domestic qualified pension plan assets invested in non-fixed...

  • Page 80
    ...income. Effect if Different Assumptions Used If the December 31, 2009 fair values of domestic qualified plan assets decreased by 10%, the accrued pension benefit liability would increase by approximately $285 million as of December 31, 2009 resulting in an after-tax decrease to shareholders' equity...

  • Page 81
    .... The Company updates this annual review as material changes in these factors are identified. The Company recognized impairment losses from commercial mortgage loan valuation reserves as follows (in millions, aftertax): x x x 2009 - $11 2008 - $0 2007 - $0 See the Investment Assets section of...

  • Page 82
    ...to core medical customers; changes in operating expenses per member; and medical expense as a percentage of premiums (medical care ratio) in the guaranteed cost business. Results of Operations (In millions) Financial Summary Premiums and fees Net investment income Mail order pharmacy revenues Other...

  • Page 83
    The Health Care segment's adjusted income from operations for 2009, as compared with 2008, was favorably impacted by the absence of a $7 million after-tax adjustment related to a large experience-rated life and non-medical account in run-out recorded in the first quarter of 2008. Excluding this item...

  • Page 84
    ... of minimum premium revenue is recorded in fees. Also, includes certain non-participating cases for which special customer level reporting of experience is required. (4) Other medical premiums include risk revenue and specialty products. (5) Represents administrative service fees for medical members...

  • Page 85
    ...the Health Care segment no longer actively markets these products. Other operating expenses include expenses related to: x x x x x both retail and mail order pharmacy; disease management; voluntary and limited benefits; Medicare claims administration businesses; and integration costs associated with...

  • Page 86
    ..., which represent finance, legal and human resources. The specialty and market segment expansion and the premium tax/commission expense components would increase over time as revenues grow. Specialty includes pharmacy, Medicare Part D, disease management, dental and behavioral coverages. x 66

  • Page 87
    ...meet emerging customer and market trends. In addition to designing lower cost plan offerings to meet emerging customer and market trends, enhancements to the Company's suite of products (CIGNA Choice Fund® CIGNA Health Advisor, CIGNA Incentive Points Program, CIGNA Choicelinx/Custom Benefit Builder...

  • Page 88
    ...security of its members, while reducing infrastructure expenses and driving productivity. The Health Care segment is focused on continuing to effectively manage medical utilization and unit costs. The Company believes that by increasing the quality of medical care and improving access to care it can...

  • Page 89
    ... The Disability and Life segment includes group disability, life, accident and specialty insurance and case management for disability and workers' compensation. Key factors for this segment are: x x x x premium growth, including new business and customer retention; net investment income; benefits...

  • Page 90
    ... new sales growth and solid customer retention in the disability, life and accident lines of business, partially offset by less favorable customer retention in the specialty line of business. Net investment income decreased by 5% in 2009 reflecting lower yields and lower security and real estate...

  • Page 91
    ... includes life, accident and supplemental health insurance products and international health care products and services, including those offered to expatriate employees of multinational corporations. The key factors for this segment are: x x x x premium growth, including new business and customer...

  • Page 92
    ... movements, the International segment's adjusted income from operations decreased 7% for 2009, compared with 2008. The decrease was primarily driven by unfavorable claims experience in the life, accident and supplemental health insurance business and the expatriate employee benefits business. The...

  • Page 93
    ... Accounting Estimates" section of the MD&A beginning on page 55 of this Form 10-K for more information on the effect of capital market assumption changes on shareholders' net income. Results of Operations (In millions) Financial Summary Premiums and fees Net investment income Other revenues Segment...

  • Page 94
    ...loss was primarily related to declines in equity markets and interest rates and increased market volatility. Adjusted loss from operations for Run-off Reinsurance in 2008 compared with 2007 was also negatively impacted by reduced favorable settlement activity related to personal accident and workers...

  • Page 95
    ... and related asset do not represent what management believes will ultimately be required as this business runs off. However, significant declines in mutual fund values that underlie the contracts (increasing the exposure to the Company) together with declines in the 7-year treasury rates (used to...

  • Page 96
    ... these contracts are based on ceding companies' claim payments. For GMDB and GMIB, claim payments vary because of changes in equity markets and interest rates, as well as mortality and policyholder behavior. For workers' compensation and personal accident, the claim payments relate to accidents and...

  • Page 97
    ...individual life insurance and annuity business and the 2004 sale of the retirement benefits business; and run-off settlement annuity business. COLI has contributed the majority of the earnings in 2009, 2008 and 2007 for Other Operations. Federal legislation enacted in 1996 affected certain policies...

  • Page 98
    ... the Company's stock price in 2008. DISCONTINUED OPERATIONS Description Discontinued operations represent results associated with certain investments or businesses that have been sold or are held for sale. (In millions) Financial Summary Income before income (taxes) benefits Income (taxes) benefits...

  • Page 99
    ... the Company and other private health plans; the potential creation of federal or state-level exchanges (or similar constructs) that could serve as a distribution mechanism and/or additional regulatory structure for certain segments of the health care market; potential changes to medical coverage...

  • Page 100
    ... of cash, cash equivalents and short-term investments; using cash flows from operating activities; selling investments; matching investment durations to those estimated for the related insurance and contractholder liabilities; and borrowing from its parent company. Liquidity requirements at the...

  • Page 101
    ...by the favorable effect of the pension contributions on tax payments. Cash flows from operating activities decreased by $911 million in 2009 compared with 2008. Excluding the results of the GMDB equity hedge program (which did not affect net income), cash flows from operating activities decreased by...

  • Page 102
    ... compared with 2007. Excluding the results of the GMDB equity hedge program (which did not affect net income), cash flows from operating activities decreased by $51 million. This decrease in 2008 primarily reflects higher payments for certain prepaid expenses in 2008. Investing activities Cash used...

  • Page 103
    ... the Company maintains. Management allocates resources to new long-term business commitments when returns, considering the risks, look promising and when the resources available to support existing business are adequate. The Company prioritizes its use of capital resources to: x x x provide capital...

  • Page 104
    ...at the parent company level. In 2010, the parent company's debt service consists of scheduled interest payments of $168 million on outstanding long-term debt of $2.4 billion at December 31, 2009 and approximately $100 million of commercial paper that will mature over the next three months. There are...

  • Page 105
    ... 31, 2009, are estimated to be as follows: Less than 1 (In millions, on an undiscounted basis) On-Balance Sheet: Insurance liabilities: Contractholder deposit funds Future policy benefits Health Care medical claims payable Unpaid claims and claims expenses Short-term debt Long-term debt Non-recourse...

  • Page 106
    ... premiums and fees, represent estimated net benefit payments for health, life and disability insurance policies and annuity contracts. Recorded contractholder deposit funds reflect current fund balances primarily from universal life customers. Contractual cash obligations for these universal life...

  • Page 107
    ...separate account assets. Additional information regarding the Company's investment assets and related accounting policies is included in Notes 2, 11, 12, 14 and 17 to the Consolidated Financial Statements. Fixed Maturities Investments in fixed maturities (bonds) include publicly traded and privately...

  • Page 108
    ..., it expects to hold a significant portion of these assets for the long term and therefore, does not expect such gains or losses to be material to the Company's liquidity or financial condition. The value of the Company's fixed maturity portfolio increased $574 million in 2009 driven by a decline in...

  • Page 109
    ... 2007 to real estate values estimated during the second quarter of 2009. This was driven by management's decision to not fully reflect peak prices in prior valuations, along with declines in value recognized during the Company's 2008 portfolio review. In 2009, overall debt service coverage for the...

  • Page 110
    ... Critical Accounting Estimates beginning on page 55 of this Form 10-K for more information on the effect of declines in property values on commercial mortgage loans. Other Long-term Investments The Company's other long-term investments include $561 million in private equity and real estate funds as...

  • Page 111
    ... downgrade in credit rating; collateral losses on asset-backed securities; and for commercial mortgages, deterioration of debt service coverage below 1.0 or value declines resulting in estimated loan-to-value ratios increasing to 100% or more. The Company recognizes interest income on problem bonds...

  • Page 112
    ... effect on the Company's liquidity or financial condition. While management believes the commercial mortgage loan portfolio is positioned to perform well due to the solid aggregate loan to value ratio, strong debt service coverage and minimal underwater position, the commercial real estate market...

  • Page 113
    ...Longer-term investments generally support products with longer pay out periods such as annuities and long-term disability liabilities. Use of local currencies for foreign operations. The Company generally conducts its international business through foreign operating entities that maintain assets and...

  • Page 114
    ...Company uses futures contracts as part of a GMDB equity hedge program to substantially reduce the effect of equity market changes on certain reinsurance contracts that guarantee minimum death benefits based on unfavorable changes in underlying variable annuity account values. The hypothetical effect...

  • Page 115
    ... premium rates in the Company's health care operations, including increased use and costs of medical services; increased medical, administrative, technology or other costs resulting from new legislative and regulatory requirements imposed on the Company's employee benefits businesses; challenges...

  • Page 116
    ...public sector alternative and/or alternative assessments and tax increases specific to the Company's industry), which could increase cost and affect the market for the Company's health care products and services; and amendments to income tax laws, which could affect the taxation of employer provided...

  • Page 117
    ...timely detection of unauthorized acquisitions, use or disposition of the Company's assets that could have a material effect on the financial statements. (iii) Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management assessed...

  • Page 118
    Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information contained under the caption "Market Risk" in the MD&A section of this Form 10-K is incorporated by reference. 98

  • Page 119
    ... investment gains (losses) Total revenues Benefits and Expenses Health Care medical claims expense Other benefit expenses Mail order pharmacy cost of goods sold Guaranteed minimum income benefits (income) expense Other operating expenses Total benefits and expenses Income from Continuing Operations...

  • Page 120
    ... assets Liabilities Contractholder deposit funds Future policy benefits Unpaid claims and claim expenses Health Care medical claims payable Unearned premiums and fees Total insurance and contractholder liabilities Accounts payable, accrued expenses and other liabilities Short-term debt Long-term...

  • Page 121
    ... updated guidance on certain hybrid financial instruments (See Note 2) Implementation effect of updated guidance on uncertain tax positions (See Note 2) Shareholders' net income Effect of issuance of stock for employee benefit plans Common dividends declared (per share: $0.04; $0.04; $0.04) Retained...

  • Page 122
    ... funds Change in cash overdraft position Net change in short-term debt Net proceeds on issuance of long-term debt Repayment of long-term debt Repurchase of common stock Issuance of common stock Common dividends paid Net cash provided by (used in) financing activities Effect of foreign currency rate...

  • Page 123
    ... care products and services such as medical coverages, pharmacy, behavioral health, dental benefits, and disease management; group disability, life and accident insurance; and disability and workers' compensation case management and related services. In addition, the Company has an international...

  • Page 124
    ...-related and restructuring costs to be expensed as incurred and requires changes in tax items after the acquisition date to be reported in income tax expense. There were no effects to the Company's Consolidated Financial Statements at adoption. Derivatives disclosures. Effective January 1, 2009...

  • Page 125
    ... for reinsurance contracts covering guaranteed minimum income benefits (GMIB assets and liabilities) under certain variable annuity contracts issued by other insurance companies and related retrocessional contracts. The Company also reports separate account assets at fair value; however, changes in...

  • Page 126
    ... and limited liability companies holding real estate, securities or loans. These investments are carried at cost plus the Company's ownership percentage of reported income or loss in cases where the Company has significant influence, otherwise the investment is carried at cost. Income from...

  • Page 127
    ... Deferred Policy Acquisition Costs Acquisition costs include sales compensation, commissions, direct response marketing, telemarketing, premium taxes and other costs that the Company incurs in connection with new and renewal business. Depending on the product line they relate to, the Company records...

  • Page 128
    ...in the Company's revenues and expenses. Fees earned for asset management services are reported in premiums and fees. K. Contractholder Deposit Funds Liabilities for contractholder deposit funds include deposits received from customers for investment-related and universal life products and investment...

  • Page 129
    ... are estimates of payments to be made under insurance coverages (primarily long-term disability, workers' compensation and life and health) for reported claims and for losses incurred but not yet reported. The Company develops these estimates for losses incurred but not yet reported using actuarial...

  • Page 130
    ... including medical service utilization and unit costs and the Company's ability to manage these factors through benefit design, underwriting, provider contracting and the Company's medical management initiatives. These factors are affected by changes in the level and mix of medical benefits offered...

  • Page 131
    ... health insurance and managed care coverages are recognized as revenue on a pro rata basis over the contract period. Benefits and expenses are recognized when incurred. Premiums for individual life insurance and individual and group annuity products, excluding universal life and investment-related...

  • Page 132
    ...-West Healthcare primarily sells medical plans on a self-funded basis with stop loss coverage to select and regional employer groups. Great-West Healthcare's offerings also include the following specialty products: stop loss, life, disability, medical, dental, vision, prescription drug coverage, and...

  • Page 133
    ... Premiums, accounts and notes receivable Reinsurance recoverables Property and equipment (primarily capitalized software) Deferred income taxes Goodwill Other assets, including other intangibles Total assets acquired Future policy benefits Unpaid claims and claim expenses Health Care medical claims...

  • Page 134
    ... of December 31, 2009, the remaining deferred gain of $29 million after-tax will be recognized in the Company's results of operations through 2032. D. Sale of Individual Life Insurance and Annuity Business In 1998, the Company sold its individual life insurance and annuity business for cash proceeds...

  • Page 135
    ... Company's common stock for the period. (In millions) Antidilutive options 2009 8.8 2008 6.3 2007 1.2 Note 5 - Health Care Medical Claims Payable Medical claims payable for the Health Care segment reflects estimates of the ultimate cost of claims that have been incurred but not yet reported, those...

  • Page 136
    ... An increase or decrease to medical claims payable on accounts in deficit, in effect, accrues to the Company and directly impacts shareholders' net income. An account is in deficit when the accumulated medical costs and administrative charges, including profit charges, exceed the accumulated premium...

  • Page 137
    ... review to reduce the operating expenses of its ongoing businesses ("cost reduction program"). As a result, the Company recognized severance-related and real estate charges in other operating expenses. Severance charges in 2008 and 2009 resulted from reductions of approximately 2,350 positions...

  • Page 138
    ...equity market exposures relating to guaranteed minimum death benefit contracts, the Company operates a dynamic hedge program ("GMDB equity hedge program"), using exchange-traded futures contracts. The hedge program is designed to offset both positive and negative impacts of changes in equity markets...

  • Page 139
    ... equity hedge program using futures contracts, and is based on the Company's view that short-term interest rates will average 5% over future periods, but considers that current short-term rates are less than 5%. The mean investment performance assumption for the underlying fixed income mutual funds...

  • Page 140
    ...the results of the futures contracts; and adverse interest rate impacts. Interest rate risk is not covered by the GMDB equity hedge program, and the interest rate returns on the futures contracts were less than the Company's long-term assumption for mean investment performance generating $14 million...

  • Page 141
    ...the fair value of the related mutual fund investments at the time of a contractholder's death. Other annuity designs that the Company reinsured guarantee that the benefit received at death will be: x x the contractholder's account value as of the last anniversary date (anniversary reset); or no less...

  • Page 142
    ...and Assumed Reinsurance Ceded Reinsurance: Ongoing operations. The Company's insurance subsidiaries have reinsurance recoverables from various reinsurance arrangements in the ordinary course of business for its Health Care, Disability and Life, and International segments as well as the non-leveraged...

  • Page 143
    ... Company under these contracts are based on the ceding companies' claim payments. For GMDB, claim payments vary because of changes in equity markets and interest rates, as well as mortality and contractholder behavior. For workers' compensation and personal accident, the payments relate to accidents...

  • Page 144
    ...of ceded premiums, and Total benefits and expenses were presented net of reinsurance recoveries, in the following amounts: (In millions) Premiums and Fees Short-duration contracts: Direct Assumed Ceded Long-duration contracts: Direct Assumed Ceded: Individual life insurance and annuity business sold...

  • Page 145
    ... and equipment Other intangibles Total depreciation and amortization $ $ 2009 147 91 238 30 268 $ $ 2008 143 76 219 25 244 $ $ 2007 111 74 185 9 194 The Company estimates annual pre-tax amortization for intangible assets, including internal-use software, over the next five calendar years to be as...

  • Page 146
    ...of its subsidiaries provide pension, health care and life insurance defined benefits to eligible retired employees, spouses and other eligible dependents through various plans. On May 8, 2009, the Company announced a freeze of its primary domestic defined benefit pension plans effective July 1, 2009...

  • Page 147
    ... relating to census changes and updated medical trend assumptions resulting from the 2009 plan valuations; and the effect of the 2009 curtailment. Those impacts were partially offset by actual returns on pension plan assets being more favorable than expected in 2009, as both equity and fixed income...

  • Page 148
    ... the Company's current claim experience and management's estimate that rates of growth will decline in the future. A 1% increase or decrease in the estimated rate would change 2009 reported amounts as follows: (In millions) Effect on total service and interest cost Effect on postretirement benefit...

  • Page 149
    ... the volatility in returns, while also providing adequate liquidity to fund benefit distributions. As of December 31, 2009, pension plan assets included $2.6 billion invested in the separate accounts of Connecticut General Life Insurance Company ("CGLIC") and Life Insurance Company of North America...

  • Page 150
    ... equity real estate and fixed income funds that are priced using the net asset value are classified in Level 3 due to restrictions on withdrawal. The following table summarizes the changes in pension plan assets classified in Level 3 for the year ended December 31, 2009. Actual return on plan assets...

  • Page 151
    ... long-term market conditions, plan asset mix and management's investment strategy. Actual and target investment allocations are very similar at December 31, 2009. To measure pension costs, the Company uses a market-related asset valuation for domestic pension plan assets invested in non-fixed income...

  • Page 152
    ... was frozen in 1999. Participants in the active plan may invest in a fund that invests in the Company's common stock, several diversified stock funds, a bond fund and a fixed-income fund. The Company may elect to increase its matching contributions if the Company's annual performance meets certain...

  • Page 153
    ...Company's pension plan assets. December 31, 2009 Quoted Prices in Active Markets for Significant Other Identical Assets Observable Inputs (Level 1) (Level 2) Significant Unobservable Inputs (Level 3) (In millions) Financial assets at fair value: Fixed maturities: Federal government and agency State...

  • Page 154
    ... in Level 2 including most public and private corporate debt and equity securities, federal agency and municipal bonds, non-government mortgage and asset-backed securities and preferred stocks. Because many fixed maturities and preferred stocks do not trade daily, fair values are often derived using...

  • Page 155
    ... price in the absence of market data indicating a change in the estimated fair values. Guaranteed minimum income benefit contracts. Because cash flows of the GMIB liabilities and assets are affected by equity markets and interest rates, and are settled in lump sum payments, the Company reports...

  • Page 156
    ... liability (own credit) or the Company will not collect on its GMIB retrocessional coverage (reinsurer credit risk). The significant assumptions used to value the GMIB assets and liabilities as of December 31, 2009 were as follows: x x The market return and discount rate assumptions are based on the...

  • Page 157
    ... are reported in the Company's Consolidated Balance Sheets in Accounts payable, accrued expenses and other liabilities. GMIB assets associated with these contracts represent net receivables in connection with reinsurance that the Company has purchased from two external reinsurers and are reported in...

  • Page 158
    ...was classified in Level 3. Typically, investments that transfer out of Level 3 are classified in Level 2 as market data on the securities becomes more readily available. The Company provided reinsurance for other insurance companies that offer a guaranteed minimum income benefit, and then retroceded...

  • Page 159
    ...22) Non-guaranteed separate accounts (1) Total separate account assets Total 1,755 5,533 7,288 (1) Non-guaranteed separate accounts include $2.6 billion in assets supporting the Company's pension plan, including $517 million classified in Level 3. December 31, 2008 Quoted Prices in Active Markets...

  • Page 160
    The following tables summarize the change in separate account assets reported in Level 3 for the years ended December 31, 2009 and 2008. (In millions) Balance at 1/1/09 Policyholder losses (1) Purchases, issuances, settlements Transfers into Level 3 Balance at 12/31/09 (1) Included in this amount ...

  • Page 161
    ... life and annuity and retirement benefits businesses. The fair value for these contracts is determined using the fair value of these buyers' assets supporting these reinsured contracts. The Company had a reinsurance recoverable equal to the carrying value of these reinsured contracts. Long-term...

  • Page 162
    ... utilizing standard underwriting practices and are not considered sub-prime loans. Gross unrealized appreciation (depreciation) on fixed maturities (excluding trading securities and hybrid securities) by type of issuer is shown below. (In millions) Amortized Cost Federal government and agency State...

  • Page 163
    ...2009, the Company had commitments to purchase $72 million of fixed maturities bearing interest at a fixed market rate. Review of declines in fair value. Management reviews fixed maturities for impairment based on criteria that include: x x x x length of time and severity of decline; financial health...

  • Page 164
    ..., all of which were at a fixed rate of interest. These loan commitments are diversified by property type and geographic region. As of December 31, 2009, the Company had commitments to contribute additional equity of $10 million to real estate investments. The Company expects to disburse most of the...

  • Page 165
    ... by 2015. D. Short-Term Investments and Cash Equivalents Short-term investments and cash equivalents included corporate securities of $624 million, federal government securities of $402 million and money market funds of $104 million at December 31, 2009. The Company's short-term investments and cash...

  • Page 166
    ... has written or sold contracts to guarantee minimum income benefits and, from time to time, to enhance investment returns. The Company uses hedge accounting when derivatives are designated, qualify and are highly effective as hedges. Effectiveness is formally assessed and documented at inception...

  • Page 167
    ... date, the benchmark Treasury rate component of future interest payments on debt to be issued. The Company paid the fair value of the contracts at their expiration and reported the cash outflow in operating activities. Using cash flow hedge accounting, fair values were reported in short-term...

  • Page 168
    ... market price of outstanding contracts Equity and foreign currency To reduce domestic and international equity market exposures for certain reinsurance contracts that guarantee minimum death benefits (GMDB) resulting from changes in variable annuity account values based on underlying mutual funds...

  • Page 169
    ...the years ended December 31 were as follows: (In millions) Fixed maturities Equity securities Commercial mortgage loans Policy loans Real estate Other long-term investments Short-term investments and cash Less investment expenses Net investment income $ $ 2009 748 7 223 92 (1) (30) 10 1,049 35 1,014...

  • Page 170
    ...Company's revenues for the years ended December 31 were as follows: (In millions) Separate accounts Investment gains required to adjust future policy benefits for the run-off settlement annuity business $ $ 2009 (25) 51 $ $ 2008 (146) 8 $ $ 2007 652 18 Sales information for available-for-sale fixed...

  • Page 171
    ...up liquidity to support the outstanding commercial paper. If at any time funds are not available on favorable terms under the Program, the Company may use its credit facility for funding. In October 2008, the Company added an additional dealer to its Program. As of December 31, 2009, the Company had...

  • Page 172
    ... 2009 2008 The Company maintains a share repurchase program, which was authorized by its Board of Directors. The decision to repurchase shares depends on market conditions and alternative uses of capital. The Company has, and may continue from time to time, to repurchase shares on the open market...

  • Page 173
    ... amounts required to adjust future policy benefits for the run-off settlement annuity business. Changes in accumulated other comprehensive income (loss) were as follows: Tax (Expense) (In millions) 2009 Net unrealized appreciation, securities: Implementation effect of updated guidance on other...

  • Page 174
    ... 31, 2009, the Company's life insurance and HMO subsidiaries had investments on deposit with state departments of insurance with statutory carrying values of $349 million. The Company's life insurance and HMO subsidiaries are also subject to regulatory restrictions that limit the amount of annual...

  • Page 175
    ...) Tax expense at nominal rate Tax-exempt interest income Effect of permanently invested foreign earnings Dividends received deduction Resolution of federal tax matters State income tax (net of federal income tax benefit) Change in valuation allowance Other Total income taxes $ $ 2009 664 (31) (23...

  • Page 176
    ... allowance reflects management's assessment that certain deferred tax assets may not be realizable. As was the case at December 31, 2008, the valuation allowance at December 31, 2009 relates primarily to operating losses, and other deferred tax benefits, of the run-off reinsurance operations. It is...

  • Page 177
    ... ultimately enacted, these changes could increase the Company's effective tax rate. Note 20 - Employee Incentive Plans The People Resources Committee of the Board of Directors awards stock options, restricted stock and deferred stock to certain employees. To a very limited extent, the Committee has...

  • Page 178
    ... maturities of traded options are less than one year. The risk-free interest rate is derived using the four-year U.S. Treasury bond yield rate as of the award date for the primary grant. Expected option life reflects the Company's historical experience excluding activity related to options granted...

  • Page 179
    ... for human resource and information technology support services. The initial service periods under these arrangements range from two to seven years and their related costs are reported consistent with operating leases over the service period based on the pattern of use. The Company recorded in other...

  • Page 180
    ... filing a separate income tax return. The Company does not report total assets by segment since this is not a metric used to allocate resources or evaluate segment performance. The Company presents segment information as follows: Health Care includes medical, dental, behavioral health, prescription...

  • Page 181
    ... premium revenue is recorded in fees. Also includes certain non-participating cases for which special customer level reporting of experience is required. (4) Other medical premiums include risk revenue for specialty products. (5) Represents administrative service fees for medical members and related...

  • Page 182
    ...and Life Premiums and fees: Life Disability Other Total Other revenues Net investment income Segment revenues Income taxes Segment earnings International Premiums and fees: Health Care Life, Accident and Health Total Other revenues Net investment income Segment revenues Income taxes Equity in income...

  • Page 183
    .... The Company records separate account liabilities equal to separate account assets. In certain cases, primarily associated with the sold retirement benefits business (which was sold in April 2004), the Company guarantees a minimum level of benefits for retirement and insurance contracts, written...

  • Page 184
    ...31, 2009. As part of the reinsurance and administrative service arrangements, the Company pays claims for the group medical and long-term disability business of Great-West Healthcare and collects related amounts due from their third-party reinsurers. Any uncollected amounts will represent additional...

  • Page 185
    ... state and federal law, including legislative and regulatory proposals related to health care issues, which could increase cost and affect the market for the Company's health care products and services; and pension legislation, which could increase pension cost; changes in Employee Retirement Income...

  • Page 186
    ... over disallowed claims under the settlement submitted by a representative of certain class member physicians is in arbitration. Separately, in 2005, the court approved a settlement between CIGNA and a class of non-physician health care providers. Only the American Dental Association case remains...

  • Page 187
    ..., Pain Management and Surgery Center of Southern Indiana, filed a voluntary dismissal of its claims on November 11, 2009. It is reasonably possible that others could initiate additional litigation or additional regulatory action against the Company with respect to use of data provided by Ingenix...

  • Page 188
    ..., evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining...

  • Page 189
    ... before income taxes Shareholders' net income Shareholders' net income per share: Basic Diluted 2008 Total revenues Income from continuing operations before income taxes Shareholders' net income (loss) Shareholders' net income (loss) per share: Basic Diluted Stock and Dividend Data 2009 Price range...

  • Page 190
    ... 198 128 155 $ 62 $ 81 $ 72 $ $ $ 130 102 90 * Assumes that the value of the investment in CIGNA common stock and each index was $100 on December 31, 2004 and that all dividends were reinvested. ** Weighted average of S&P Managed Health Care (75%) and Life & Health Insurance (25%) Indexes. 170

  • Page 191
    ... that information required to be disclosed by CIGNA in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. B. Internal Control Over Financial Reporting Management's Annual Report...

  • Page 192
    ... business conduct and ethics, and applies to CIGNA's directors, officers (including the chief executive officer, chief financial officer and chief accounting officer) and employees. The Code of Ethics is posted on the Corporate Governance section found on the "About Us" page of the Company's website...

  • Page 193
    ...is incorporated by reference. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information under the captions "Policy for the Pre-Approval of Audit and Non-Audit Services" and "Fees to Independent Registered Public Accounting Firm" in CIGNA's proxy statement to be dated on or about March 19, 2010...

  • Page 194
    ...has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: February 25, 2010 CIGNA CORPORATION By: /s/ Annmarie T. Hagan Annmarie T. Hagan Executive Vice President and Chief Financial Officer (Principal Financial Officer) Pursuant to the requirements...

  • Page 195
    /s/ James E. Rogers James E. Rogers Director /s/ Carol Cox Wait Carol Cox Wait Director /s/ Eric C. Wiseman Eric C. Wiseman Director /s/ Donna F. Zarcone Donna F. Zarcone Director /s/ William D. Zollars William D. Zollars Director 175

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  • Page 197
    ... PAGE Report of Independent Registered Public Accounting Firm on Financial Statement Schedules...Schedules I Summary of Investments--Other Than Investments in Related Parties as of December 31, 2009 ...II Condensed Financial Information of CIGNA Corporation (Registrant)...III Supplementary Insurance...

  • Page 198
    ... Registered Public Accounting Firm on Financial Statement Schedules To the Board of Directors and Shareholders of CIGNA Corporation Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report dated February...

  • Page 199
    ... SCHEDULE I SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES December 31, 2009 (in millions) Amount at which shown in Fair Type of Investment Cost Value the Consolidated Balance Sheet Fixed maturities: Bonds: United States government and government agencies and authorities States...

  • Page 200
    ... AND SUBSIDIARIES SCHEDULE II CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION (REGISTRANT) STATEMENTS OF INCOME (in millions) For the year ended December 31, 2009 2008 2007 Other revenues Total revenues Operating expenses: Interest Intercompany interest Other Total operating expenses Loss...

  • Page 201
    ... FINANCIAL INFORMATION OF CIGNA CORPORATION (REGISTRANT) BALANCE SHEETS (in millions) As of December 31, 2009 Assets: Cash and cash equivalents Investments in subsidiaries Other assets Total assets $ $ 13,674 586 14,260 $ $ 1 12,275 723 12,999 2008 Liabilities: Intercompany Short-term debt Long...

  • Page 202
    ... cash provided by investing activities Cash Flows from Financing Activities: Net change in intercompany debt Net change in short-term debt Net proceeds on issuance of long-term debt Repayment of long-term debt Issuance of common stock Common dividends paid Repurchase of common stock Net cash used in...

  • Page 203
    ...of Directors approved a three-for-one stock split (in the form of a stock dividend) of the Company's common shares. The stock split was effective on June 4, 2007 for shareholders of record as of the close of business on May 21, 2007. Note 3-Short-term and long-term debt consisted of the following at...

  • Page 204
    ... Treasury Rate plus 50 basis points. On March 14, 2008, the Company entered into a new commercial paper program ("the Program"). Under the Program, the Company is authorized to sell from time to time short-term unsecured commercial paper notes up to a maximum of $500 million. The proceeds are used...

  • Page 205
    ... programs to indemnify the insurer for claim liabilities that fall within deductible amounts for policy years dating back to 1994. The Company also provides solvency guarantees aggregating $34 million under state and federal regulations in support of its indirect wholly owned medical HMOs...

  • Page 206
    ...) Deferred policy acquisition Segment Year Ended December 31, 2009: Health Care Disability and Life International Run-off Reinsurance Other Operations Corporate Total $ costs Future policy benefits and contractholder deposit funds Medical claims payable and unpaid claims Unearned premiums and fees...

  • Page 207
    ...'s 2009 Annual Report. The allocation of net investment income is based upon the investment year method, the identification of certain portfolios with specific segments, or a combination of both. Benefit expenses include Health Care medical claims expense and other benefit expenses. Other operating...

  • Page 208
    CIGNA CORPORATION AND SUBSIDIARIES SCHEDULE IV REINSURANCE (in millions) Percentage Gross amount Year Ended December 31, 2009: Life insurance in force Premiums and fees: Life insurance and annuities Accident and health insurance Total Year Ended December 31, 2008: Life insurance in force Premiums ...

  • Page 209
    CIGNA CORPORATION AND SUBSIDIARIES SCHEDULE V VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (in millions) Charged (Credited) Balance at beginning Description 2009: Investment asset valuation reserves: Commercial mortgage loans Allowance for doubtful accounts: Premiums, accounts and notes receivable...

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  • Page 211
    ... ended September 30, 2009 and incorporated herein by reference. Filed herewith. 10.6 10.7 CIGNA Corporation Stock Plan, as amended and restated through July 2000 10.8 CIGNA Stock Unit Plan, as amended and restated effective July 22, 2008 Filed as Exhibit 10.1 to the registrant's Form 10-Q for...

  • Page 212
    ... herewith. (b) Amendment No. 1 to the CIGNA Supplemental Pension Plan, amended and restated effective as of September 1, 1999 Filed herewith. (c) Amendment No. 2 dated December 6, 2000 to the CIGNA Supplemental Pension Filed as Exhibit 10.12(c) to the registrant's Form 10-K for the year ended...

  • Page 213
    ... Filed herewith. 10.20 10.21 Schedule regarding Amended Deferred Stock Unit Agreements effective December 31, 2008 with Messrs. Hanway, Bell and Murabito and Form of Amended Deferred Stock Unit Agreement Agreement and Release dated May 22, 2009 with Mr. Bell 10.22 10.23 Form of CIGNA Long-Term...

  • Page 214
    ... U.S.C. Section 1350 Certification of Chief Financial Officer of CIGNA Corporation pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350 Filed herewith. 31.2 Filed herewith. 32.1 Furnished herewith. 32.2 Furnished herewith. The registrant will furnish to the Commission upon...

  • Page 215
    ...12 CIGNA CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions) Year Ended December 31, Income from continuing operations before income taxes Adjustments: Loss (income) from equity investee Loss (income) attributable to noncontrolling interest Income before income taxes...

  • Page 216
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  • Page 217
    ... CIGNA Arbor Life Insurance Company (Connecticut) C. CIGNA Behavioral Health, Inc. (Minnesota) (1) CIGNA Behavioral Health of California, Inc. (California) (2) CIGNA Behavioral Health of Texas, Inc. (Texas) (3) MCC Independent Practice Association of New York, Inc. (New York) D. CIGNA Dental Health...

  • Page 218
    ...Limited (Bermuda) F. CIGNA HealthCare Holdings, Inc. (Colorado) (1) CIGNA HealthCare - Centennial State, Inc. (Colorado) (2) CIGNA HealthCare - Pacific, Inc. (California) (3) Great-West HealthCare of Illinois, Inc. (Illinois) G. CIGNA Life Insurance Company of Canada (Canada) H. CIGNA Life Insurance...

  • Page 219
    ... and No. 333-147994) of CIGNA Corporation of our reports dated February 25, 2010 relating to the financial statements, the financial statement schedules and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP Philadelphia...

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  • Page 221
    ... in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who...

  • Page 222
    ..., summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 25, 2010 /s/ Annmarie T. Hagan Chief Financial Officer

  • Page 223
    ... 32.1 Certification of Chief Executive Officer of CIGNA Corporation pursuant to 18 U.S.C. Section 1350 I certify that, to the best of my knowledge and belief, the Annual Report on Form 10-K of CIGNA Corporation for the fiscal period ending December 31, 2009 (the "Report"): (1) (2) complies with the...

  • Page 224
    ... 32.2 Certification of Chief Financial Officer of CIGNA Corporation pursuant to 18 U.S.C. Section 1350 I certify that, to the best of my knowledge and belief, the Annual Report on Form 10-K of CIGNA Corporation for the fiscal period ending December 31, 2009 (the "Report"): (1) (2) complies with the...

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    Our mission: To help the people we serve improve their health, well-being and sense of security.

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    ... in the United States and throughout the world. Its subsidiaries are major providers of employee benefits offered through the workplace, with products and services including health care; group life, accident and disability insurance; dental; vision; behavioral health; and pharmacy. "CIGNA" and the...