Cigna 2009 Annual Report Download - page 131

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O. Unearned Premiums and Fees
Premiums for life, accident and health insurance are recognized as revenue on a pro rata basis over the contract period. Fees for
mortality and contract administration of universal life products are recognized ratably over the coverage period. The unrecognized
portion of these amounts is recorded as unearned premiums and fees.
P. Accounts Payable, Accrued Expenses and Other Liabilities
Accounts payable, accrued expenses and other liabilities consist principally of pension, other postretirement and postemployment
benefits and various insurance-related liabilities, including amounts related to reinsurance contracts and insurance-related assessments
that management can reasonably estimate. Accounts payable, accrued expenses and other liabilities also include certain overdraft
positions and the loss position of certain derivatives, primarily for GMIB contracts (see Note 13). Legal costs to defend the
Company’s litigation and arbitration matters are expensed when incurred in cases for which the Company cannot reasonably estimate
the ultimate cost to defend. In cases for which the Company can reasonably estimate the cost to defend, these costs are recognized
when the claim is reported.
Q. Translation of Foreign Currencies
The Company generally conducts its international business through foreign operating entities that maintain assets and liabilities in
local currencies, which are generally their functional currencies. The Company uses exchange rates as of the balance sheet date to
translate assets and liabilities into U.S. dollars. Translation gains or losses on functional currencies, net of applicable taxes, are
recorded in accumulated other comprehensive income (loss). The Company uses average monthly exchange rates during the year to
translate revenues and expenses into U.S. dollars.
R. Premiums and Fees, Revenues and Related Expenses
Premiums for life, accident and 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
products, are recognized as revenue when due. Benefits and expenses are matched with premiums.
Revenue for investment-related products is recognized as follows:
x Net investment income on assets supporting investment-related products is recognized as earned.
x Contract fees, which are based upon related administrative expenses, are recognized in premiums and fees as they are earned
ratably over the contract period.
Benefits and expenses for investment-related products consist primarily of income credited to policyholders in accordance with
contract provisions.
Revenue for universal life products is recognized as follows:
x Net investment income on assets supporting universal life products is recognized as earned.
x Fees for mortality and surrender charges are recognized as assessed, which is as earned.
x Administration fees are recognized as services are provided.
Benefits and expenses for universal life products consist of benefit claims in excess of policyholder account balances. Expenses are
recognized when claims are submitted, and income is credited in accordance with contract provisions.
Contract fees and expenses for administrative services only programs and pharmacy programs and services are recognized as services
are provided. Mail order pharmacy revenues and cost of goods sold are recognized as each prescription is shipped.