Cigna 2009 Annual Report Download - page 142

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Retirement benefits business. The Company had a reinsurance recoverable of $1.7 billion as of December 31, 2009, and $1.9 billion
as of December 31, 2008 from Prudential Retirement Insurance and Annuity Company resulting from the sale of the retirement
benefits business, which was primarily in the form of a reinsurance arrangement. The reinsurance recoverable, which is reduced as
the Company’s reinsured liabilities are paid or directly assumed by the reinsurer, is secured primarily by fixed maturities and
mortgage loans equal to or greater than 100% of the reinsured liabilities held in a trust established for the benefit of the Company. As
of December 31, 2009, the fair value of trust assets exceeded the reinsurance recoverable and S&P had assigned this reinsurer a rating
of AA-.
Individual life and annuity reinsurance. The Company had reinsurance recoverables totaling $4.4 billion as of December 31, 2009
and $4.6 billion as of December 31, 2008 from The Lincoln National Life Insurance Company and Lincoln Life & Annuity of New
York resulting from the 1998 sale of the Company’s individual life insurance and annuity business through indemnity reinsurance
arrangements. A substantial portion of the reinsurance recoverables are secured by investments held in a trust established for the
benefit of the Company. At December 31, 2009, the trust assets secured approximately 90% of the reinsurance recoverables. The
remaining balance is currently unsecured. If Lincoln National Life Insurance Company and Lincoln Life & Annuity of New York do
not maintain a specified minimum credit or claims paying rating, these reinsurers are required to fully secure the outstanding balance.
S&P has assigned each of these companies a rating of AA-.
Other Ceded 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 and leveraged corporate-owned life insurance business. Reinsurance recoverables of $294 million as of
December 31, 2009 are expected to be collected from more than 90 reinsurers which have been assigned the following financial
strength ratings by S&P:
Percent of Reinsurance
Reinsurance Percent Recoverable Protected
Ongoing operations (In millions) Recoverable of Total by Collateral
AA- (Single reinsurer) $ 47 16% 0%
AA- or higher (Other reinsurers) 33 11% 0%
A (Single reinsurer) 29 10% 0%
A+ to A- (Other reinsurers) 111 38% 4%
Unrated (Single reinsurer) 35 12% 99%
Below A- or unrated (Other reinsurers) 39 13% 37%
Total $ 294 100% 18%
The collateral protecting the recoverables includes assets held in trust and letters of credit. The Company reviews its reinsurance
arrangements and establishes reserves against the recoverables in the event that recovery is not considered probable. As of December
31, 2009, the Company’s recoverables related to these segments were net of a reserve of $9 million.
Assumed and Ceded reinsurance: Run-off Reinsurance segment. The Company's Run-off Reinsurance operations assumed risks
related to GMDB contracts, GMIB contracts, workers’ compensation, and personal accident business. The Company’s Run-off
Reinsurance operations also purchased retrocessional coverage to reduce the risk of loss on these contracts.
Liabilities related to GMDB, workers’ compensation and personal accident are included in future policy benefits and unpaid claims.
Because the GMIB contracts are treated as derivatives under GAAP, the asset related to GMIB is recorded in the Other assets,
including other intangibles caption and the liability related to GMIB is recorded in the Accounts payable, accrued expenses, and other
liabilities caption on the Company’s Consolidated Balance Sheets (see Notes 11 and 23 for additional discussion of the GMIB assets
and liabilities).