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CIGNA CORPORATION2010 Form 10K 15
PARTI
ITEM 1 Business
Corporate-owned Life Insurance (“COLI”)
Principal Products and Services
e principal products of the COLI business are permanent insurance
contracts sold to corporations to provide coverage on the lives of
certain of their employees for the purpose of funding employer-paid
future benefi t obligations. Permanent life insurance provides coverage
that, when adequately funded, does not expire after a term of years.
e contracts are primarily non-participating universal life policies.
Universal life policies typically provide fl exible coverage and fl exible
premium payments. Policy cash values fl uctuate with the amount
of the premiums paid, mortality and expense charges assessed, and
interest credited to the policy. Variable universal life policies are
universal life contracts in which the cash values vary directly with the
performance of a specifi c pool of investments underlying the policy.
e principal services provided by the COLI business are issuance
and administration of the insurance policies (e.g., maintenance of
records regarding cash values and death benefi ts, claims processing,
etc.) as well as oversight of the investment management for separate
account assets that support the variable universal life product.
Product Features
COLI policies provide a death benefi t for which CIGNA collects
fees to cover mortality risk and pay death benefi ts. Mortality risk is
retained according to guidelines established by CIGNA. To the extent
a given policy carries mortality risk that exceeds these guidelines,
reinsurance is purchased from third parties for the balance. COLI
policies also allow the policy owner to borrow against a portion of
their cash surrender value.
Cash values on universal life policies are credited interest at a declared
interest rate that refl ects the anticipated investment results of the
assets backing these policies and may vary with the characteristics
of each product. Universal life policies generally have a minimum
guaranteed declared interest rate which may be cumulative from the
issuance date of the policy.  e declared interest rate may be changed
monthly, but is generally changed less frequently.
Cash values on variable universal life policies vary directly with the
performance of a specifi c pool of investments underlying the policy.
A limited number of variable universal life policies guarantee that the
realized investment performance for a quarter, excluding the impact
of unrealized gains/losses and the impact of credit-related events, will
not be negative.
Pricing, Reserves, and Reinsurance
Fees for universal life insurance products consist of mortality,
administrative and surrender charges assessed against the
policyholder’s fund balance. Interest credited and mortality charges
for universal life and mortality charges on variable universal life may
be adjusted prospectively to refl ect expected interest and mortality
experience. For universal life insurance, CIGNA establishes reserves
for deposits received and interest credited to the contractholder,
less mortality and administrative charges assessed against the
contractholder’s fund balance. In order to reduce its exposure
to large individual and catastrophe losses, CIGNA purchases
reinsurance from unaffi liated reinsurers.
Markets and Distribution
e Company is actively developing and enhancing its product
portfolio to pursue new business.  e principal markets for COLI
products are regional to national account-sized corporations,
including banks. CIGNA’s COLI products are off ered through a
select group of independent brokers with particular expertise in the
bank market and in the use of COLI for the fi nancing of benefi t plan
liabilities.
Competition
e principal competitive factors that aff ect CIGNA’s COLI
business are pricing, service, product innovation and access to third-
party distribution. For CIGNA’s COLI business, competitors are
primarily major life insurance companies. CIGNA expects that the
competitive environment will intensify as the economy recovers and
competitors develop new investment strategies and product designs,
and aggressively price their off erings to build distribution capacity
and gain market share.
Industry Developments and Strategic Initiatives
e COLI regulatory environment continues to evolve, with
various Federal budget related proposals recommending changes in
policyholder tax treatment. In addition, provisions of the Dodd-
Frank fi nancial reform legislation may limit the ability of some
fi nancial institutions to hold certain types of COLI contracts.
Although regulatory and legislative activity could adversely impact
our business and policyholders, management does not expect the
impact to materially aff ect the Company’s results of operations,
liquidity or fi nancial condition.
Individual Life Insurance & Annuity
and Retirement Benefi ts Businesses
CIGNA sold its individual life insurance and annuity business in
1998 and its retirement benefi ts business in 2004. Portions of the
gains from these sales were deferred because the principal agreements
to sell these businesses were structured as reinsurance arrangements.
e deferred portion relating to the remaining reinsurance is being
recognized at the rate that earnings from the sold businesses would
have been expected to emerge, primarily over 15 years on a declining
basis.
For more information regarding the sale of these businesses and
the arrangements which secure CIGNA’s reinsurance recoverables,
see Note 8 of the Consolidated Financial Statements beginning on
page 89 of this Form 10-K.
Settlement Annuity Business
CIGNA’s settlement annuity business is a run-off block of contracts.
ese contracts are primarily liability settlements with approximately
34% of the liabilities associated with payments that are guaranteed
and not contingent on survivorship. In the case of the contracts that
involve non-guaranteed payments, such payments are contingent on
the survival of one or more parties involved in the settlement.
e settlement annuities business is premium defi cient, meaning
initial premiums were not suffi cient to cover all claims and profi t.
Liabilities are estimates of the present value of benefi ts to be paid