Cigna 2011 Annual Report Download - page 106

84 CIGNA CORPORATION2011 Form10K
PART II
ITEM 8 Financial Statements and Supplementary Data
e table below presents the account value, net amount at risk and average attained age of underlying contractholders for guarantees in the event
of death, by type of benet as of December31. e net amount at risk is the death benet coverage in force or the amount that the Company
would have to pay if all contractholders died as of the specied date, and represents the excess of the guaranteed benet amount over the fair
value of the underlying mutual fund investments.
(Dollars in millions) 2011 2010
Highest anniversary annuity value
Account value $ 10,801 $ 13,336
Net amount at risk $ 4,487 $ 4,372
Average attained age of contractholders (weighted by exposure) 71 70
Anniversary value reset
Account value $ 1,184 $ 1,396
Net amount at risk $ 56 $ 52
Average attained age of contractholders (weighted by exposure) 63 63
Other
Account value $ 1,768 $ 1,864
Net amount at risk $ 834 $ 755
Average attained age of contractholders (weighted by exposure) 70 69
Total
Account value $ 13,753 $ 16,596
Net amount at risk $ 5,377 $ 5,179
Average attained age of contractholders (weighted by exposure) 71 70
Number of contractholders (approx.) 480,000 530,000
e Company has also written reinsurance contracts with issuers of variable annuity contracts that provide annuitants with certain guarantees
related to minimum income benets. All reinsured GMIB policies also have a GMDB benet reinsured by the Company. See Note10 for further
information.
NOTE 7 Reinsurance
e Company’s insurance subsidiaries enter into agreements with other
insurance companies to assume and cede reinsurance. Reinsurance is
ceded primarily to limit losses from large exposures and to permit recovery
of a portion of direct losses.Reinsurance is also used in acquisition
and disposition transactions where the underwriting company is not
being acquired. Reinsurance does not relieve the originating insurer of
liability. e Company regularly evaluates the nancial condition of
its reinsurers and monitors its concentrations of credit risk.
Retirement benefits business
e Company had reinsurance recoverables of $1.6billion as of
December31,2011, and $1.7billion as of December31,2010 from
Prudential Retirement Insurance and Annuity Company resulting
from the 2004 sale of the retirement benets business, which was
primarily in the form of a reinsurance arrangement. e reinsurance
recoverable, that is reduced as the Company’s reinsured liabilities are
paid or directly assumed by the reinsurer, is secured primarily by xed
maturities equal to or greater than 100% of the reinsured liabilities.
ese xed maturities are held in a trust established for the benet of
the Company.As of December31,2011, the fair value of trust assets
exceeded the reinsurance recoverable.
Individual life and annuity reinsurance
e Company had reinsurance recoverables of $4.2billion as of
December31,2011 and $4.3billion as of December31,2010 from
e 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. e Lincoln National Life Insurance Company
and Lincoln Life& Annuity of New York must maintain a specied
minimum credit or claims paying rating or they will be required to fully
secure the outstanding recoverable balance. As of December31,2011,
both companies had ratings sucient to avoid triggering a contractual
obligation.
Other Ceded and Assumed Reinsurance
Ceded Reinsurance: Ongoing operations
e 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 corporate-owned life insurance business. Reinsurance
recoverables of $277million as of December31,2011 are expected
to be collected from more than 70 reinsurers. e highest balance that
a single reinsurer carried as of December31,2011 was $57million.
No other single reinsurer’s balance amounted to more than 12% of
the total recoverable for ongoing operations.
e Company reviews its reinsurance arrangements and establishes
reserves against the recoverables in the event that recovery is not
considered probable. As of December31,2011, the Company’s
recoverables related to these segments were net of a reserve of $4million.
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