Cigna 2011 Annual Report Download - page 112

90 CIGNA CORPORATION2011 Form10K
PART II
ITEM 8 Financial Statements and Supplementary Data
e following table summarizes the changes in pension plan assets classied in Level3 for the years ended December31,2011 and December31,2010.
Actual return on plan assets in this table may include changes in fair value that are attributable to both observable and unobservable inputs.
(In millions)
Fixed
Maturities
&Equity
Securities
Real Estate
& Mortgage
Loans
Securities
Partnerships Hedge Funds
Guaranteed
Deposit
Account
Contract Total
Balance at January 1, 2011 $ 46 $ 240 $ 347 $ - $ 24 $ 657
Actual return on plan assets:
Assets still held at the reporting date 1 44 66 (2) 3 112
Assets sold during the period 18 - - - - 18
TOTAL ACTUAL RETURN ONPLAN ASSETS 19 44 66 2 3 130
Purchases, sales, settlements, net (33) 21 (99) 150 12 51
Transfers into/out of Level 3 (6) (2) - - - (8)
Balance at December 31, 2011 $ 26 $ 303 $ 314 $ 148 $ 39 $ 830
(In millions)
Fixed
Maturities&
Equity Securities
Real Estate&
Mortgage Loans
Securities
Partnerships
Guaranteed Deposit
Account Contract Total
Balance at January1,2010 $ 167 $ 160 $ 257 $ 29 $ 613
Actual return on plan assets:
Assets still held at the reporting date (15) 16 53 2 56
Assets sold during the period 14 - - - 14
Total actual return on plan assets (1) 16 53 2 70
Purchases, sales, settlements, net (119) 64 37 (7) (25)
Transfers into/out of Level3 (1) - - - (1)
Balance at December31,2010 $ 46 $ 240 $ 347 $ 24 $ 657
e assets related to other postretirement benet plans are invested in
deposit funds with interest credited based on xed income investments
in the general account of CGLIC. As there are signicant unobservable
inputs used in determining the fair value of these assets, they are
classied as Level3. During 2011, these assets earned a return of
$1million, oset by a net withdrawal from the fund of $2million,
while during 2010, they earned a return of $1million, oset by a net
withdrawal of $2million.
Assumptions for pension and other postretirement
benefit plans
Management determined the present value of the projected benet
obligation and the accumulated other postretirement benet obligation
and related benet costs based on the following weighted average
assumptions as of and for the years ended December31:
2011 2010
Discount rate:
Pension benet obligation 4.00% 5.00%
Other postretirement benet obligation 3.75% 4.75%
Pension benet cost 5.00% 5.50%
Other postretirement benet cost 4.75% 5.25%
Expected long-term return on plan assets:
Pension benet cost 8.00% 8.00%
Other postretirement benet cost 5.00% 5.00%
Expected rate of compensation increase:
Other postretirement benet obligation 3.00% 3.00%
Other postretirement benet cost 3.00% 3.00%
Discount rates are set by applying actual annualized yields at various
durations from the Citigroup Pension Liability curve, without adjustment,
to the expected cash ows of the postretirement benets liabilities. e
Company believes that the Citigroup Pension Liability curve is the most
representative curve to use because it is derived from a broad array of
bonds in various industries throughout the domestic market for high
quality bonds. Further, Citigroup monitors the bond portfolio to ensure
that only high quality issues are included. Accordingly, the Company
does not believe that any adjustment is required to the Citigroup curve.
Expected long-term rates of return on plan assets were developed
considering actual long-term historical returns, expected long-term
market conditions, plan asset mix and management’s investment
strategy, which includes a signicant allocation to domestic and foreign
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