Cigna 2011 Annual Report Download - page 118

96 CIGNA CORPORATION2011 Form10K
PART II
ITEM 8 Financial Statements and Supplementary Data
(In millions)
Fixed
Maturities&
Equity Securities GMIB Assets GMIB Liabilities GMIB Net
Balance at January1,2010 $ 845 $ 482 $ (903) $ (421)
Gains (losses) included in income:
GMIB fair value gain/(loss) - 57 (112) (55)
Other 27 - - -
Total gains (losses) included in shareholders’ net income 27 57 (112) (55)
Gains included in other comprehensive income 10 - - -
Gains required to adjust future policy benets for settlement annuities(1) 34 - - -
Purchases, issuances, settlements:
Purchases 39 - - -
Sales (1) - - -
Settlements (112) (59) 112 53
Total purchases, sales, and settlements (74) (59) 112 53
Transfers into/(out of) Level3:
Transfers into Level3 155 - - -
Transfers out of Level3 (64) - - -
Total transfers into/(out of) Level3 91 - - -
Balance at December31,2010 $ 933 $ 480 $ (903) $ (423)
Total gains (losses) included in shareholders’ net income attributable
toinstruments held at the reporting date $ 18 $ 57 $ (112) $ (55)
(1) Amounts do not accrue to shareholders.
As noted in the tables above, total gains and losses included in net
income are reected in the following captions in the Consolidated
Statements of Income:
•
Realized investment gains (losses) and net investment income for
amounts related to xed maturities and equity securities; and
•
GMIB fair value (gain) loss for amounts related to GMIB assets
and liabilities.
Reclassications impacting Level3 nancial instruments are reported
as transfers into or out of the Level3 category as of the beginning of
the quarter in which the transfer occurs. erefore gains and losses
in income only reect activity for the quarters the instrument was
classied in Level3.
Transfers into or out of the Level3 category occur when unobservable
inputs, such as the Company’s best estimate of what a market participant
would use to determine a current transaction price, become more or
less signicant to the fair value measurement. For the years ended
December31,2011 and 2010, transfer activity between Level3 and
Level2 primarily reects changes in the level of unobservable inputs
used to value certain private corporate bonds, principally related to
credit risk of the issuers.
e Company provided reinsurance for other insurance companies that
oer a guaranteed minimum income benet, and then retroceded a
portion of the risk to other insurance companies. ese arrangements
with third-party insurers are the instruments still held at the reporting
date for GMIB assets and liabilities in the table above. Because these
reinsurance arrangements remain in eect at the reporting date, the
Company has reected the total gain or loss for the period as the total
gain or loss included in income attributable to instruments still held at
the reporting date. However, the Company reduces the GMIB assets
and liabilities resulting from these reinsurance arrangements when
annuitants lapse, die, elect their benet, or reach the age after which
the right to elect their benet expires.
Under FASB’s guidance for fair value measurements, the Company’s
GMIB assets and liabilities are expected to be volatile in future periods
because the underlying capital markets assumptions will be based largely
on market-observable inputs at the close of each reporting period
including interest rates and market-implied volatilities.
GMIB fair value losses of $234million for 2011 were primarily due to
a decline in both the interest rate used for projecting claim exposure
(7-year Treasury rates) and the rate used for projecting market returns
and discounting (LIBOR swap curve).
GMIB fair value losses of $55million for 2010, were primarily due
to declining interest rates, partially oset by increases in underlying
account values resulting from favorable equity and bond fund returns,
which resulted in decreased exposures.
Contents
Q