Cigna 2011 Annual Report Download - page 128

106 CIGNA CORPORATION2011 Form10K
PART II
ITEM 8 Financial Statements and Supplementary Data
e following table provides the eect of these derivative instruments on the nancial statements for the indicated periods:
Fair Value Eect on the Financial Statements (In millions)
Instrument
Other Long-Term Investments
Accounts Payable, Accrued Expenses
and Other Liabilities
Gain (Loss) Recognized in Other
Comprehensive Income(1)
As of December31, As of December31, For the years ended December31,
2011 2010 2011 2010 2011 2010
Interest rate swaps $ 7 $ 10 $ - $ - $ (3) $ 2
Foreign currency swaps 3 6 19 20 (1) 10
Combination interest rate and
foreign currency swaps - - 11 12 1 (7)
TOTAL $ 10 $ 16 $ 30 $ 32 $ 3 $ 5
(1) Other comprehensive income for foreign currency swaps excludes amounts required to adjust future policy benefits for the run-off settlement annuity business.
For the years ended December31,2011 and 2010, the amount of gains (losses) reclassied from accumulated other comprehensive income into
income was not material. No gains (losses) were recognized due to ineectiveness and there were no amounts excluded from the assessment of
hedge ineectiveness.
NOTE 13 Variable Interest Entities
When the Company becomes involved with a variable interest entity
and when the nature of the Company’s involvement with the entity
changes, in order to determine if the Company is the primary beneciary
and must consolidate the entity, it evaluates:
•the structure and purpose of the entity;
•the risks and rewards created by and shared through the entity; and
•
the entity’s participants’ ability to direct its activities, receive its benets
and absorb its losses. Participants include the entity’s sponsors, equity
holders, guarantors, creditors and servicers.
In the normal course of its investing activities, the Company makes
passive investments in securities that are issued by variable interest
entities for which the Company is not the sponsor or manager. ese
investments are predominantly asset-backed securities primarily
collateralized by foreign bank obligations or mortgage-backed securities.
e asset-backed securities largely represent xed-rate debt securities
issued by trusts that hold perpetual oating-rate subordinated notes
issued by foreign banks. e mortgage-backed securities represent senior
interests in pools of commercial or residential mortgages created and
held by special-purpose entities to provide investors with diversied
exposure to these assets. e Company owns senior securities issued by
several entities and receives xed-rate cash ows from the underlying
assets in the pools. e Company is not the primary beneciary and
does not consolidate any of these entities because either:
•
it had no power to direct the activities that most signicantly impact
the entities’ economic performance; or
•
it had neither the right to receive benets nor the obligation to absorb
losses that could be signicant to these variable interest entities.
e Company has not provided, and does not intend to provide,
nancial support to these entities. e Company performs ongoing
qualitative analyses of its involvement with these variable interest entities
to determine if consolidation is required. e Company’s maximum
potential exposure to loss related to these entities is limited to the
carrying amount of its investment reported in xed maturities and
equity securities, and its aggregate ownership interest is insignicant
relative to the total principal amount issued by these entities.
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