Cigna 2011 Annual Report Download - page 94

72 CIGNA CORPORATION2011 Form10K
PART II
ITEM 8 Financial Statements and Supplementary Data
Notes to the Consolidated Financial Statements
NOTE 1 Description of Business
Cigna Corporation is a holding company and is not an insurance
company. Its subsidiaries conduct various businesses, that are
described in this Annual Report on Form10-K for the scal year
ended December31,2011 (“Form10-K”). As used in this document,
“Cigna” and the “Company” may refer to Cigna Corporation itself, one
or more of its subsidiaries, or Cigna Corporation and its consolidated
subsidiaries.
e Company is a global health services organization with insurance
subsidiaries that are major providers of medical, dental, disability,
life and accident insurance and related products and services. In the
U.S., the majority of these products and services are oered through
employers and other groups (e.g. unions and associations) and, in
selected international markets, Cigna oers supplemental health, life
and accident insurance products and international health care coverage
and services to businesses, governmental and non-governmental
organizations and individuals. In addition to its ongoing operations
described above, the Company also has certain run-o operations,
including a Run-o Reinsurance segment.
NOTE 2 Summary of Significant Accounting Policies
A. Basis of Presentation
e Consolidated Financial Statements include the accounts of Cigna
Corporation and its signicant subsidiaries. Intercompany transactions
and accounts have been eliminated in consolidation.
ese Consolidated Financial Statements were prepared in conformity
with accounting principles generally accepted in the UnitedStates of
America (“GAAP”). Amounts recorded in the Consolidated Financial
Statements necessarily reect management’s estimates and assumptions
about medical costs, investment valuation, interest rates and other
factors. Signicant estimates are discussed throughout these Notes;
however, actual results could dier from those estimates. e impact
of a change in estimate is generally included in earnings in the period
of adjustment.
In preparing these Consolidated Financial Statements, the Company
has evaluated events that occurred between the balance sheet date and
February23,2012 and determined that, with the exception of the
January31,2012 acquisition of HealthSpring,Inc., that is disclosed
in Note3, there were no other items to disclose.
Certain reclassications have been made to prior period amounts to
conform to the current presentation. In addition, certain amounts
have been restated as a result of the adoption of new accounting
pronouncements.
Variable interest entities
As of December31,2011 and 2010 the Company determined it was
not a primary beneciary in any variable interest entities.
B. Changes in Accounting Pronouncements
Deferred acquisition costs
In October2010, the Financial Accounting Standards Board (“FASB”)
amended guidance (ASU 2010-26) for the accounting of costs to
acquire or renew insurance contracts to require costs such as certain sales
compensation or telemarketing costs that are related to unsuccessful
eorts to acquire or retain business and any indirect costs to be expensed
as incurred. is new guidance must be implemented on January1,2012
and any changes to the Company’s Consolidated Financial Statements
may be recognized prospectively for acquisition costs incurred beginning
in 2012 or through retrospective adjustment of comparative prior periods.
The Company expects to implement the new requirements on
January1,2012 through retrospective adjustment of prior periods.
e Company’s deferred acquisition costs arise from sales and renewal
activities primarily in its International segment. Because the new
requirements further restrict the types of costs that are deferrable,
more of the Company’s acquisition costs will be expensed as incurred.
e Company expects the cumulative eect of implementing this
new guidance to decrease shareholders’ equity as of January1,2011
by a range of $250million to $300million. In addition, as certain
acquisition costs will no longer be eligible for deferral under the new
guidance, the Company expects that full-year 2011 shareholders’ net
income on a retrospectively adjusted basis will decrease by approximately
$70million primarily in its International segment. e Company expects
the eect of the new guidance on shareholders’ net income in 2012 to
be generally comparable to that estimated for 2011. Implementation
of this new guidance will have no impact on the underlying economic
value, revenues or cash ows of the Company’s businesses, nor will it
impact the Company’s liquidity or the statutory surplus of its insurance
subsidiaries.
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