Cigna 2012 Annual Report Download - page 131

PART II
ITEM 8 Financial Statements and Supplementary Data
Variable Interest Entities
When the Company becomes involved with a variable interest entity provide health care services to the Medicare Advantage customers and
and when the nature of the Company’s involvement with the entity the Company provides medical management and administrative
changes, in order to determine if the Company is the primary services to the IPAs.
beneficiary and must consolidate the entity, it evaluates: The Company is not the primary beneficiary and does not consolidate
the structure and purpose of the entity; these entities because either:
the risks and rewards created by and shared through the entity; and it had no power to direct the activities that most significantly impact
the entities’ economic performance; or
the entity’s participants’ ability to direct its activities, receive its
benefits and absorb its losses. Participants include the entity’s it had neither the right to receive benefits nor the obligation to
sponsors, equity holders, guarantors, creditors and servicers. absorb losses that could be significant to these variable interest
entities.
In the normal course of its investing activities, the Company makes
passive investments in securities that are issued by variable interest The Company has not provided, and does not intend to provide,
entities for which the Company is not the sponsor or manager. These financial support to these entities that it is not contractually required
investments are predominantly asset-backed securities primarily to provide. The Company performs ongoing qualitative analyses of its
collateralized by foreign bank obligations or mortgage-backed involvement with these variable interest entities to determine if
securities. The asset-backed securities largely represent fixed-rate debt consolidation is required. The Company’s maximum potential
securities issued by trusts that hold perpetual floating-rate exposure to loss related to the investment entities is limited to the
subordinated notes issued by foreign banks. The mortgage-backed carrying amount of its investment reported in fixed maturities and
securities represent senior interests in pools of commercial or equity securities, and its aggregate ownership interest is insignificant
residential mortgages created and held by special-purpose entities to relative to the total principal amount issued by these entities. The
provide investors with diversified exposure to these assets. The Company’s maximum exposure to loss related to the IPA
Company owns senior securities issued by several entities and receives arrangements is limited to the liability for incurred but not reported
fixed-rate cash flows from the underlying assets in the pools. claims for the Company’s Medicare Advantage customers. These
liabilities are not material and are generally secured by deposits
In order to provide certain services to its Medicare Advantage maintained by the IPAs.
customers, the Company contracts with independent physician
associations (IPAs) that are variable interest entities. Physicians
Investment Income and Gains and Losses
The components of pre-tax net investment income for the years ended December 31 were as follows:
(In millions) 2012 2011 2010
Fixed maturities $ 843 $ 817 $ 788
Equity securities 466
Commercial mortgage loans 192 218 221
Policy loans 74 86 90
Real estate (2) (2) (2)
Other long-term investments 59 48 29
Short-term investments and cash 14 10 11
1,184 1,183 1,143
Less investment expenses 40 37 38
NET INVESTMENT INCOME $ 1,144 $ 1,146 $ 1,105
CIGNA CORPORATION - 2012 Form 10-K 109
NOTE 14
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NOTE 15
A. Net Investment Income