Cigna 2012 Annual Report Download - page 164

PART IV
ITEM 15 Exhibits and Financial Statement Schedules
Holdings and ultimately used to fund the HealthSpring acquisition in was accrued at an average monthly rate of 0.71% for 2012 and 0.63%
2012. for 2011.
The Company may redeem these Notes, at any time, in whole or in Note 4 – As of December 31, 2012, the Company had guarantees and
part, at a redemption price equal to the greater of: similar agreements in place to secure payment obligations or solvency
requirements of certain wholly owned subsidiaries as follows:
100% of the principal amount of the Notes to be redeemed; or
The Company has arranged for bank letters of credit in the amount
the present value of the remaining principal and interest payments of $3 million to provide collateral in support of its indirect wholly
on the Notes being redeemed discounted at the applicable Treasury owned subsidiaries.
Rate plus 30 basis points (5-Year 2.75% Notes due 2016), 35 basis
points (10-Year 4% Notes due 2022), or 40 basis points (30-Year Various indirect, wholly-owned subsidiaries have obtained surety
5.375% Notes due 2042). bonds in the normal course of business. If there is a claim on a surety
bond and the subsidiary is unable to pay, the Company guarantees
In March 2011, the Company issued $300 million of 10-Year Notes payment to the company issuing the surety bond. The aggregate
due March 15, 2021 at a stated interest rate of 4.5% ($298 million, amount of such surety bonds as of December 31, 2012 was
net of discount, with an effective interest rate of 4.683% per year) and $28 million.
$300 million of 30-Year Notes due March 15, 2041 at a stated interest
rate of 5.875% ($298 million, net of discount, with an effective The Company is obligated under a $12 million letter of credit
interest rate of 6.008% per year). Interest is payable on March 15 and required by the insurer of its high-deductible self-insurance
September 15 of each year beginning September 15, 2011. The programs to indemnify the insurer for claim liabilities that fall
proceeds of this debt were used for general corporate purposes, within deductible amounts for policy years dating back to 1994.
including the repayment of debt maturing in 2011. The Company also provides solvency guarantees aggregating
The Company may redeem these Notes, at any time, in whole or in $34 million under state and federal regulations in support of its
part, at a redemption price equal to the greater of: indirect wholly-owned medical HMOs in several states.
100% of the principal amount of the Notes to be redeemed; or The Company has arranged a $50 million letter of credit in support
of Cigna Europe Insurance Company, an indirect wholly-owned
the present value of the remaining principal and interest payments subsidiary. The Company has agreed to indemnify the banks
on the Notes being redeemed discounted at the applicable Treasury providing the letters of credit in the event of any draw. Cigna
Rate plus 20 basis points (10-Year 4.5% Notes due 2021) or 25 basis Europe Insurance Company is the holder of the letters of credit.
points (30-Year 5.875% Notes due 2041).
The Company has agreed to indemnify payment of losses included
Maturities of debt are as follows (in millions): none in 2013, 2014, in Cigna Europe Insurance Company’s reserves on the assumed
2015, $600 in 2016, $250 in 2017 and the remainder in years after reinsurance business transferred from ACE. As of December 31,
2017. Interest expense on long-term and short-term debt was 2012, the reserve was $43 million.
$262 million in 2012, $195 million in 2011, and $176 million in
2010. Interest paid on long-term and short-term debt was In 2012, no payments have been made on these guarantees and none
$242 million in 2012, $179 million in 2011, and $175 million in are pending. The Company provided other guarantees to subsidiaries
2010. that, in the aggregate, do not represent a material risk to the
Company’s results of operations, liquidity or financial condition.
Note 3 – Intercompany liabilities consist primarily of loans payable to
Cigna Holdings, Inc. of $ 289 million as of December 31, 2012 and Note 5 – On November 16, 2011, the Company issued 15.2 million
$489 million as of December 31, 2011. The proceeds of the debt shares of its common stock at $42.75 per share. Proceeds were
issuance in November 2011 of $2.1 billion (see Note 2) and the equity $650 million ($629 million net of underwriting discount and fees)
issuance of $629 million (see Note 5) were used to reduce the and used to reduce the intercompany loan payable balance with Cigna
intercompany loan payable balance with Cigna Holdings and Holdings and ultimately used to fund the HealthSpring acquisition in
ultimately used to fund the HealthSpring acquisition in 2012. Interest January 2012.
FS-8 CIGNA CORPORATION - 2012 Form 10-K
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