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2013 CIGNA ANNUAL REPORT
YOUR WORLD. YOUR NEEDS.

Table of contents

  • Page 1
    2013 CIGNA ANNUAL REPORT YOUR WORLD. YOUR NEEDS.

  • Page 2
    m o nd a y 6:48 AM HOUSTON, TEXAS TABLE OF CONTENTS To our shareholders Service: Personal. Relevant. Meaningful. Support: A helping hand around the world Security: Unique, yet universal Cigna in Perspective Corporate and Board of Directors 2 16 18 20 22 24

  • Page 3
    ...a sales manager in Turkey dreams of retirement. A father in Denver takes a front-row seat at his daughter's school science fair and applauds the world's next biologist. Around the world, people have their own unique stories. And around the clock, Cigna supports their needs for a healthy, secure life...

  • Page 4
    ... remain well-prepared to successfully confront disruptive market forces such as ongoing market pressures on Medicare Advantage, and changing client and customer needs our industry faces in 2014. Cigna: 2013 at a glance Consolidated Total Revenue % change from 2012 Adjusted Income from Operations...

  • Page 5
    ... services, which we view as essential to excelling in a highly competitive marketplace, and to meeting the individual needs of our customers. We adapted to an environment of considerable market disruption, most notably from Health Care Reform and changes to Medicare Advantage in the United States...

  • Page 6
    ... Bank, meeting the health, life and accident insurance needs of that country's growing middle class. What's especially gratifying, even given these pressures and disruptions, is that we were the only publicly traded company to achieve a five-star CMS rating - for our Medicare Advantage business in...

  • Page 7
    ... driven by the public and private exchanges, as well as more convenient access to health care through employer clinics and telemedicine, to give just a couple of examples. Outside of the U.S., consumers with growing incomes are looking for trusted, easy-to-use, personal and reliable plans to protect...

  • Page 8
    ... mode of being a health insurer focused on financing sick care, and transformed ourselves into a global health service company that focuses on health, wellness and preventive care, and sense of security solutions. Reform in the U.S., they think first in terms of the public exchanges. What is...

  • Page 9
    wednesday 3:42 PM CHICAGO, ILLINOIS 7

  • Page 10
    ... the shared culture and common purpose they create. In short, they represent distinctive "communities." Cigna is committed to personalizing our products and services across customer segments and around the world - whether it's for a Government or Voluntary products customer, a Supplemental Benefits...

  • Page 11
    ...In health care, it also means being personally engaged in partnerships with the physicians who treat our customers - and with the employers who hire them and rely on their productivity. At Cigna, we seek to support and connect employees, clients and physicians. Q What is an example of this? working...

  • Page 12
    ... organizations we work with - our insights give Cigna a unique ability to bring our customers personalized solutions as their life and health stages change. Our third key area - our care delivery and physician partnership capabilities - also drives our successful collaborative accountable care and...

  • Page 13
    ... investments are enabling us to create deeper, more personal relationships with our customers - to better understand their needs, and to align, integrate and develop our products and services with those needs. Technology is fueling our ability to create a new, personalized health care experience...

  • Page 14
    friday 9:26 PM DENVER, COLORADO 12

  • Page 15
    ... market share and increased contributions from our ancillary product offerings. We expect to drive continued growth in our Commercial Health Care business around the world, as well as continued growth in our Global Supplemental Benefits business. We also see long-term opportunity for Medicare...

  • Page 16
    ... school programs made possible by Cigna Foundation grants of $450,000. Cigna provides assistance for customers who have a disability and aren't able to walk their dogs. 3:58 BOSTON, MASSACHUSETTS 2:15 PM PM LONDON, E N GLAND Cigna's people, products and programs make a difference...

  • Page 17
    Arjan Toor, a marketing leader at Cigna, visits an African village with his family and brings needed food and supplies. the world makes us global. The fact that we do it one individual at a time makes us Cigna. 9:38 AM NAMIBIA, AFRICA 15

  • Page 18
    ... to 50% fewer emergency room visits compared to the market.* And our health information and service lines are open 24 hours a day, because our customers' needs can't wait until tomorrow. *Source: Cigna Collaborative Accountable Care, Large PCP Group Results, 2013. Results vs. market average 16

  • Page 19
    saturday 12:50 PM WELLINGTON, NEW ZEALAND 17

  • Page 20
    ... 2013 with a new global focus. This was highlighted by our sponsorship of the first Global Healthy Workplace Summit in London, where the global business community shared innovative health practices to extend and enhance better workforce health worldwide. Our Corporate Responsibility Cigna Connects...

  • Page 21
    ... their road to recovery. Cigna and our employee volunteers have teamed up with Achilles International since 2008, helping adults and children with disabilities participate in the Walt Disney World® Marathon Weekend, and many other events. Supporting customers and communities is an important part of...

  • Page 22
    ...-winning disability and rehabilitation case management. The desire for security circles the globe. When you're working on assignment outside your home country and need an operation, you can count on Cigna to direct you to medical care within a global network of one-million health care professionals...

  • Page 23
    AM sunday 9:23 AMRITSAR, INDIA 21

  • Page 24
    ...broad line of insured and self-insured medical, dental, behavioral health, vision, prescription drug benefit plans, health advocacy programs and other products and services that may be integrated to provide comprehensive global health care benefit programs to employers and their employees, including...

  • Page 25
    ... - 32% Commercial Segment - 68% Premiums and fees in millions: $22,933 Global Supplemental Benefits by country: â- South Korea - 51% â- Taiwan - 11% â- Europe - 10% â- U.S. - 12% â- Indonesia - 4% â- Other - 12% Premiums and fees in millions: $2,513 Group Disability and Life by product...

  • Page 26
    ... AND BOARD Board of Directors Isaiah Harris, Jr. Independent Chairman of the Board, Retired President and Chief Executive Officer AT&T Advertising and Publishing - East, a communications services company Jane E. Henney, MD Former Senior Vice President, Provost and Professor of Medicine, University...

  • Page 27
    ... Chief Marketing Officer Cigna Corporation John M. Murabito Executive Vice President of Human Resources and Services, Cigna Corporation Jason D. Sadler Mark L. Boxer Executive Vice President and Global Chief Information Officer, Cigna Corporation President Global Individual Health, Life & Accident...

  • Page 28
    ... the payment date. For more information and an enrollment authorization form, contact Computershare at 800.760.8864, or outside the United States and Canada at 201.680.6535. You can access your account online through the Computershare website: computershare.com. STOCK LISTING Cigna's common shares...

  • Page 29
    ... file number 1-8323 29OCT201118203261 CIGNA CORPORATION (Exact name of registrant as specified in its charter) Delaware 06-1059331 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 900 Cottage Grove Road, Bloomfield, Connecticut 06002 (Address...

  • Page 30
    ...STATEMENT PART I ITEM 1. 1 Business...1 • Overview ...1 • Global Health Care ...2 • Global Supplemental Benefits ...8 • Group Disability and Life ...9 • Run-off Reinsurance ...11 • Other Operations ...11 • Investments and Investment Income...11 • Regulation ...12 • Miscellaneous...

  • Page 31
    ... Officers and Corporate Governance...116 A. Directors of the Registrant ...116 B. Executive Officers of the Registrant ...116 C. Code of Ethics and Other Corporate Governance Disclosures ...116 D. Section 16(a) Beneficial Ownership Reporting Compliance...116 Executive Compensation...116 Security...

  • Page 32
    ... and manage medical costs and price effectively and develop and maintain good relationships with physicians, hospitals and other health care providers; our ability to realize the expected benefits of strategic transactions and/or acquisitions; the substantial level of government regulation over...

  • Page 33
    ... segment offers supplemental health, life and accident insurance products in selected international markets and the U.S. This segment provides group long-term and short-term disability, group life, accident and specialty insurance products and related services. CIGNA CORPORATION - 2013 Form 10-K 1

  • Page 34
    ...insured customers medical, dental, behavioral health, vision, and prescription drug benefit plans, health advocacy programs and other products and services that may be integrated as part of a comprehensive global health care benefit program. Our Government operating segment offers Medicare Advantage...

  • Page 35
    ...receive health care benefits, including prescription drugs, through a managed care health plan such as our coordinated care plans. A significant portion of our Medicare Advantage customers receive medical care from our innovative plan models that focus on developing highly engaged physician networks...

  • Page 36
    ...management services, employee assistance programs (EAP), and work/life programs to employers, government entities and other groups sponsoring health benefit plans. We focus on integrating our programs and services with medical, pharmacy and disability programs to facilitate customized, holistic care...

  • Page 37
    ... our medical and dental product offerings. Our national vision care network, consisting of approximately 63,000 health care providers in over 24,000 locations, includes private practice ophthalmologist and optometrist offices, as well as retail eye care centers. Service and Quality Customer Service...

  • Page 38
    ...directly to employers, unions and other groups. We also employ representatives to sell utilization review services, behavioral health care 6 CIGNA CORPORATION - 2013 Form 10-K and pharmacy management, and employee assistance services directly to insurance companies, HMOs, third party administrators...

  • Page 39
    ... of service and provider networks; effectiveness of medical care management; products that meet the needs of employers and their employees; total cost management; technology; and effectiveness of marketing and sales. Financial strength of the insurer, as indicated by ratings issued by nationally...

  • Page 40
    ... various plans with specific plan options to meet their unique needs and may visit, without the need for a referral, any health care professional or facility that accepts Medicare throughout the United States. Pricing and Reinsurance Premium rates for our global supplemental benefits products are...

  • Page 41
    ... this segment's business. Approximately 13,600 insured disability policies covering approximately 7.5 million lives were in force as of December 31, 2013. Products and Services Group Disability Long-term and short-term group disability insurance products generally provide a fixed level of income to...

  • Page 42
    ...health status. This focus on managing the employee's total absence enables us to increase the number and likelihood of interventions and minimize disabling events. The group insurance market remains highly competitive as the rising cost of providing medical coverage to employees has forced companies...

  • Page 43
    ... a term of years. The contracts are primarily non-participating universal life policies. Fees for universal life insurance products consist primarily of mortality and administrative charges assessed against the policyholder's fund balance. Interest credited and mortality charges for universal life...

  • Page 44
    ... business operations, including, but not limited to: • the form and content of customer contracts including benefit mandates (including special requirements for small groups); • premium rates and medical loss ratios; • the content of agreements with participating providers of covered services...

  • Page 45
    ... rate is expected to increase beginning in 2014 as a result of this fee. The reinsurance fee is a fixed dollar per customer levy on all commercial business, including ASO and is tax deductible. Our Medicare Advantage and Medicare Part D prescription drug plan businesses are also impacted by Health...

  • Page 46
    ... 2013, our HMOs and life and health insurance subsidiaries, as well as non-U.S. insurance Licensing Requirements Pharmacy Licensure Laws Certain of our subsidiaries are pharmacies that dispense prescription drugs to participants of benefit plans administered or insured by Cigna's HMO and insurance...

  • Page 47
    ... and HMOs). Claim Administration, Utilization Review and Related Services Certain subsidiaries contract to provide claim administration, utilization management and other related services for the administration of self-insured benefit plans. These subsidiaries may be subject to state third-party...

  • Page 48
    ... to our providing the relevant services under audit. These risks may include reimbursement claims as well as potential fines and penalties. For example, with respect to our Medicare Advantage business, CMS and the Office of the Inspector General perform audits to determine a health plan's compliance...

  • Page 49
    ..., the investment management activities and investments of individual insurance companies are subject to regulation by multiple jurisdictions. Miscellaneous Premiums and fees from CMS represented 22% of our total consolidated revenues for the year ended December 31, 2013 under a number of contracts...

  • Page 50
    ...our Commercial operating segment) if employers cease to offer health care coverage for their employees; • restricting revenue, premium and customer growth in certain products and markets or expansion into new markets; • increasing health care or other benefit costs through enhanced or guaranteed...

  • Page 51
    ... and other reviews, audits and investigations by state insurance and health and welfare departments, attorneys general, the Centers for Medicare and Medicaid Services (''CMS'') and the Office of Inspector General (''OIG''). With respect to our Medicare Advantage business, CMS and OIG perform audits...

  • Page 52
    ... contract with CMS and various state governmental agencies to provide managed health care services, including Medicare Advantage plans and Medicareapproved prescription drug plans. Revenues from the Medicare programs are dependent, in whole or in part, upon annual funding from the federal government...

  • Page 53
    ..., such as changes in Medicare and/or Medicaid reimbursement levels, increasing revenue and other pressures on health care providers and consolidation activity among hospitals, physician groups and health care providers. For example, ongoing reductions by CMS and state governments in amounts payable...

  • Page 54
    ...impacted. use to serve our customers and health care professionals and to operate our business. If our data were found to be inaccurate or unreliable due to fraud or other error, or if we (or the third-party service parties we utilize) were to fail to maintain information systems and data integrity...

  • Page 55
    ...our business, results of operations, financial condition and liquidity. We face price competition and other pressures that could result in premiums that are insufficient to cover the cost of the health care services delivered to our members and inadequate medical claims reserves. While health plans...

  • Page 56
    ... criteria, provider contracting, utilization management and product design. We record medical claims reserves on our balance sheet for estimated future payments. While we continually review estimates of future payments relating to medical claims costs for services incurred in the current and prior...

  • Page 57
    ... reimbursements or payments in state and federal government programs, such as Medicare and Social Security. These state and federal budgetary pressures also could cause the government to impose new or a higher level of taxes or assessments on us, such as premium taxes on insurance companies and HMOs...

  • Page 58
    ... Emirates, and the United Kingdom. Our principal, domestic office locations, including various support operations, along with Group Disability and Life Insurance, Health Services, Core Medical and Service Operations and the domestic office of our Global Supplemental Benefits business are the Wilde...

  • Page 59
    ... Group President, Government Health Care, for Xerox Corporation/Affiliated Computer Services from March 2009 until April 2011. DAVID M. CORDANI, 48, Chief Executive Officer of Cigna beginning December 2009; Director since October 2009; President beginning June 2008; and Chief Operating Officer from...

  • Page 60
    ...Total # of shares purchased as part of publicly announced program (2) 1,792,625 - - 1,792,625 (1) Includes shares tendered by employees as payment of taxes withheld on the exercise of stock options and the vesting of restricted stock granted under the Company's equity compensation plans. Employees...

  • Page 61
    ... $ 146 $ 140 * Assumes that the value of the investment in Cigna common stock and each index was $100 on December 31, 2008 and that all dividends were reinvested. ** Weighted average of S&P Managed Health Care (75%) and Life and Health Insurance (25%) Indexes. CIGNA CORPORATION - 2013 Form 10-K 29

  • Page 62
    ... 29,300 Revenues Premiums and fees and other revenues Net investment income Mail order pharmacy revenues Realized investment gains (losses) TOTAL REVENUES Results of Operations: Global Health Care Global Supplemental Benefits Group Disability and Life Run-off Reinsurance Other Operations Corporate...

  • Page 63
    ... Care ...44 Global Supplemental Benefits ...47 Group Disability and Life ...49 Run-off Reinsurance ...50 Other Operations ...52 Corporate ...53 Investment Assets ...54 Management's Discussion and Analysis of Financial Condition and Results of Operations (''MD&A'') is intended to provide information...

  • Page 64
    ... insured and self-insured customers medical, dental, • behavioral health, vision, and prescription drug benefit plans, health advocacy programs and other products and services that may be integrated as part of a comprehensive global health care benefit program. Government Offers Medicare Advantage...

  • Page 65
    ... in 2014 through improved clinical management, purchasing and administrative efficiencies. In 2012, we completed three significant transactions targeting the seniors, individual and global supplemental benefits markets: • HealthSpring, Inc. We acquired HealthSpring, a Medicare Advantage provider...

  • Page 66
    ... fee through benefit changes and prices, we anticipate that the earnings impact will be more significant than it will be for our commercial business. Reinsurance fee. Beginning in 2014, this fee will be a fixed dollar per customer levy on all commercial business, including ASO, and is tax deductible...

  • Page 67
    ...) 2012 vs. 2011 7,221 (2) 176 (123) (18) 7,254 6,653 601 238 363 - 363 38% - 12 (50) (29) 33 33 32 39 29 - 29% Premiums and fees Net investment income Mail order pharmacy revenues Other revenues Realized investment gains Total revenues Benefits and expenses Income before income taxes Income taxes...

  • Page 68
    ...-term investments in 2013 compared with 2012 was driven by investment of increased cash levels in liquid commercial paper and United States Government obligations. Liquidity We maintain liquidity at two levels: the subsidiary level and the parent company level. 36 CIGNA CORPORATION - 2013 Form...

  • Page 69
    ... (930) $ $ $ 2012 2,350 (3,857) (228) $ $ $ 2011 1,491 (1,270) 2,867 Cash flows from operating activities consist of cash receipts and disbursements for premiums and fees, mail order pharmacy, other revenues, investment income, taxes, benefits and expenses, and, prior to February 4, 2013, gains...

  • Page 70
    ... in 2014. In addition, during 2013, we increased our asset allocation to fixed income investments and reduced our allocation to domestic stocks in order to reduce the investment risk in the pension plan. Solvency II. Our businesses in the European Union will be subject to the directive on insurance...

  • Page 71
    ... and fees, represent estimated net benefit payments for health, life and disability insurance policies and annuity contracts. Recorded contractholder deposit funds reflect current fund balances primarily from universal life customers. Contractual cash obligations for these universal life contracts...

  • Page 72
    ... 31, 2013, purchase obligations consisted of estimated payments required under contractual arrangements for future services and investment commitments as follows: (In millions) Fixed maturities Commercial mortgage loans Real estate Limited liability entities (other long-term investments) Total...

  • Page 73
    ..., taxes, capital levels and long-term growth rates. Our Cigna-HealthSpring business (reported in the Government operating segment that is also the reporting unit) contracts with CMS and various state governmental agencies to provide managed health care services, including Medicare Advantage plans...

  • Page 74
    ... 2013. The change in the amount of the incurred claims related to prior years in the medical claims payable liability does not directly correspond to an increase or decrease in shareholders' net income as explained in Note 5 to the Consolidated Financial Statements. 42 CIGNA CORPORATION - 2013 Form...

  • Page 75
    ... should not be viewed as a substitute for the most directly comparable GAAP measure that is shareholders' net income. We exclude special items because management does not believe they are representative of our underlying results of operations. We also exclude CIGNA CORPORATION - 2013 Form 10-K 43

  • Page 76
    ...customer growth; • sales of specialty products; • operating expense as a percentage of segment revenues (operating expense ratio); and • medical expense as a percentage of premiums (medical care ratio or ''MCR'') in the guaranteed cost and Medicare businesses. 44 CIGNA CORPORATION - 2013 Form...

  • Page 77
    ...increase in Global Health Care's segment earnings and adjusted income from operations in 2013, as compared with 2012, reflected revenue growth from a higher customer base and rate increases consistent with underlying medical cost trends. In 2013, both measures also benefited from increased specialty...

  • Page 78
    ... and higher income from partnership investments. Mail order pharmacy revenues increased in each of 2013 and 2012, compared with each prior year, primarily reflecting higher prescription volume for specialty medications (injectibles). Benefits and Expenses Global Health Care segment benefits and...

  • Page 79
    ... Risk Total commercial risk Medicare Medicaid Total government Total risk Service, including international health care TOTAL MEDICAL CUSTOMERS Less: voluntary / limited benefits customers Total medical customers excluding voluntary / limited benefits customers Medical customers increased 1% in 2013...

  • Page 80
    ...of Operations Financial Summary (In millions) For the Years Ended December 31, 2013 2012 2011 Increase/(Decrease) 2013 vs. 2012 Increase/(Decrease) 2012 vs. 2011 Premiums and fees Net investment income Other revenues Segment revenues Benefits and expenses Income Income Income Income before taxes...

  • Page 81
    ...results. In 2013, our operations in South Korea represented 4% of Cigna's total consolidated revenues and 10% of shareholders' net income. Group Disability and Life Segment Key factors for this segment are: • premium growth, including new business and customer retention; • net investment income...

  • Page 82
    ... of the tax benefit reported in 2011 related to the completion of the 2007-2008 tax audits. Revenues Premiums and fees. The increases in both 2013 and in 2012 reflect strong disability and life new sales, in-force growth and continued strong persistency. Net investment income. The increases in both...

  • Page 83
    ... of Operations Results of Operations Financial Summary (In millions) Premiums and fees Net investment income Other revenues Segment revenues Benefits and expenses Loss before income tax benefits Income tax benefits Segment loss Less: results of GMIB business Less: special items (after-tax) included...

  • Page 84
    ... impact of the continued low level of short-term interest rates, and the adverse impacts of overall market declines, including an increase in the provision for future partial surrenders and declines in the value of contractholders' non-equity investments such as bond funds, neither of which are...

  • Page 85
    ... the sold retirement benefits and individual life insurance and annuity businesses. Other revenues were flat in 2012 compared with 2011. Benefits and expenses increased in 2013 compared with 2012, primarily due to scheduled lump sum annuity payments and the expense to settle a tax sharing agreement...

  • Page 86
    ... and the impact of increased market yields on asset valuations. These investments do not include separate account assets. (In millions) Fixed maturities Equity securities Commercial mortgage loans Policy loans Real estate Other long-term investments Short-term investments TOTAL $ 2013 16,486 141...

  • Page 87
    ... rated A3 or better excluding guarantees by monoline bond insurers, consistent with the prior year. As of December 31, 2013, approximately 63% or $1,340 million of our total investments in state and local government securities were guaranteed by monoline bond insurers, providing additional credit...

  • Page 88
    ... under the contract terms. Other Long-term Investments Our other long-term investments include $1,169 million in security partnership and real estate funds as well as direct investments in real estate joint ventures. The funds typically invest in mezzanine debt or equity of privately held companies...

  • Page 89
    ... in Other long-term investments that were previously reported in commercial mortgage loans. Net problem and potential problem investments representing approximately 1% of total investments, excluding policy loans at December 31, 2013, decreased by $96 million from December 31, 2012, primarily...

  • Page 90
    ... fixed-rate investments support interest-sensitive and health liabilities. Longer-term investments generally support products with longer pay out periods such as annuities and long-term disability liabilities. • Use of local currencies for foreign operations. We generally conduct our international...

  • Page 91
    ... 7A. Quantitative and Qualitative Disclosures About Market Risk ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk The information contained under the caption ''Market Risk'' in the MD&A section of this Form 10-K is incorporated by reference. CIGNA CORPORATION - 2013 Form 10-K 59

  • Page 92
    ... statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain...

  • Page 93
    ... gains Total realized investment gains TOTAL REVENUES Benefits and Expenses Global Health Care medical claims expense Other benefit expenses Mail order pharmacy cost of goods sold GMIB fair value (gain) loss Other operating expenses TOTAL BENEFITS AND EXPENSES Income before Income Taxes Income taxes...

  • Page 94
    ... 31, (In millions, except per share amounts) 2013 $ 1,476 $ 2012 1,623 $ 2011 1,260 Shareholders' net income Shareholders' other comprehensive income (loss): Net unrealized appreciation (depreciation) on securities: Fixed maturities Equity securities Net unrealized appreciation (depreciation) on...

  • Page 95
    ...,481) Equity securities, at fair value (cost, $146; $121) Commercial mortgage loans Policy loans Real estate Other long-term investments Short-term investments Total investments Cash and cash equivalents Accrued investment income Premiums, accounts and notes receivable, net Reinsurance recoverables...

  • Page 96
    ... BALANCE AT DECEMBER 31, 2011 2012 Activity: Effect of issuing stock for employee benefit plans Effects of acquisition of joint venture Other comprehensive income Net income Common dividends declared (per share: $0.04) Repurchase of common stock BALANCE AT DECEMBER 31, 2012 2013 Activity: Effect of...

  • Page 97
    ...income taxes Cash used to exit the Run-off Reinsurance Business Proceeds from sales of mortgage loans held for sale Other, net NET CASH PROVIDED BY OPERATING ACTIVITIES Cash Flows from Investing Activities Proceeds from investments sold: Fixed maturities Equity securities Other (primarily short-term...

  • Page 98
    ...the Company'', ''we'', or ''our'') is a global health services organization with a mission to help its customers improve their health, well-being and sense of security. Its insurance subsidiaries are major providers of medical, dental, disability, life and accident insurance and related products and...

  • Page 99
    ...-line method based on the estimated useful life of each asset. Investment real estate as of December 31, 2013 and 2012 is expected to be held longer than one year and includes real estate acquired through the foreclosure of commercial mortgage loans. Other long-term investments. Other long-term...

  • Page 100
    ... universal life and other individual products, management estimates the present value of future revenues less expected payments. For group health and accident insurance products, management estimates the sum of unearned premiums and anticipated net investment income less future expected claims and...

  • Page 101
    ...-HealthSpring business contracts with CMS and various state governmental agencies to provide managed health care services, including Medicare Advantage plans and Medicare-approved prescription drug plans. Revenues from the Medicare programs are dependent, in whole or in part, upon annual funding...

  • Page 102
    ... investment returns consistent with requirements of GAAP when a premium deficiency exists. Liabilities for GMDB contracts represent the excess of the guaranteed death benefit over the contractholder's account values. See also Note 7 for additional information. N. Global Health Care Medical Claims...

  • Page 103
    ... health insurance and annuity products, excluding universal life and investment-related products, are recognized as revenue when due. Benefits and expenses are matched with premiums. Premiums and fees received for the Company's Medicare Advantage Plans and Medicare Part D products from customers...

  • Page 104
    ... jurisdiction tax rate which can be significantly lower than the U.S. statutory tax rate. Note 19 contains detailed information about the Company's income taxes. T. Participating Business The Company's participating life insurance policies entitle policyholders to earn dividends that represent...

  • Page 105
    ...Supplemental Benefits Group, one of the largest providers of supplemental health insurance products in the U.S. with cash from internal resources. The acquisition provides the Company with an increased presence in the Medicare supplemental benefits market. It also extends the Company's global direct...

  • Page 106
    ... with GAAP, the total purchase price has been allocated to the tangible and intangible net assets acquired based on management's estimates of their fair values. Goodwill has been allocated to the Government operating segment and is not deductible for federal income tax purposes. The condensed...

  • Page 107
    ... EPS 2012 Shareholders' net income Shares(in thousands): Weighted average Common stock equivalents Total shares EPS 2011 Shareholders' net income Shares(in thousands): Weighted average Common stock equivalents Total shares EPS $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ CIGNA CORPORATION - 2013 Form 10...

  • Page 108
    ... to cover incurred but not reported and pending claims for minimum premium products and certain ASO business where the right of offset does not exist. See Note 7 for additional information on reinsurance. For the year ended December 31, 2013, actual experience differed from the Company's key...

  • Page 109
    ...: $11 million pre-tax ($8 million after-tax) in the Global Supplemental Benefits segment and $2 million pre-tax ($1 million after-tax) in Group Disability and Life. We expect most of the severance to be paid by the end of 2015. 2012 Plan. During the third quarter of 2012, the Company, in connection...

  • Page 110
    ... in Other Revenues) of $32 million in 2013, $105 million in 2012 and $14 million in 2011. Offsetting amounts were recorded in benefits and expenses. As a result of discontinuing the hedge programs, the growth rate assumption for the underlying equity funds was changed to use long-term historical...

  • Page 111
    ..., Global Supplemental Benefits and Group Disability and Life segments as well as the non-leveraged and leveraged corporate-owned life insurance business. Reinsurance recoverables of $407 million as of December 31, 2013 are expected to be collected from more than 80 reinsurers. The Company reviews...

  • Page 112
    ... in direct premiums in 2012 as compared to 2011 primarily reflects the Company's acquisitions of HealthSpring and Great American Supplemental Benefits as well as the conversion of Vanbreda business from service to insurance contracts in 2012. The increase in long-duration assumed premiums in 2013...

  • Page 113
    ... Company estimates annual pre-tax amortization for intangible assets, including internal-use software, over the next five calendar years to be as follows: $410 million in 2014, $327 million in 2015, $253 million in 2016, $167 million in 2017, and $133 million in 2018. CIGNA CORPORATION - 2013 Form...

  • Page 114
    ... rate, actual investment returns greater than expected in 2013, the effect of the plan amendment described above, and amortization. Pension benefits. The Company's pension plans were underfunded by $0.6 billion in 2013 and $1.6 billion in 2012 and had related 82 CIGNA CORPORATION - 2013 Form...

  • Page 115
    ... rate of return on pension plan investments over the long-term payout period of the pension benefit obligations. As of December 31, 2013, pension plan assets included $3.8 billion invested in the separate accounts of Connecticut General Life Insurance Company (''CGLIC'') and Life Insurance Company...

  • Page 116
    ...recent trades of similar securities or pricing models as described below. Plan assets classified in Level 3 include investments primarily in securities partnerships, equity real estate and hedge funds generally 84 CIGNA CORPORATION - 2013 Form 10-K valued based on the pension plan's ownership share...

  • Page 117
    ... TOTAL ACTUAL RETURN ON PLAN ASSETS Purchases, sales, settlements, net Transfers into/out of Level 3 Balance at December 31, 2012 The assets related to other postretirement benefit plans are invested in deposit funds with interest credited based on fixed income investments in the general account...

  • Page 118
    ... internal pricing 86 CIGNA CORPORATION - 2013 Form 10-K methods are performed by the Company's investment professionals and generally involve using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality, as well...

  • Page 119
    ... assets at fair value: Fixed maturities: Federal government and agency State and local government Foreign government Corporate Federal agency mortgage-backed Other mortgage-backed Other asset-backed Total fixed maturities (1) Equity securities Subtotal Short-term investments GMIB assets (2) Other...

  • Page 120
    ... TOTAL $ $ Fair values of other asset and mortgage-backed securities and corporate and government fixed maturities are primarily determined using pricing models that incorporate the specific characteristics of each asset and related assumptions including the investment type and structure, credit...

  • Page 121
    ... affected by equity markets and interest rates, but are without significant life insurance risk and are settled in lump sum payments. Under the terms of these written and purchased contracts, the Company periodically receives and pays fees based on either contractholders' account values or deposits...

  • Page 122
    ...credit risk of the reinsurers, after considering collateral. Non-performance risk adjustments had an immaterial effect on shareholders' net income in 2013 and 2012. Other assumptions that affect the GMIB asset and liability include capital market assumptions (including market returns, interest rates...

  • Page 123
    ... separate accounts (1) TOTAL SEPARATE ACCOUNT ASSETS $ $ Total 548 7,704 8,252 (1) As of December 31, 2013, non-guaranteed separate accounts included $3.8 billion in assets supporting the Company's pension plans, including $983 million classified in Level 3. CIGNA CORPORATION - 2013 Form 10...

  • Page 124
    ...821 Carrying Value $ 2,851 $ 1,056 $ 4,986 Commercial mortgage loans Contractholder deposit funds, excluding universal life products Long-term debt, including current maturities, excluding capital leases The fair values presented in the table above have been estimated using market information when...

  • Page 125
    ...significant unobservable inputs. Contractholder deposit funds, excluding universal life products. Generally, these funds do not have stated maturities. Approximately 60% of these balances can be withdrawn by the customer at any time without prior notice or penalty. The fair value for these contracts...

  • Page 126
    ... 2013, the unrealized depreciation of investment grade fixed maturities is primarily due to increases in market yields since purchase. Excluding trading and hybrid securities, equity securities with a fair value lower than cost were not material at December 31, 2013. 94 CIGNA CORPORATION - 2013 Form...

  • Page 127
    ... the investment holding period. Mortgage origination professionals employ an internal credit quality rating system designed to evaluate the relative risk of the transaction at each loan's origination that is then updated each year as part of the annual portfolio loan review. The Company evaluates...

  • Page 128
    ...100% or above TOTAL The Company's annual in-depth review of its commercial mortgage loan investments is the primary mechanism for identifying emerging risks in the portfolio. The most recent review was completed by the Company's investment professionals in the second quarter of 2013 and included an...

  • Page 129
    ... as of December 31, 2012 were non-income producing during the preceding twelve months. As of December 31, 2013, the Company had commitments to contribute additional equity of $3 million to real estate investments. D. (In millions) Other Long-Term Investments 2013 812 357 104 1,273 2012 823 343 89...

  • Page 130
    ... flows of its fixed maturity bonds to match associated insurance liabilities. Accounting policy. Using cash flow hedge accounting, fair values are reported in other long-term investments or other liabilities. Changes in fair value are reported in accumulated other comprehensive income and amortized...

  • Page 131
    ... $ 2011 817 6 218 86 (2) 48 10 1,183 37 1,146 The components of pre-tax net investment income for the years ended December 31 were as follows: (In millions) Fixed maturities Equity securities Commercial mortgage loans Policy loans Real estate Other long-term investments Short-term investments and...

  • Page 132
    ... adjust future policy benefits for the run-off settlement annuity business. (In millions) 2013 $ 113 $ 8 (3) - 95 213 72 $ 141 $ 2012 48 $ 4 (9) (1) 2 44 13 31 $ 2011 50 (1) (16) (6) 35 62 21 41 Fixed maturities Equity securities Commercial mortgage loans Real estate Other investments, including...

  • Page 133
    ... of debt outstanding. There were letters of credit of $39 million issued as of December 31, 2013. On November 10, 2011, the Company issued $2.1 billion of long-term debt as follows: $600 million of 5-Year Notes due November 15, 2016 at a stated interest rate of 2.75% ($600 million, net of discount...

  • Page 134
    ... required to adjust future policy benefits for the run-off settlement annuity business and a portion of deferred acquisition costs associated with the corporate owned life insurance business. As required by GAAP, the Company parenthetically identifies the income statement line item affected by...

  • Page 135
    ...each of the Company's life insurance and HMO subsidiaries is sufficient to meet the minimum required by regulators. As of December 31, 2013, the Company's life insurance and HMO subsidiaries had investments on deposit with state departments of insurance with statutory carrying values of $335 million...

  • Page 136
    ... expense at nominal rate Tax advantaged investments Effect of indefinitely reinvested foreign earnings Resolution of federal tax matters State income tax (net of federal income tax benefit) Other TOTAL INCOME TAXES $ 2013 761 (30) (42) (18) 27 698 $ 2012 867 (31) (37) 28 26 853 $ 2011 657 (33) (17...

  • Page 137
    ... 1,332 374 Deferred income tax assets and liabilities as of December 31 are as follows: (In millions) Deferred tax assets Employee and retiree benefit plans Investments, net Other insurance and contractholder liabilities Deferred gain on sale of businesses Policy acquisition expenses Other accrued...

  • Page 138
    ... Compensation cost Tax benefits The Company had the following number of common stock shares available for award at December 31: 13.2 million in 2013, 8.4 million in 2012 and 11.7 million in 2011. Stock options. The Company awards options to purchase the Company's common stock at the market price...

  • Page 139
    ..., except per share amounts) Number (in thousands) Total intrinsic value Weighted average exercise price Weighted average remaining contractual life Excluding the HealthSpring rollover options issued in 2012, the weighted average fair value of options granted under employee incentive plans was $19...

  • Page 140
    ... health care businesses serving employers and their employees, other groups, and individuals. Products and services include medical, dental, behavioral health, vision, and prescription drug benefit plans, health advocacy programs and other products and services to insured and self-insured customers...

  • Page 141
    ...) 2013 2012 2011 Global Health Care Premiums and fees: Medical: Guaranteed cost Experience-rated Stop loss International health care Dental Medicare Medicaid Medicare Part D Other Total medical Fees Total premiums and fees Mail order pharmacy revenues Other revenues Net investment income Segment...

  • Page 142
    ... customers includes premiums and fees, mail order pharmacy revenues and other revenues. The following table presents these revenues by product type for the years ended December 31: (In millions) Medical Disability Supplemental Health, Life, and Accident Mail order pharmacy Other TOTAL $ $ 2013...

  • Page 143
    ... 4, 2013, the Company has retrocessional coverage in place that covers the exposures on these contracts. See Notes 7, 10 and 12 for further information on GMIB contracts. Under these guarantees, the future payment amounts are dependent on equity and bond fund market and interest rate levels prior to...

  • Page 144
    ..., provider disputes, disputes regarding reinsurance arrangements, employment and employment discrimination-related suits, employee benefit claims, wage and hour claims, tax matters, privacy, intellectual property claims and real estate related disputes. Litigation of income tax matters is accounted...

  • Page 145
    ... non-compliance with the terms of the agreement upon re-examination, the Company may be subject to additional fines or penalties. In addition to the monitoring states, most of the other jurisdictions have joined the agreement as participating, non-monitoring states. CIGNA CORPORATION - 2013 Form...

  • Page 146
    ...exit the Run-off Reinsurance business, and an after-tax charge of $51 million related to the disability claims regulatory matter in the Group Disability and Life segment. (2) The second quarter of 2013 includes an after-tax charge of $24 million for the Pharmacy Benefits Manager (''PBM'') partnering...

  • Page 147
    ...located on page 60 in this Form 10-K. Management's Annual Report on Internal Control over Financial Reporting Management of Cigna Corporation is responsible for establishing and maintaining adequate internal controls over financial reporting. The Company's internal controls were designed to provide...

  • Page 148
    ...Form 10-K. C. Code of Ethics and Other Corporate Governance Disclosures Cigna's Code of Ethics is the Company's code of business conduct and ethics, and applies to Cigna's directors, officers (including the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer) and employees...

  • Page 149
    ... performance shares, shares in payment of dividend equivalent rights, shares in lieu of cash payable under the Company's other short- and long-term incentive compensation plans and non-tax qualified supplemental retirement benefit plans, or shares in payment of SPSs or SPUs. The information...

  • Page 150
    ... Statement Schedules (a) (1) The following Financial Statements appear on pages 60 through 113: Report of Independent Registered Public Accounting Firm. Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011. Consolidated Statements of Comprehensive Income for...

  • Page 151
    ...Executive Vice President and Chief Financial Officer (Principal Financial Officer) Vice President and Chief Accounting Officer (Principal Accounting Officer) Director Chairman of the Board Director Director Director Director Director Director Director Director CIGNA CORPORATION - 2013 Form 10-K 119

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  • Page 153
    ... Parties as of December 31, 2013 ...FS-3 II - Condensed Financial Information of Cigna Corporation (Registrant) ...FS-4 III - Supplementary Insurance Information ...FS-9 IV - Reinsurance ...FS-11 V - Valuation and Qualifying Accounts and Reserves ...FS-12 Schedules other than those listed above...

  • Page 154
    ... Public Accounting Firm on Financial Statement Schedules Report of Independent Registered Public Accounting Firm on Financial Statement Schedules To the Board of Directors and Shareholders of Cigna Corporation Our audits of the consolidated financial statements and of the effectiveness of internal...

  • Page 155
    ... TOTAL FIXED MATURITIES Equity securities: Common stocks: Industrial, miscellaneous and all other Non redeemable preferred stocks TOTAL EQUITY SECURITIES Commercial mortgage loans on real estate Policy loans Real estate investments Other long-term investments Short-term investments TOTAL INVESTMENTS...

  • Page 156
    ... Other TOTAL OPERATING EXPENSES Loss before income taxes Income tax benefit Loss of parent company Equity in income of subsidiaries SHAREHOLDERS' NET INCOME Shareholders' other comprehensive income (loss): Net unrealized (depreciation) appreciation on securities: Fixed maturities Equity securities...

  • Page 157
    ... Investments in subsidiaries Intercompany Other assets TOTAL ASSETS LIABILITIES: Intercompany Short-term debt Long-term debt Other liabilities TOTAL LIABILITIES SHAREHOLDERS' EQUITY: Common stock (shares issued, 366; authorized, 600) Additional paid-in capital Net unrealized appreciation - fixed...

  • Page 158
    ...provided by operating activities Cash Flows from Investing Activities: Other, net Net cash used in investing activities Cash Flows from Financing Activities: Net change in amounts due to / from affiliates Net change in short-term debt Net proceeds on issuance of long-term debt Repayment of long-term...

  • Page 159
    ... the equity basis of accounting. Note 2 - Short-term and long-term debt consisted of the following at December 31: (In millions) December 31, 2013 $ $ 100 100 December 31, 2012 $ $ 200 200 Short-term: Commercial Paper TOTAL SHORT-TERM DEBT Long-term: Uncollateralized debt: 2.75% Notes due 2016...

  • Page 160
    ... with Cigna Holdings and ultimately used to fund the HealthSpring acquisition in 2012. Interest was accrued at an average monthly rate of 0.59% for 2013 and 0.71% for 2012. Note 4 - As of December 31, 2013, the Company had guarantees and similar agreements in place to secure payment obligations...

  • Page 161
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  • Page 162
    ...Run-off Reinsurance Other Operations Corporate TOTAL Year Ended December 31, 2011: Global Health Care Global Supplemental Benefits Group Disability and Life Run-off Reinsurance Other Operations Corporate TOTAL $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ FS-9 CIGNA CORPORATION - 2013 Form 10...

  • Page 163
    ... Global Supplemental Benefits Group Disability and Life Run-off Reinsurance Other Operations Corporate TOTAL Year Ended December 31, 2011: Global Health Care Global Supplemental Benefits Group Disability and Life Run-off Reinsurance Other Operations Corporate TOTAL (1) (2) (3) (4) Net investment...

  • Page 164
    ... 31, 2012: Life insurance in force Premiums and fees: Life insurance and annuities Accident and health insurance TOTAL Year Ended December 31, 2011: Life insurance in force Premiums and fees: Life insurance and annuities Accident and health insurance TOTAL FS-11 CIGNA CORPORATION - 2013 Form 10-K

  • Page 165
    ... Assist in November 2011. (2) Amounts for commercial mortgage loans primarily reflect charge-offs upon sales and repayments, as well as transfers to foreclosed real estate. 2012 amount also includes restructures reclassified to Other Long-term Investments. CIGNA CORPORATION - 2013 Form 10-K FS-12

  • Page 166
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  • Page 167
    ...10.3 Cigna Corporation Non-Employee Director Compensation Program Filed as Exhibit 10.3 to the registrant's Form 10-K for the year amended and restated effective January 1, 2012 ended December 31, 2011 and incorporated herein by reference. 10.4 Cigna Restricted Share Equivalent Plan for Non-Employee...

  • Page 168
    ... 1 to the Cigna Supplemental Pension Plan of 2005 Cigna Supplemental 401(k) Plan effective January 1, 2010 Description of Cigna Corporation Financial Services Program Form of Cigna Long-Term Incentive Plan: Nonqualified Stock Option and Grant Letter Form of Cigna Long-Term Incentive Plan: Restricted...

  • Page 169
    ...to the Commission upon request of any other instruments defining the rights of holders of long-term debt. Shareholders may obtain copies of exhibits by writing to Cigna Corporation, Shareholder Services Department, 1601 Chestnut Street, Philadelphia, PA 19192. CIGNA CORPORATION - 2013 Form 10-K E-3

  • Page 170
    ... taxes, as adjusted Fixed charges included in income: Interest expense Interest portion of rental expense Interest credited to contractholders Income available for fixed charges RATIO OF EARNINGS TO FIXED CHARGES: $ $ $ $ $ 2,469 $ 2,781 $ 2,105 $ 2,009 E-4 CIGNA CORPORATION - 2013 Form...

  • Page 171
    ...significant subsidiary'' of Cigna Corporation, as that term is defined in Rule 1-02(w) of Regulation S-X. Entity Name Allegiance Life & Health Insurance Company, Inc. Allegiance Re, Inc. American Retirement Life Insurance Company Benefits Management Corp. Bravo Health Mid-Atlantic, Inc. Bravo Health...

  • Page 172
    ... Insurance Public Company Limited Cigna Insurance Services (Europe) Limited Cigna International Corporation Cigna International Services Australia Pty. Ltd. Cigna Investment Group, Inc. Cigna Investments, Inc. Cigna Korea Foundation Cigna Life Insurance Company of Canada Cigna Life Insurance Company...

  • Page 173
    ...Asuransi Cigna RHP ThailandLimited Tel Drug, Inc. Tel Drug of Pennsylvania, LLC Temple Insurance Company Limited United Benefit Life Insurance Company Vanbreda International LLC Vanbreda International N.V. Vanbreda International SD.BHD Vielife Holdings Limited Vielife Limited Jurisdiction Indonesia...

  • Page 174
    ...033-60053 and No. 033-51791) of Cigna Corporation of our reports dated February 27, 2014 relating to the financial statements, the financial statement schedules and the effectiveness of internal control over financial reporting, which appear in this Form 10-K. E-8 CIGNA CORPORATION - 2013 Form 10-K

  • Page 175
    ...'s ability to record, process, summarize and report financial information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. b) b) CIGNA CORPORATION - 2013 Form 10-K E-9

  • Page 176
    ...'s ability to record, process, summarize and report financial information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. b) b) E-10 CIGNA CORPORATION - 2013 Form 10-K

  • Page 177
    ... Statement Schedules EXHIBIT 32.1 Certification of Chief Executive Officer of Cigna Corporation pursuant to 18 U.S.C. Section 1350 I certify that, to the best of my knowledge and belief, the Annual Report on Form 10-K of Cigna Corporation for the fiscal period ending December 31, 2013 (the ''Report...

  • Page 178
    ... Statement Schedules EXHIBIT 32.2 Certification of Chief Financial Officer of Cigna Corporation pursuant to 18 U.S.C. Section 1350 I certify that, to the best of my knowledge and belief, the Annual Report on Form 10-K of Cigna Corporation for the fiscal period ending December 31, 2013 (the ''Report...

  • Page 179
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  • Page 180
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  • Page 181
    ... and not by Cigna Corporation. Such operating subsidiaries include Connecticut General Life Insurance Company (CGLIC), Cigna Health and Life Insurance Company (CHLIC), and HMO or service company subsidiaries of Cigna Health Corporation and Cigna Dental Health, Inc. In Arizona, HMO plans are offered...

  • Page 182
    We're more than a health insurance company. We're a global health service leader. cigna.com 900 Cottage Grove Bloomfield, CT 06002 900 Road Cottage Grove Road Bloomfield, CT 06002 www.cigna.com