Cigna 2015 Annual Report Download

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TOGETHER
STRONGER
CIGNA ANNUAL
REPORT 2015

Table of contents

  • Page 1
    STRONGER TOGETHER CIGNA ANNUAL REPORT 2015

  • Page 2
    TRUSTED PARTNER

  • Page 3
    ...lowebing blood pbessube. And moments fob wobby - such as a scaby diagnosis ob an unexpected medical bill. Thboughout this joubney, Cigna is a tbusted pabtneb to all we sebve - explaining youb options, guiding you to the bight health cabe at the bight pbice, and cheebing you on when you hit bumps in...

  • Page 4
    ... one for Cigna. We delivered a sixth consecutive year of strong financial results. Our focused "Go Deep, Go Global, Go Individual" strategy is continuing to drive growth and operational performance across our portfolio of businesses for the benefit of our global customers, clients and shareholders...

  • Page 5
    ... and Chief Executive Officer Cigna Corporation Cigna's 2015 full-year consolidated revenue increased by eight percent, to approximately $38 billion. Adjusted income from operations was $8.66 per share, 1 We've made significant progress by partnering with diverse stakeholders to improve health care...

  • Page 6
    ... Health Care business segment delivers health care, wellness and preventive products and services through medical and specialty solutions for individual customers and employer clients globally. 2015 premiums and fees grew 10 percent to $26.8 billion over full-year 2014, with adjusted income from...

  • Page 7
    ...other target markets around the world. GROUP DISABILITY AND LIFE Cigna is a leader in productivity optimization programs in the U.S.5 through our group disability, life and accident insurance operations. 2015 results, with premiums and fees from business growth increasing eight percent over 2014 to...

  • Page 8
    ...and sharing relevant information with our customers, employers and physicians, we are guiding individuals in support of their health and driving higher levels of communication to enable greater improvement in the quality of clinical care. Our efforts to address the unsustainable costs of health care...

  • Page 9
    ... customers and providers. To deepen our understanding of key drivers, we commissioned new research, learning that most health problems and related costs are highly correlated to a small set of health conditions.9 With these findings in mind, we began working this year to further increase awareness...

  • Page 10
    ... affordability, and which are personally relevant to our customers - important goals that will benefit our communities and yield a more sustainable health care ecosystem over the long term. We believe that the most successful companies effectively align financial performance with the best interests...

  • Page 11
    ... or investor day events. 3. Press release: "Anthem Announces Definitive Agreement to Acquire Cigna Corporation," July 24, 2015. 4. Global network includes more than 1 million partnerships with health care professionals, clinics and facilities including: 89,000 participating behavioral health care...

  • Page 12
    ... of their health, yet are unaware of key preventive care benefits. The campaign issued a call to action for all consumers to get their annual physical - which is included in a suite of in-network preventive services covered by most health plans. HEY AMERICA, IT'S TIME TO PERSONAL GO KNOW TAKE...

  • Page 13
    ... customers released in 2015.3 There are health improvement programs that help people address the conditions which increase costs, however. employers are increasingly rewarding employees who identify and address their potential health risks by discounting the employee's health plan premiums or adding...

  • Page 14
    12 JOINING FORCeS

  • Page 15
    ... health care products that leverage the expertise of both organizations. The arrangement enables Seton and Cigna to combine health plan, hospital, clinic, provider and administrative capabilities in a unified effort to improve people's lives, deliver long-term sustained medical cost savings...

  • Page 16
    LOCAL EXPERTISE Serving 90 million customer relationships around the world. GLOBAL NETWORK 14 JOINING FORCeS

  • Page 17
    ...In 2015, Cigna Global Health benefits introduced CignaLinks® Canada to its network family. We can now provide employees access to medical services through a network of more than 30,000 local health care professionals and facilities throughout Canada. CignaLinks integrates Cigna global coverage with...

  • Page 18
    ... demonstrates how Cigna's non-financial performance aligns with its mission, supports its core businesses, and creates benefits for stakeholders. With the release of the report, we also announced that in 2015 Cigna became the first U.S. health insurance company to sign the United Nations (UN) Global...

  • Page 19
    ... and poor health are inextricably linked, Community Solutions has been working to increase access to healthy food, improve community parks and exercise spaces, reduce unnecessary hospital use and replace lost jobs by supporting successful, food-related businesses. In 2015, the Cigna Foundation...

  • Page 20
    ... to the Achilles Cigna Customer Referral program, which connects Cigna disability customers with an Achilles International trainer and fitness resources to incorporate exercise and activity with the goal of helping individuals return to health and, in many cases, return to work. 18 DRIVING CHANGe

  • Page 21
    ...joined her as a guide along with lisa bacus, Cigna's chief marketing officer. Christine said when she crossed the finish line, she was one step closer to finding her way back to independence. evidence-based information on how to understand, prevent, intervene, treat, and recover from the disease of...

  • Page 22
    ... Global Health Care by product Global Health Care includes a commercial line of business encompassing the United States and certain international operations. Commercial offers a broad line of insured and self-insured medical, dental, behavioral health, vision, prescription drug benefit plans, health...

  • Page 23
    ... benefits also offers Medicare supplement coverage. $3,934 Group Disability and Life by product Group Disability and life provides insurance products and related services for group long- and short-term disability insurance, group life insurance, and accident and specialty insurance. Cigna markets...

  • Page 24
    ... President and Chief executive Officer AT&T Advertising and Publishing - east, a communications services company David M. Cordani President and Chief executive Officer Cigna Corporation Roman Martinez IV Private Investor John M. Partridge Former President Visa Inc., a consumer credit company James...

  • Page 25
    ... Matthew G. Manders President, U.S. Commercial Markets and Global Health Care Operations Thomas A. McCarthy executive Vice President and Chief Financial Officer John M. Murabito executive Vice President of Human Resources and Services Jason D. Sadler Customer focused. Global perspective. eXeCUTIVe...

  • Page 26
    ... online information about Cigna, our products and services, visit Cigna.com. 24 1. www.cdc.gov/prevention 2. Cigna employee survey data compiled from Cigna employee surveys sent out October 15, 2015 and January 6, 2016. 3. Cigna Internal Data of group health plan customers, 2015 Cigna Operational...

  • Page 27
    ... requirements for the past 90 days. • whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period...

  • Page 28
    Table of Contents Page CAUTIONARY STATEMENT PART I Item 1. Business 1 Overview ...1 Global Health Care ...3 Global Supplemental Benefits ...9 Group Disability and Life ...11 Other Operations ...13 Investments and Investment Income ...13 Regulation...14 Miscellaneous ...18 Item 1A. Risk ...

  • Page 29
    ...117 B. Executive Officers of the Registrant ...117 C. Code of Ethics and Other Corporate Governance Disclosures ...117 D. Section 16(a) Beneficial Ownership Reporting Compliance ...117 Executive Compensation...117 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder...

  • Page 30
    ..., but are not limited to: our ability to achieve our financial, strategic and operational plans or initiatives; our ability to predict and manage medical costs and price effectively and develop and maintain good relationships with physicians, hospitals and other health care providers; our ability to...

  • Page 31
    ... 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 32
    ... health, life and accident insurance products in selected international markets and in the U.S. Group Disability and Life provides group long-term and short-term disability, group life, accident and specialty insurance products and related services. On a consolidated basis, total 2015 operating...

  • Page 33
    ... change and putting customers at the center of all we do Products and Services Medical Stop Loss Dental Vision • Pharmacy • Behavioral • Health Advocacy and Coaching • Medicare Advantage • Medicare Part D • Medicaid Funding Types • Administrative Services Only (ASO) • Guaranteed...

  • Page 34
    ... or both. In addition, our experience-rated group medical insurance policies include premium funding options similar to administrative services combined with stop loss coverage. 4 CIGNA CORPORATION - 2015 Form 10-K In most states, individual and group insurance premium rates must be approved by the...

  • Page 35
    ... groups sponsoring health benefit plans. We focus on integrating our programs and services with medical, pharmacy and disability programs to facilitate customized, holistic care. CIGNA CORPORATION - 2015 Form 10-K 5 Medicaid We offer Medicaid coverage to low income individuals in selected markets...

  • Page 36
    ... our medical and dental product offerings. Our national vision care network, consisting of approximately 76,000 health care providers in over 26,100 locations, includes private practice ophthalmologist and optometrist offices, as well as retail eye care centers. Service and Quality Customer Service...

  • Page 37
    ...integrated health care and providing access to quality, value-based care in local communities. cost-efficiency criteria. Customers in Cigna Care Network plans pay reduced co-payments or co-insurance when they receive care from a specialist designated as a Cigna Care Network physician. Participating...

  • Page 38
    ... employ representatives to sell access to our national participating provider network, utilization review services, behavioral health care and pharmacy management services, and employee assistance services directly to insurance companies, HMOs and third party administrators. As of December 31, 2015...

  • Page 39
    ...based health care businesses include: • Other national insurance and health services companies that provide group health and life insurance products; • Not for profit managed care organizations; • Other regional stand-alone managed care and specialty companies; • Managed care organizations...

  • Page 40
    .... Supplemental health products provide specified payments for a variety of health risks and include personal accident, accidental death, critical illness, hospitalization, travel, dental, cancer and other dread disease coverages. We also offer customers individual private medical insurance, term and...

  • Page 41
    ... medical and specialty offerings, promoting health, wellness and optimizing employee productivity • Complementary portfolio of group disability, life and accident offerings • Disciplined underwriting, pricing and investment strategies supporting profitable long-term growth Products and Services...

  • Page 42
    ...insurance companies that market and distribute these or similar types of products. As of December 31, 2015, we are one of the top five providers of group disability, life and accident insurance in the United States, based on premiums. Pricing and Reinsurance Premiums charged for disability and term...

  • Page 43
    ... status. This focus on managing the employee's total absence enables us to increase the number and effectiveness 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 44
    ... of the information received from customers; • risk sharing arrangements with providers; • reimbursement or payment levels for Medicare services; • advertising; and 14 CIGNA CORPORATION - 2015 Form 10-K • the operation of consumer-directed plans (including health savings accounts, health...

  • Page 45
    ... businesses to the industry total. The reinsurance fee is a temporary (2014-2016) fixed dollar per customer levy on all insurers, HMOs and self-insured group health plans and is tax deductible. The health insurance exchange enrollment process began on October 1, 2013 with coverage first effective...

  • Page 46
    ...state laws concerning labeling, packaging, advertising and adulteration of prescription drugs and dispensing of controlled substances. Certain subsidiaries contract to provide claim administration, utilization management and other related services for the administration of self-insured benefit plans...

  • Page 47
    ... health plans, health care providers and clearinghouses for the privacy and security of protected health information. HIPAA also established rules that standardize the format and content of certain electronic transactions, including, but not limited to, eligibility and claims. Effective October 2015...

  • Page 48
    ... offering, promising, providing or authorizing others to give anything of value to a foreign government official or employee to obtain or retain business or otherwise secure a business advantage. In many countries outside of the United States, health care professionals are employed by the government...

  • Page 49
    ...the primary market for 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...

  • Page 50
    ..., price for and effectively manage future health care costs through underwriting 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...

  • Page 51
    ..., failure to timely or appropriately pay for or provide health care, provider network structure, poor outcomes for care delivered or arranged, provider disputes including disputes over compensation or contractual provisions, and claims related to our administration of self-funded business. There are...

  • Page 52
    .... Health Care Reform required establishing health insurance exchanges for individuals and small employers. Insurers participating on the health insurance exchanges are required to offer a minimum level of benefits and comply with requirements with respect to premium rates and coverage limitations...

  • Page 53
    ... limited to, certain pharmacy benefit management services. To improve operating costs, productivity and efficiencies, we contract with third parties for the provision of specific services, such as pharmacy benefit management services, information technology, medical management services, call center...

  • Page 54
    ...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 our third-party service providers were to fail to maintain information systems and data integrity effectively, we could...

  • Page 55
    ... proprietary or personal information, and the cost of attempting to protect against these risks also increases. We have implemented security technologies, processes and procedures to protect consumer identity; however, there are no assurances that such measures will be effective against all types of...

  • Page 56
    ... borrowed funds and negatively affect our ability to access capital. Financial strength, claims paying ability and debt ratings by recognized rating organizations are each important factors in establishing the competitive position of insurance and health benefits 26 CIGNA CORPORATION - 2015 Form 10...

  • Page 57
    ...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 and surcharges or fees on select fee-for-service and capitated medical claims...

  • Page 58
    ...within the time frame we anticipate or at all, potentially negatively affecting our business, financial results and operations. On July 23, 2015, we entered into an agreement under which Anthem will acquire all of the outstanding shares of our common stock. The 28 CIGNA CORPORATION - 2015 Form 10-K

  • Page 59
    ... 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 Building located at 900 Cottage Grove Road in Bloomfield, Connecticut (our corporate...

  • Page 60
    ..., 47, President, International Markets beginning June 2014; President, Global Individual Health, Life and Accident from July 2010 until June 2014, and Managing Director Insurance Business Hong Kong, HSBC Insurance Asia Limited from January 2007 until July 2010. 30 CIGNA CORPORATION - 2015 Form 10-K

  • Page 61
    ... through February 25, 2016, the Company repurchased 0.8 million shares for $110 million. Remaining authorization under the program was $390 million as of February 25, 2016. (3) Approximate dollar value of shares is as of the last date of the applicable month. CIGNA CORPORATION - 2015 Form 10-K 31

  • Page 62
    ... $ 118 $ 130 * Assumes that the value of the investment in Cigna common stock and each index was $100 on December 31, 2010 and that all dividends were reinvested. ** Weighted average of S&P Managed Health Care (75%) and Life and Health Insurance (25%) Indexes. 32 CIGNA CORPORATION - 2015 Form 10-K

  • Page 63
    ...' net income NET INCOME Shareholders' net income per share: Basic Diluted Common dividends declared per share Cash and investments Total assets(1) Long-term debt(1) Total liabilities Employees (1) 2015 37,876 2,094 2,077 8.17 8.04 0.04 26,681 57,088 5,020 44,975 12,035 39,300 2014 34,914...

  • Page 64
    ...48 Global Health Care ...49 Global Supplemental Benefits...50 Group Disability and Life ...51 Other Operations ...52 Corporate ...52 Investment Assets ...53 Management's Discussion and Analysis of Financial Condition and Results of Operations (''MD&A'') is intended to provide information to assist...

  • Page 65
    ...) From Operations Global Health Care Global Supplemental Benefits Group Disability and Life Other Operations Corporate TOTAL ADJUSTED INCOME FROM OPERATIONS SHAREHOLDERS' NET INCOME Earnings per share (diluted): Adjusted income from operations(1) Shareholders' net income(1) Global medical customers...

  • Page 66
    ... Health Care, Global Supplemental Benefits, and Group Disability and Life). These increases are primarily attributable to customer growth in our targeted market segments, rate actions in our commercial health care businesses to recover medical cost trend as well as amounts assessed under Health Care...

  • Page 67
    ... the effect of the tax through benefit changes and customer premium increases, the combination of the tax and lower MA rates have contributed to lower margins in the Government operating segment in both 2015 and 2014. Because the industry assessment in 2016 is also $11.3 billion, we expect our share...

  • Page 68
    ... to pay insurers under the risk corridor program for the balance of the 2014 coverage year as well as the 2015 coverage year, as required by Health Care Reform. If CMS' risk corridor program collections, including carryovers from prior years, are insufficient to satisfy its payment obligations...

  • Page 69
    ...17) 5 52 73 42 N/M 42% Premiums Fees and other revenues Net investment income Mail order pharmacy revenues Operating revenues Net realized investment gains Total revenues Global Health Care medical costs Other benefit expenses Mail order pharmacy costs Other operating expenses Amortization of other...

  • Page 70
    ...ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations A reconciliation of shareholders' net income to adjusted income from operations follows: Financial Summary (In millions) For the Years Ended December 31, 2015 2014 2013 $ 2,094 $ 2,102 $ 1,476 $ Increase...

  • Page 71
    ... Health Care, Global Supplemental Benefits and Group Disability and Life. These results are primarily attributable to customer growth in our targeted market segments and rate actions in our commercial health care businesses consistent with medical cost trend. The increase in 2014 compared with 2013...

  • Page 72
    ...7. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated short-term investments increased in 2015 compared with 2014 as a result of higher net purchases of short-term investments at the parent company level. The decrease in short-term investments in 2014...

  • Page 73
    ...credit or equity market conditions may reduce our ability to issue debt or equity securities. Liquidity and Capital Resources Outlook At December 31, 2015, there was approximately $1.4 billion in cash and investments available at the parent company level. In 2016, the CIGNA CORPORATION - 2015 Form...

  • Page 74
    ... in increases to recorded reserves and adversely impact results of operations. The amounts associated with the sold retirement benefits and individual life insurance and annuity businesses, as well as the reinsured workers' compensation, personal accident and supplemental benefits businesses, are...

  • Page 75
    ... 7. Management's Discussion and Analysis of Financial Condition and Results of Operations • Other long-term liabilities. This table includes estimated payments for GMIB contracts, pension and other postretirement and postemployment benefit obligations, supplemental and deferred compensation plans...

  • Page 76
    ... fair value of each reporting unit. In our Government operating segment (which is a reporting unit) we contract with CMS and various state governmental agencies to provide managed health care services, including Medicare Advantage plans and Medicare-approved prescription drug plans. Estimated future...

  • Page 77
    ... (in millions): • 2015 - $953 • 2014 - $1,099 See Note 9 to the Consolidated Financial Statements for assumptions and methods used to estimate pension liabilities. The discount rate is typically the most significant assumption in measuring the pension liability. We develop the discount rate by...

  • Page 78
    ... are public securities, and one-third are private placement securities. See Note 10 to the Consolidated Financial Statements for a discussion of our fair value measurements and the procedures performed by management to determine that the amounts represent appropriate estimates. Assessment of...

  • Page 79
    ... adjusted income from operations for this segment are: • customer growth; • sales of specialty products; • operating expense as a percentage of operating revenues (operating expense ratio); and • medical costs as a percentage of premiums (medical care ratio or ''MCR'') for our commercial and...

  • Page 80
    ... books of business. Medical Customers A medical customer is defined as a person meeting any one of the following criteria: • is covered under an insurance policy or service agreement issued by us; • has access to the Company's provider network for covered services under their medical plan; or...

  • Page 81
    ... investment income; • benefit expenses as a percentage of premiums (loss ratio); and • operating expense as a percentage of operating revenues excluding net investment income (expense ratio). Results of Operations Financial Summary (In millions) For the Years Ended December 31, 2015 2014 2013...

  • Page 82
    ... the run-off reinsurance business. The favorable after-tax effects of reserve reviews were $52 million in 2014 and $60 million in 2013. Operating revenues. The increases in both 2015 and in 2014 reflected premiums from new business growth due to disability and life sales. Net investment income also...

  • Page 83
    ... Equity securities Commercial mortgage loans Policy loans Other long-term investments Short-term investments TOTAL $ 2015 19,455 190 1,864 1,419 1,404 381 $ 2014 18,983 189 2,081 1,438 1,488 163 $ 24,713 $ 24,342 Fixed Maturities Investments in fixed maturities include publicly traded and...

  • Page 84
    ... debt service coverage ratios and high loan to value ratios, as well as increased operating income and value across most underlying properties. See Note 11 to the Consolidated Financial Statements for further information. Commercial real estate capital markets remain very active for well-leased...

  • Page 85
    ...-term investments generally support shorter-term life and health liabilities. Medium-term, 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...

  • Page 86
    ...effect of hypothetical changes in market rates or prices on the fair value of certain financial instruments including: • a hypothetical increase in market interest rates, primarily for fixed maturities and commercial mortgage loans, partially offset by liabilities for long-term, largely fixed-rate...

  • Page 87
    ... 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 - 2015 Form 10-K 57

  • Page 88
    ... 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 reasonable assurance...

  • Page 89
    ...investment income Mail order pharmacy revenues Realized investment gains (losses): Other-than-temporary impairments on fixed maturities Other realized investment gains, net Net realized investment gains TOTAL REVENUES Benefits and Expenses Global Health Care medical costs Other benefit expenses Mail...

  • Page 90
    ... noncontrolling interests Other comprehensive income (loss) attributable to other noncontrolling interests TOTAL COMPREHENSIVE INCOME The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements. 2015 $ 2,094 $ 2014 2,102 $ 2013 1,476 (202) 15 (212...

  • Page 91
    ... 31, ASSETS Investments: Fixed maturities, at fair value (amortized cost, $18,456; $17,278) Equity securities, at fair value (cost, $190; $199) Commercial mortgage loans Policy loans Other long-term investments Short-term investments Total investments Cash and cash equivalents Premiums, accounts and...

  • Page 92
    ... Data Cigna Corporation Consolidated Statements of Changes in Total Equity (In millions, except per share amounts) Balance at January 1, 2013 2013 Activity: Effect of issuing stock for employee benefit plans Effects of acquisition of joint venture Other comprehensive income (loss) Net income Common...

  • Page 93
    ... net cash provided by operating activities: Depreciation and amortization Realized investment gains, net Deferred income taxes Net changes in assets and liabilities, net of non-operating effects: Premiums, accounts and notes receivable Reinsurance recoverables Deferred policy acquisition costs Other...

  • Page 94
    ... commercial health and dental insurance, Medicare and Medicaid products and health, life and accident insurance coverages to individuals in the U.S. and selected international markets. In addition to these ongoing operations, Cigna also has certain run-off operations. NOTE 2 Summary of Significant...

  • Page 95
    ... be provided beginning in 2016 about various real estate and security limited partnerships to be newly identified as variable interest entities for which the Company is not the primary beneficiary. Fees Paid to the Federal Government by Health Insurers (ASU 2011-06). Effective January 1, 2014, the...

  • Page 96
    ... new or renewal insurance and investment contracts and other costs directly related to successful contract acquisition. Examples of deferrable costs include commissions, sales compensation and benefits, policy issuance and underwriting costs and premium 66 CIGNA CORPORATION - 2015 Form 10-K

  • Page 97
    ... 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 98
    ... Payable Medical costs payable for the Global Health Care segment include reported claims, estimates for losses incurred but not yet reported and liabilities for services rendered by providers, as well as liabilities under risk-sharing and quality management arrangements with providers. The Company...

  • Page 99
    ...2014-2016) reinsurance program is designed to provide reimbursement to insurers for high cost individual business sold on or off the public exchanges. The reinsurance entity established by the U.S. Department of Health and Human Services (''HHS'') is funded by a per-customer reinsurance fee assessed...

  • Page 100
    ...performance period, expense is adjusted to the actual outcome (number of shares awarded times the share price at the grant date). See Note 20 for additional information on the Company's stock compensation plans. Contract fees for administrative services only (''ASO'') programs and pharmacy programs...

  • Page 101
    ... the tangible and intangible net assets acquired based on management's preliminary estimates of their fair values. The results of acquisition activities for these years were not material to the Company's results of operations, liquidity or financial condition. CIGNA CORPORATION - 2015 Form 10-K 71

  • Page 102
    ...net income Shares Weighted average Common stock equivalents Total shares EPS The following outstanding employee stock options were not included in the computation of diluted earnings per share because their effect was anti-dilutive. (In millions) 2015 0.4 2014 1.0 2013 0.9 Anti-dilutive options...

  • Page 103
    ... December 31, 2014. The favorable effect of prior year development for both years primarily reflects low utilization of medical services. Incurred costs related to prior years in the table above do not directly correspond to an increase or decrease to shareholders' net income. The primary reason...

  • Page 104
    ...on a contractholder's anniversary date. Under this type of death benefit, the Company is liable to the extent the highest historical anniversary account value exceeds the fair value of the related mutual fund investments at the time of a contractholder's death. 74 CIGNA CORPORATION - 2015 Form 10-K

  • Page 105
    ... in the Company's Consolidated Statements of Income. (In millions) 2015 2014 2013 Premiums Short-duration contracts: Direct Assumed Ceded Long-duration contracts: Direct Assumed Ceded: Individual life insurance and annuity business sold Other (158) (158) 2,856 TOTAL Reinsurance recoveries...

  • Page 106
    ... Business (2012 acquisition) Global Health Care, Global Supplemental Benefits, Group Disability and Life Lincoln National Life and Lincoln Life & Annuity of New York Prudential Retirement Insurance and Annuity Great American Life Various 995 315 553 Other run-off reinsurance Various 81 Total...

  • Page 107
    ... 2015 Customer relationships Other Total reported in other assets, including other intangibles Value of business acquired (reported in deferred policy acquisition costs) Internal-use software (reported in property and equipment) TOTAL OTHER INTANGIBLE ASSETS 2014 Customer relationships Other Total...

  • Page 108
    ... the discount rate and a change in the mortality assumption (as discussed further in the assumptions section of this note). 78 CIGNA CORPORATION - 2015 Form 10-K Pension benefits. The Company funds its qualified pension plans at least at the minimum amount required by the Employee Retirement Income...

  • Page 109
    ... allocation to equity securities and increase the allocation to fixed income investments as funding levels improve. As of December 31, 2015, pension plan assets included $3.6 billion invested in the separate accounts of Connecticut General Life Insurance Company and Life Insurance Company of North...

  • Page 110
    ... has several participating benefit plans and each owns a share of the total pool of investments. Plan assets in Level 1 include exchange-listed equity securities. Level 2 assets primarily include: • fixed income and international equity funds priced using their daily net asset value that is...

  • Page 111
    ... levels and inflation. To measure pension costs, the Company uses a market-related asset valuation for domestic pension plan assets invested in non-fixed income investments. The market-related value of these pension assets recognizes the difference between actual and expected long-term returns...

  • Page 112
    ... freeze the domestic defined benefit pension plans, effective January 1, 2010, the NOTE 10 Fair Value Measurements The Company carries certain financial instruments at fair value in the financial statements including fixed maturities, equity securities, short-term investments and derivatives. Other...

  • Page 113
    .... Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2015 (In millions) Total Financial assets at fair value: Fixed maturities: Federal government and agency State and local...

  • Page 114
    ...most public and private corporate debt and equity securities, federal agency and municipal bonds, 84 CIGNA CORPORATION - 2015 Form 10-K non-government mortgage-backed securities and preferred stocks. Because many fixed maturities do not trade daily, third-party pricing services and internal methods...

  • Page 115
    ... fixed maturities Total fixed maturities Equity securities Subtotal Securities not priced by the Company(1) Total Level 3 securities (1) The fair values for these securities use single, unadjusted non-binding broker quotes not developed directly by the Company. CIGNA CORPORATION - 2015 Form...

  • Page 116
    ... Corporate and government fixed maturities Total fixed maturities Equity securities Subtotal Securities not priced by the Company(1) Total Level 3 securities (1) The fair values for these securities use single, unadjusted non-binding broker quotes not developed directly by the Company. Significant...

  • Page 117
    ... 2015 Gains (losses) included in shareholders' net income: GMIB fair value gain/(loss) Other Total gains (losses) included in shareholders' net income Losses included in other comprehensive income Losses required to adjust future policy benefits for settlement annuities Purchases, sales, settlements...

  • Page 118
    ... in Level 3 include investments primarily in securities partnerships, real estate and hedge funds generally valued based on the separate account's ownership share of the equity of the investee including changes in the fair values of its underlying investments. 88 CIGNA CORPORATION - 2015 Form 10...

  • Page 119
    ... 3 Level 2 December 31, 2015 Fair Carrying Value Value $ 1,911 $ 1,151 $ 5,515 $ 1,864 $ 1,148 $ 5,020 December 31, 2014 Fair Carrying Value Value $ 2,168 $ 1,136 $ 5,740 $ 2,081 $ 1,124 $ 4,967 Commercial mortgage loans Contractholder deposit funds, excluding universal life products Long-term...

  • Page 120
    .... The fair value of long-term debt is based on quoted market prices for recent trades. When quoted market prices are not available, fair value is estimated using a discounted cash flow analysis and the Company's estimated current borrowing rate for debt of similar terms and remaining maturities...

  • Page 121
    ...the criteria listed above. These fixed maturities are primarily corporate securities with a decline in fair value that reflects an increase in market yields since purchase. December 31, 2015 Amortized Unrealized Cost Depreciation (Dollars in millions) Fair Value Number of Issues Fixed maturities...

  • Page 122
    ... real estate market-related factors such as rental rates and vacancies, and property-specific inputs such as growth rate assumptions and lease rollover statistics. However, the two most significant contributors to the credit quality rating are the debt service coverage and loan-to-value ratios...

  • Page 123
    ...31, other long-term investments consisted of the following: (In millions) Real estate investments Securities partnerships Other TOTAL Real estate investments and securities partnerships with a carrying value of $277 million at December 31, 2015 and $264 million at December 31, 2014 were non-income...

  • Page 124
    ... guaranteed amount (''GMIB liabilities''). According to the contractual terms of the written reinsurance contracts, payment by the Company depends on the actual account value in the underlying mutual funds and the level of interest rates when the contractholders elect to receive minimum income...

  • Page 125
    ... services to its Medicare Advantage customers, the Company contracts with independent physician associations (''IPAs'') that are variable interest entities. Physicians provide health care services to Medicare Advantage customers and the Company provides medical management and administrative services...

  • Page 126
    ... as follows: (In millions) 2015 $ $ 117 114 $ $ 2014 376 86 $ $ 2013 417 9 Separate accounts Investment gains required to adjust future policy benefits for the run-off settlement annuity business Sales information for available-for-sale fixed maturities and equity securities for the years ended...

  • Page 127
    ...due 2016, including accrued interest from November 15, 2014 through the settlement date of April 13, 2015. The redemption price equaled the present value of the remaining principal and interest payments on the Notes being redeemed, discounted at a rate equal to the 10-year Treasury Rate plus a fixed...

  • Page 128
    ... the Company retired 70 million shares of treasury stock. This transaction had no effect on total shareholders' equity. The Company has authorized a total of 25 million shares of $1 par value preferred stock. No shares of preferred stock were outstanding at December 31, 2015, 2014 or 2013. 98 CIGNA...

  • Page 129
    ... amounts 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. Changes in the components of accumulated other comprehensive income (loss) were as follows: Tax...

  • Page 130
    ... and prior service costs (other operating expenses) Reclassification adjustment for curtailment gain (other operating expenses) Total reclassification adjustment to shareholders' net income (other operating expenses) Net change due to valuation update and plan amendments Net postretirement benefits...

  • Page 131
    ...% of the Company's pre-tax income in 2015, 10% in 2014 and 12% in 2013. Effective Tax Rates The consolidated effective tax rates of 37.6% in 2015 and 36.6% in 2014 have increased from historical levels due to the health insurance industry tax that took effect in 2014 and that is not deductible for...

  • Page 132
    ... 2015 $ 535 465 101 177 99 1,377 (71) 1,306 $ 2014 597 440 72 203 105 1,417 (49) 1,368 Deferred income tax assets and liabilities as of December 31 were as follows: (In millions) Deferred tax assets Employee and retiree benefit plans Other insurance and contractholder liabilities Net operating...

  • Page 133
    ...8. Financial Statements and Supplementary Data D. Other Tax Matters The Internal Revenue Service is expected to complete their examination of the Company's 2011 and 2012 consolidated federal income tax returns during the second half of 2016. The Company conducts business in a number of state and...

  • Page 134
    .... Strategic performance shares are divided into two broad groups: 50% are subject to a market condition (total shareholder return relative to industry peer companies) and 50% are subject to performance conditions (2013 and 2014 awards: revenue growth and cumulative adjusted net income; 2015 awards...

  • Page 135
    ... 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 136
    ... 77 75 2 60 37 2013 $ 51 $ 2013 2013 $ $ 40 24 $ $ (1) There were no special items recorded in 2014. (2) Under this agreement, the Company utilizes a vendor's technology and service platforms, retail network contracting and claims processing services. 106 CIGNA CORPORATION - 2015 Form 10-K

  • Page 137
    ... Data Summarized segment financial information for the years ended December 31, was as follows: Global Health Care $ 22,696 4,357 340 2,536 29,929 43 29,972 526 27,028 2,944 1,150 1,794 Global Supplemental Benefits $ 3,000 46 103 - 3,149 - 3,149 31 2,849 300 33 267 $ Group Disability and Life 3,843...

  • Page 138
    ...79 Corporate $ - (16) 1 - (15) 35 20 1 340 (320) (79) (241) Total $27,214 4,141 1,166 2,239 34,760 154 34,914 588 31,610 3,304 1,202 2,102 2014 Premiums Fees and other revenues Net investment income Mail order pharmacy revenues Total operating revenues Net realized investment gains Total revenues...

  • Page 139
    ... 30,204 2,176 700 1,476 2013 Premiums Fees and other revenues Net investment income Mail order pharmacy revenues Total operating revenues Net realized investment gains Total revenues Depreciation and amortization Total benefits and expenses Income before taxes Income taxes and net loss attributable...

  • Page 140
    ...) 2015 2014 2013 Medical Premiums by product: Guaranteed cost Experience-rated Stop loss International health care Dental Medicare Medicaid Medicare Part D Other medical premiums Total medical premiums Medical fees Total medical premiums and fees Disability Life, Accident and Supplemental Health...

  • Page 141
    ...obligations are typically subject to various time limitations, defined by the contract or by B. Guaranteed Minimum Income Benefit Contracts Under these guarantees, future payment amounts are dependent on underlying mutual fund investment values and interest rate levels prior to and at the date of...

  • Page 142
    ... of managing a health services business. These actions may include benefit disputes, breach of contract claims, tort claims, provider disputes, disputes regarding reinsurance arrangements, employment and employment discrimination-related suits, employee benefit claims, wage and hour claims, privacy...

  • Page 143
    ... General Life Insurance Company, et al., pending in the U.S. District Court for the District of New Jersey. The consolidated amended complaint, filed in 2009 on behalf of subscribers, health care providers and various medical associations, asserted claims related to benefits and disclosure...

  • Page 144
    ... agreement to the extent already implemented, and costs and damages. Effective November 24, 2015, solely to avoid the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, the Company, the Company's directors, Anthem and Merger Sub entered into...

  • Page 145
    ... the third quarter of 2015 and $28 million in the fourth quarter of 2015 for advisory, legal and other transactions costs directly related to the Company's proposed merger with Anthem. See Note 3 to the Consolidated Financial Statements for additional details. CIGNA CORPORATION - 2015 Form 10-K 115

  • Page 146
    ... Cigna Corporation is responsible for establishing and maintaining adequate internal controls over financial reporting. The Company's internal controls were designed to provide reasonable assurance to the Company's management and Board of Directors that the Company's consolidated published financial...

  • Page 147
    ... to the 2016 annual meeting of shareholders is incorporated by reference. ITEM 11. Executive Compensation The information under the captions ''Corporate Governance Matters - Non-Employee Director Compensation,'' ''Compensation Matters - Report of the People Resources Committee,'' ''- Compensation...

  • Page 148
    ... as of the close of business on December 31, 2015 for future issuance under the Cigna Long-Term Incentive Plan. The information under the captions ''Ownership of Cigna Common Stock - Stock Held by Directors, Nominees and Executive Officers'' and ''Ownership of Cigna Common Stock - Stock Held by...

  • Page 149
    ..., 2015 and 2014. Consolidated Statements of Changes in Total Equity for the years ended December 31, 2015, 2014 and 2013. Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013. Notes to the Consolidated Financial Statements. (2) The financial statement schedules...

  • Page 150
    ...Executive Vice President and Chief Financial Officer (Principal Financial Officer) Vice President and Chief Accounting Officer (Principal Accounting Officer) Director Director Chairman of the Board Director Director Director Director Director Director Director 120 CIGNA CORPORATION - 2015 Form 10-K

  • Page 151
    ... on Financial Statement Schedules ...FS-2 Schedules I - Summary of Investments - Other Than Investments in Related Parties as of December 31, 2015 ...FS-3 II - Condensed Financial Information of Cigna Corporation (Registrant) ...FS-4 III - Supplementary Insurance Information ...FS-9 IV - Reinsurance...

  • Page 152
    ... 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 control over financial reporting referred to in our report dated February 25, 2016...

  • Page 153
    ... Schedules Cigna Corporation and Subsidiaries Schedule I - Summary of Investments - Other Than Investments in Related Parties December 31, 2015 Type of Investment (in millions) Cost Fair Value Amount at which shown in the Consolidated Balance Sheet Fixed maturities: Bonds: United States...

  • Page 154
    ...Subsidiaries Schedule II - Condensed Financial Information of Cigna Corporation - (Registrant) Statements of Income For the years ended December 31, (in millions) 2015 2014 2013 Operating expenses: Interest Intercompany interest Loss on early extinguishment of debt Other TOTAL OPERATING EXPENSES...

  • Page 155
    ...Cash and cash equivalents Short term investments 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, 296; authorized, 600) Additional paid-in...

  • Page 156
    ... Cigna Corporation and Subsidiaries Schedule II - Condensed Financial Information of Cigna Corporation (Registrant) Statements of Cash Flows (in millions) For the years ended December 31, 2015 2014 $ 2,094 $ 2,102 $ 2013 1,476 Cash Flows from Operating Activities: Shareholders' Net Income...

  • Page 157
    ...interest rate swap contracts hedging a portion of these fixed-rate debt instruments. On March 11, 2015, the Company issued $900 million of 10-Year Notes due April 15, 2025 at a stated interest rate of 3.25% ($892 million, net of discount and issuance costs, with an effective annual interest rate of...

  • Page 158
    ... 2015, no payments have been made on these guarantees and none are pending. The Company provided other guarantees to subsidiaries that, in the aggregate, do not represent a material risk to the Company's results of operations, liquidity or financial condition. FS-8 CIGNA CORPORATION - 2015 Form 10...

  • Page 159
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  • Page 160
    ... TOTAL Year Ended December 31, 2013: Global Health Care Global Supplemental Benefits Group Disability and Life Other Operations Corporate TOTAL Unearned premiums $ 145 453 13 18 - 629 155 431 15 20 - 621 116 419 23 22 - 580 $ $ $ $ $ $ $ $ $ $ $ $ FS-9 CIGNA CORPORATION - 2015 Form...

  • Page 161
    ... Financial Statement Schedules Premiums Year Ended December 31, 2015: Global Health Care Global Supplemental Benefits Group Disability and Life Other Operations Corporate TOTAL Year Ended December 31, 2014: Global Health Care Global Supplemental Benefits Group Disability and Life Other Operations...

  • Page 162
    ...TOTAL Year Ended December 31, 2014: Life insurance in force Premiums: Life insurance and annuities Accident and health insurance TOTAL Year Ended December 31, 2013: Life insurance in force Premiums: Life insurance and annuities Accident and health insurance TOTAL FS-11 CIGNA CORPORATION - 2015 Form...

  • Page 163
    ...- - (2) - - Other deductions(1 4) (1 3) (6) - - Balance at end of year 15 75 71 3 12 101 49 4 8 43 49 4 (1) Amounts for commercial mortgage loans primarily reflect charge-offs upon sales and repayments, as well as transfers to foreclosed real estate. CIGNA CORPORATION - 2015 Form 10-K FS-12

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  • Page 165
    ....3 Cigna Corporation Non-Employee Director Compensation Program Filed as Exhibit 10.1 to the registrant's Form 10-Q for the quarterly amended and restated effective February 26, 2014 period ended March 31, 2014 and incorporated herein by reference. 10.4 Cigna Restricted Share Equivalent Plan for Non...

  • Page 166
    ...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: Strategic Performance Share Grant Agreement Form of Cigna Long-Term Incentive Plan: Nonqualified Stock Option...

  • Page 167
    ... Certification of Chief Financial Officer of Cigna Corporation pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350 The following materials from Cigna Corporation's Annual Report on Form 10-K for the year ended December 31, 2015, formatted in XBRL (Extensible Business Reporting...

  • Page 168
    ... interests Income before income 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: $ 2015 $ 3,327 2014 $ 3,304 2013 $ 2,176 2012...

  • Page 169
    ...Life & Health Insurance Company, Inc. Allegiance Re, Inc. American Retirement Life Insurance Company Benefits Management Corp. Bravo Health Mid-Atlantic, Inc. Bravo Health of Pennsylvania, Inc. Central Reserve Life Insurance Company Ceres Sales of Ohio, LLC Cigna & CMB Life Insurance Company Limited...

  • Page 170
    ... Limited Cigna Insurance Public Company Limited Cigna Insurance Services (Europe) Limited Cigna Intellectual Property, Inc. Cigna International Corporation Cigna International Health Services Kenya Limited Cigna International Health Services SDN BHD Cigna International Health Services BVBA Cigna...

  • Page 171
    ..., LLC NewQuest Management Northeast, LLC Olympic Health Management Services, Inc. Provident American Life and Health Insurance Company PT Asuransi Cigna Qualcare Alliance Networks, Inc. Qualcare Captive Insurance Company Inc. PCC Qualcare Management Resources Limited Liability Company Qualcare, Inc...

  • Page 172
    ... 25, 2016 No. 033-51791) of Cigna Corporation of our reports dated February 25, 2016 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 - 2015 Form 10-K

  • Page 173
    ...'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 - 2015 Form 10-K E-9

  • Page 174
    ...'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 - 2015 Form 10-K

  • Page 175
    ... Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Cigna Corporation. /s/ David M. Cordani David M. Cordani Chief Executive Officer February 25, 2016 CIGNA CORPORATION - 2015 Form 10-K E-11

  • Page 176
    ...Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Cigna Corporation. /s/ Thomas A. McCarthy Thomas A. McCarthy Chief Financial Officer February 25, 2016 E-12 CIGNA CORPORATION - 2015 Form 10-K

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  • Page 179
    ...American Life Insurance Company, Cigna Behavioral Health, Inc., Cigna Health Management, Inc., and HMO or service company subsidiaries of Cigna Health Corporation and Cigna Dental Health, Inc. The Cigna name, logo, and other Cigna marks are owned by Cigna Intellectual Property, Inc. 892184 a 03/2016...

  • Page 180
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