Cigna 2015 Annual Report Download - page 40

PART I
ITEM 1. Business
these channels under a variety of arrangements with affinity partners,
Principal Products and Services
including banks, credit card companies and other financial and
non-financial institutions. We also market directly to consumers via
Supplemental Health, Life and Accident Insurance
direct response television and the Internet. In certain countries, we
Supplemental health, life and accident insurance products generally market our products through captive and third party brokers and
provide simple, affordable coverage of risks for the health and agents. Our Medicare supplement product line is distributed
financial security of individuals. Supplemental health products primarily through independent agents and telemarketing directly to
provide specified payments for a variety of health risks and include the consumer.
personal accident, accidental death, critical illness, hospitalization,
South Korea represents our single largest geographic market for
travel, dental, cancer and other dread disease coverages. We also offer
Global Supplemental Benefits. For information on this concentration
customers individual private medical insurance, term and variable
of risk for the Global Supplemental Benefits segment’s business in
universal life insurance, and certain savings products.
South Korea, see ‘‘Other Items Affecting Results of Global
Supplemental Benefits’’ in the Global Supplemental Benefits section
Medicare Supplement Plans
of Management’s Discussion and Analysis of Financial Condition and
We offer individual Medicare Supplement plans that provide retirees Results of Operations (‘‘MD&A’’) beginning on page 50 of this
with federally standardized Medigap-style plans. Retirees may select Form 10-K.
among the various plans with specific plan options to meet their For our supplemental health, life and accident insurance products sold
unique needs and may visit, without the need for a referral, any health in foreign markets we are increasingly exposed to geopolitical,
care professional or facility that accepts Medicare throughout the currency and other risks inherent in foreign operations. Also, given
United States. that we bill and collect a significant portion of premiums through
credit cards, a substantial contraction in consumer credit could impact
Pricing and Reinsurance
our ability to retain existing policies and sell new policies. A decline in
customer retention would result in both a reduction of revenue and an
Premium rates for our global supplemental benefits products are based acceleration of the amortization of acquisition-related costs. Changes
on assumptions about mortality, morbidity, customer acquisition and in regulation for permitted distribution channels also may impact our
retention, customer demographics, expenses and target profit business or results.
margins, as well as interest rates. For variable universal life insurance
products, fees consist of mortality, administrative, asset management
and surrender charges assessed against the contractholder’s fund
Competition
balance. Mortality charges on variable universal life may be adjusted We expect that the competitive environment for global supplemental
prospectively to reflect expected mortality experience. Most contracts benefits will continue to intensify as U.S., Europe and other
permit premium rate changes at least annually. regionally-based insurance and financial services providers more
Most of the businesses in this segment operate through foreign aggressively pursue expansion opportunities across geographies,
subsidiaries. We maintain a capital management strategy to retain especially in Asia. We believe competitive factors will include
overseas a significant portion of the earnings from these foreign branding, product and distribution innovation and differentiation,
operations. These undistributed earnings are deployed outside of the efficient management of marketing processes and costs, commission
United States in support of the liquidity and capital requirements of levels paid to distribution partners, the quality of claims, local
our foreign operations. As a result, the effective tax rate for Global network coverage, customer services and talent acquisition and
Supplemental Benefits reflects income tax expense that is generally retention. Additionally, in most overseas markets, perception of
lower than in the United States. financial strength also will likely continue to be an important
competitive factor.
A global approach to underwriting risk management allows each local
business to underwrite and accept risk within specified limits. Our competitors are primarily locally-based insurance companies,
Retentions are centrally managed through cost effective use of external including insurance subsidiaries of banks primarily in Asia and
reinsurance to limit our liability on per life, per risk, and per event Europe and multi-national companies. Insurance company
(catastrophe) bases. competitors in this segment primarily focus on traditional product
distribution through captive agents, with direct marketing being
secondary channels. We estimate that we have less than 3% market
Markets and Distribution
share of the total insurance premiums in any given market in which
Our supplemental health, life and accident insurance products sold in we operate.
foreign countries are generally marketed through distribution partners In the Medicare supplement business, the principal competitive
with whom the individual insured has an affinity relationship. These factors are underwriting and pricing, relative operating efficiency,
products are sold primarily through direct marketing channels, such as broker relations, and the quality of claims and customer service. Our
outbound telemarketing, and in-branch bancassurance (when we primary competitors in this business include U.S.-based health
partner with a bank and use the bank’s sales channels to sell our insurance companies.
insurance products). Marketing campaigns are conducted through
10 CIGNA CORPORATION - 2015 Form 10-K