Cigna 2008 Annual Report Download - page 171

FS-8
In June 2007, the Company amended and restated its five year revolving credit and letter of credit agreement for $1.75
billion, which permits up to $1.25 billion to be used for letters of credit. The credit agreement includes options, which are
subject to consent by the administrative agent and the committing bank, to increase the commitment amount up to $2.0
billion and to extend the term of the agreement. The Company entered into the agreement for general corporate purposes,
including support for the issuance of commercial paper and to obtain statutory reserve credit for certain reinsurance
arrangements. There was a $25 million of letter of credit issued as of December 31, 2008.
Maturities of long-term debt are as follows (in millions): none in 2009 and 2010, $448 in 2011, none in 2012 and the
remainder in years after 2012.
Interest paid on short- and long-term debt amounted to $135 million, $116 million and $101 million for 2008, 2007 and 2006,
respectively.
Note 4—Intercompany liabilities consist primarily of loans payable to CIGNA Holdings, Inc. of $5.1 billion as of December 31, 2008
and $5.6 billion as of December 31, 2007. Interest was accrued at an average monthly rate of 4.23% and 5.62% for 2008 and
2007, respectively.
Note 5—As of December 31, 2008, the Company had guarantees and similar agreements in place to secure payment obligations or
solvency requirements of certain wholly owned subsidiaries as follows:
• The Company has arranged for bank letters of credit in support of CIGNA Global Reinsurance Company, an indirect
wholly owned subsidiary domiciled in Bermuda, in the amount of $57 million. These letters of credit primarily secure
the payment of insureds’ claims from run-off reinsurance operations. The Company has agreed to indemnify the banks
providing the letters of credit in the event of any draw. As of December 31, 2008 approximately $40 million of the
letters of credit are issued.
• The Company has provided a capital commitment deed in an amount up to $185 million in favor of CIGNA Global
Reinsurance Company. This deed is equal to the letters of credit securing the payment of insureds’ claims from run-off
reinsurance operations. This deed is required by Bermuda regulators to have these letters of credit for the London run-
off reinsurance operations included as admitted assets.
• Various indirect, wholly owned subsidiaries have obtained surety bonds in the normal course of business. If there is a
claim on a surety bond and the subsidiary is unable to pay, the Company guarantees payment to the company issuing
the surety bond. The aggregate amount of such surety bonds as of December 31, 2008 was $61 million.
• The Company is obligated under a $25 million letter of credit required by the insurer of its high-deductible self-
insurance programs to indemnify the insurer for claim liabilities that fall within deductible amounts for policy years
dating back to 1994.
• The Company also provides solvency guarantees aggregating $34 million under state and federal regulations in support
of its indirect wholly owned medical HMOs in several states.
• The Company has arranged a $100 million letter of credit in support of CIGNA Europe Insurance Company, an indirect
wholly owned subsidiary. The Company has agreed to indemnify the banks providing the letters of credit in the event
of any draw. CIGNA Europe Insurance Company is the holder of the letters of credit.
• In addition, the Company has agreed to indemnify payment of losses included in CIGNA Europe Insurance Company’s
reserves on the assumed reinsurance business transferred from ACE. As of December 31, 2008, the reserve was $152
million.
In 2008, 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.