Cigna 2008 Annual Report Download - page 40
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20
for these obligations. The purchaser of the retirement benefits business deposited assets associated with the reinsurance of general
account contracts into a trust (the “Ceded Business Trust”) to provide security to CIGNA for the related reinsurance recoverables. The
purchaser is permitted to withdraw assets from the Ceded Business Trust equal to the reduction in CIGNA’s reserves whenever a
reduction occurs. For example, reductions will occur when the purchaser enters into additional novation agreements and directly
assumes liability to the insured party. Assets in the trust must be greater than or equal to general account statutory liabilities of the
ceded business. Trust assets are limited to those types of investments that are permitted by the state of Connecticut for general account
investing and consist primarily of fixed maturities. As of December 31, 2008, assets totaling $2.5 billion remained in the Ceded
Business Trust, and the remaining reserves for the purchased business were $1.9 billion.
Settlement Annuity Business
CIGNA’s settlement annuity business is a run-off block of contracts. These contracts are primarily liability settlements with
approximately 35% of the liabilities associated with payments which are guaranteed and not contingent on survivorship. In the case of
the contracts that involve non-guaranteed payments, such payments are contingent on the survival of one or more parties involved in
the settlement.
The Settlement Annuities business is premium deficient, meaning initial premiums were not sufficient to cover all claims and
profit. Liabilities are estimates of the present value of benefits to be paid less the present value of investment income generated by
the assets supporting the product including realized and unrealized capital gains. The company estimates these liabilities based on
assumptions for investment yields, mortality, and administrative expenses. Refer to Note 2 to CIGNA’s Consolidated Financial
Statements beginning on page 86 for additional information regarding reserves for this business.
Other Risks
For more information, see “Other Operations” beginning on page 65 of this Form 10-K.