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CIGNA CORPORATION2010 Form 10K 103
PART II
ITEM 8 Financial Statements and Supplementary Data
Fair Value Disclosures for Financial Instruments Not
Carried at Fair Value
Most fi nancial instruments that are subject to fair value disclosure
requirements are carried in the Company’s Consolidated Financial
Statements at amounts that approximate fair value.  e following
table provides the fair values and carrying values of the Company’s
fi nancial instruments not recorded at fair value that are subject
to fair value disclosure requirements at December 31, 2010 and
December 31, 2009.
(In millions)
December31,2010 December31,2009
Fair Value Carrying Value Fair Value Carrying Value
Commercial mortgage loans $ 3,470 $ 3,486 $ 3,323 $ 3,522
Contractholder deposit funds, excluding universal life products $ 1,001 $ 989 $ 940 $ 941
Long-term debt, including current maturities, excluding capital leases $ 2,926 $ 2,709 $ 2,418 $ 2,427
e fair values presented in the table above have been estimated using
market information when available.  e following is a description
of the valuation methodologies and inputs used by the Company to
determine fair value.
Commercial mortgage loans. e Company estimates the fair value
of commercial mortgage loans generally by discounting the contractual
cash fl ows at estimated market interest rates that refl ect the Company’s
assessment of the credit quality of the loans. Market interest rates
are derived by calculating the appropriate spread over comparable
U.S. Treasury rates, based on the property type, quality rating and
average life of the loan.  e quality ratings refl ect the relative risk of
the loan, considering debt service coverage, the loan-to-value ratio and
other factors. Fair values of impaired mortgage loans are based on the
estimated fair value of the underlying collateral generally determined
using an internal discounted cash fl ow model.
Contractholder deposit funds, excluding universal life products.
Generally, these funds do not have stated maturities. Approximately
45% of these balances can be withdrawn by the customer at any time
without prior notice or penalty.  e fair value for these contracts
is the amount estimated to be payable to the customer as of the
reporting date, which is generally the carrying value. Most of the
remaining contractholder deposit funds are reinsured by the buyers
of the individual life insurance and annuity and retirement benefi ts
businesses.  e fair value for these contracts is determined using the
fair value of these buyers’ assets supporting these reinsured contracts.
e Company had a reinsurance recoverable equal to the carrying value
of these reinsured contracts.
Long-term debt, including current maturities, excluding capital
leases. e 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 fl ow analysis and the
Company’s estimated current borrowing rate for debt of similar terms
and remaining maturities.
Fair values of off -balance sheet fi nancial instruments were not material.
NOTE 12 Investments
A. Fixed Maturities and Equity Securities
Securities in the following table are included in fi xed maturities and
equity securities on the Company’s Consolidated Balance Sheets.
ese securities are carried at fair value with changes in fair value
reported in other realized investment gains (losses) and interest and
dividends reported in net investment income.  e Company’s hybrid
investments include certain preferred stock or debt securities with call
or conversion features.
(In millions)
2010 2009
Included in fi xed maturities:
Trading securities (amortized cost: $3; $8) $ 3 $ 8
Hybrid securities (amortized cost: $45; $37) 52 43
TOTAL $55 $51
Included in equity securities:
Hybrid securities (amortized cost: $108; $109) $ 86 $ 81
Fixed maturities included $98 million at December 31, 2010 and
$197 million at December 31, 2009, which were pledged as collateral
to brokers as required under certain futures contracts.  ese fi xed
maturities were primarily corporate securities.
e following information about fi xed maturities excludes trading
and hybrid securities.  e amortized cost and fair value by
contractual maturity periods for fi xed maturities were as follows at
December 31, 2010:
(In millions)
Amortized Cost Fair Value
Due in one year or less $ 776 $ 789
Due after one year through fi ve years 4,509 4,804
Due after fi ve years through ten years 4,835 5,256
Due after ten years 2,619 3,052
Mortgage and other asset-backed securities 658 753
TOTAL $ 13,397 $ 14,654