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CIGNA CORPORATION2010 Form 10K
114
PART II
ITEM 8 Financial Statements and Supplementary Data
NOTE 19 Shareholders’ Equity and Dividend Restrictions
State insurance departments and foreign jurisdictions that regulate
certain of the Company’s subsidiaries prescribe accounting practices
(which diff er in some respects from GAAP) to determine statutory
net income and surplus.  e Company’s life insurance and HMO
company subsidiaries are regulated by such statutory requirements.
e statutory net income for the years ended, and statutory surplus
as of, December 31 of the Company’s life insurance and HMO
subsidiaries were as follows:
(In millions)
2010 2009 2008
Net income $ 1,697 $ 1,088 $ 420
Surplus $ 5,107 $ 4,728 $ 3,638
As of December 31, 2010, statutory surplus for each of the
Company’s life insurance and HMO subsidiaries is suffi cient to meet
the minimum required by regulators. As of December 31, 2010, the
Company’s life insurance and HMO subsidiaries had investments on
deposit with state departments of insurance with statutory carrying
values of $319 million.  e Company’s life insurance and HMO
subsidiaries are also subject to regulatory restrictions that limit the
amount of annual dividends or other distributions (such as loans
or cash advances) insurance companies may extend to the parent
company without prior approval of regulatory authorities.  e
maximum dividend distribution that the Company’s life insurance
and HMO subsidiaries may make during 2011 without prior
approval is approximately $1.5 billion. Restricted net assets of the
Company as of December 31, 2010, were approximately $5 billion.
One of the Company’s life insurance subsidiaries is permitted to loan
up to $600 million to the parent company without prior approval.
NOTE 20 Income Taxes
A. Income Tax Expense
e components of income taxes for the years ended December 31 were as follows:
(In millions)
2010 2009 2008
Current taxes
U.S. income $ 267 $ 211 $ 255
Foreign income 45 48 57
State income 19 16 1
331 275 313
Deferred taxes (bene ts)
U.S. income 182 279 (224)
Foreign income 15 39 2
State income (7)11
190 319 (221)
TOTAL INCOME TAXES $ 521 $ 594 $ 92
Total income taxes for the years ended December 31 were diff erent from the amount computed using the nominal federal income tax rate of
35% for the following reasons:
(In millions)
2010 2009 2008
Tax expense at nominal rate $ 655 $ 664 $ 135
Tax-exempt interest income (31) (31) (32)
Eff ect of permanently invested foreign earnings (31) (23) —
Dividends received deduction (3) (3) (3)
Resolution of federal tax matters — (27) (1)
State income tax (net of federal income tax benefi t) 9 12 1
Change in valuation allowance (94) (2) (15)
Other 1647
TOTAL INCOME TAXES $ 521 $ 594 $ 92
Eff ect of Permanently Invested Foreign Earnings
e Company has historically accrued U. S. income taxes on the
undistributed earnings of its foreign subsidiaries. However, the
Company recently began computing income taxes attributable to
the South Korea and Hong Kong operations using the tax rates of
the foreign jurisdictions, as compared to the higher U. S. statutory
tax rate.  is change, adopted in 2009 for South Korea and earlier
in 2010 for Hong Kong, was based upon a determination that the
prospective earnings of these operations would be permanently
invested overseas.