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CIGNA CORPORATION2010 Form 10K
64
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
On-Balance Sheet
•Insurance liabilities. Contractual cash obligations for insurance
liabilities, excluding unearned premiums and fees, represent
estimated net benefi t payments for health, life and disability
insurance policies and annuity contracts. Recorded contractholder
deposit funds refl ect current fund balances primarily from universal
life customers. Contractual cash obligations for these universal
life contracts are estimated by projecting future payments using
assumptions for lapse, withdrawal and mortality.  ese projected
future payments include estimated future interest crediting
on current fund balances based on current investment yields
less the estimated cost of insurance charges and mortality and
administrative fees. Actual obligations in any single year will vary
based on actual morbidity, mortality, lapse, withdrawal, investment
and premium experience.  e sum of the obligations presented
above exceeds the corresponding insurance and contractholder
liabilities of $16 billion recorded on the balance sheet because the
recorded insurance liabilities refl ect discounting for interest and the
recorded contractholder liabilities exclude future interest crediting,
charges and fees.  e Company manages its investment portfolios
to generate cash fl ows needed to satisfy contractual obligations. Any
shortfall from expected investment yields could result in increases
to recorded reserves and adversely impact results of operations.
e amounts associated with the sold retirement benefi ts and
individual life insurance and annuity businesses, as well as the
reinsured workers’ compensation and personal accident businesses
are excluded from the table above as net cash fl ows associated with
them are not expected to impact the Company.  e total amount of
these reinsured reserves excluded is approximately $6 billion.
•Short-term debt represents commercial paper, current maturities of
long-term debt, and current obligations under capital leases.
•Long-term debt includes scheduled interest payments. Capital
leases are included in long-term debt and represent obligations for
software licenses.
•Other long-term liabilities. ese items are presented in accounts
payable, accrued expenses and other liabilities in the Company’s
Consolidated Balance Sheets.  is table includes estimated
payments for GMIB contracts, pension and other postretirement
and postemployment benefi t obligations, supplemental and
deferred compensation plans, interest rate and foreign currency
swap contracts, and certain tax and reinsurance liabilities.
Estimated payments of $113 million for deferred compensation,
non-qualifi ed and International pension plans and other
postretirement and postemployment benefi t plans are expected to
be paid in less than one year.  e Company’s best estimate is that
contributions to the qualifi ed domestic pension plan during 2011
will be approximately $250 million.  e Company expects to
make payments subsequent to 2011 for these obligations, however
subsequent payments have been excluded from the table as their
timing is based on plan assumptions which may materially diff er
from actual activities (see Note 10 to the Consolidated Financial
Statements for further information on pension and other
postretirement benefi t obligations).
e above table also does not contain $177 million of gross liabilities
for uncertain tax positions because the Company cannot reasonably
estimate the timing of their resolution with the respective taxing
authorities. See Note 20 to the Consolidated Financial Statements
for the year ended December 31, 2010 for further information.
Off -Balance Sheet
•Purchase obligations. As of December 31, 2010, purchase
obligations consisted of estimated payments required under
contractual arrangements for future services and investment
commitments as follows:
(In millions)
Fixed maturities $14
Commercial mortgage loans 63
Real estate 11
Limited liability entities (other long-term investments) 521
Total investment commitments 609
Future service commitments 675
TOTAL PURCHASE OBLIGATIONS $ 1,284
e Company had commitments to invest in limited liability
entities that hold real estate, loans to real estate entities or securities.
See Note 12(D) to the Consolidated Financial Statements for
additional information.
Future service commitments include an agreement with IBM
for various information technology (IT) infrastructure services.
e Company’s remaining commitment under this contract is
approximately $268 million over the next 3 years.  e Company
has the ability to terminate this agreement with 90 days notice,
subject to termination fees.
e Company’s remaining estimated future service commitments
primarily represent contracts for certain outsourced business
processes and IT maintenance and support.  e Company
generally has the ability to terminate these agreements, but does
not anticipate doing so at this time. Purchase obligations exclude
contracts that are cancelable without penalty and those that do not
specify minimum levels of goods or services to be purchased.
•Operating leases. For additional information, see Note 22 to the
Consolidated Financial Statements.
Guarantees
e Company, through its subsidiaries, is contingently liable for
various fi nancial and other guarantees provided in the ordinary course
of business. See Note 24 to the Consolidated Financial Statements for
additional information on guarantees.