Cigna 2010 Annual Report Download - page 97

CIGNA CORPORATION  2010 Form 10K 77
PART II
ITEM 8 Financial Statements and Supplementary Data
Notes to the Consolidated Financial Statements
NOTE 1 Description of Business
As used in this document, “CIGNA” and the “Company” may
refer to CIGNA Corporation itself, one or more of its subsidiaries,
or CIGNA Corporation and its consolidated subsidiaries. CIGNA
Corporation is a holding company and is not an insurance company.
Its subsidiaries conduct various businesses, which are described
in this Annual Report on Form 10-K for the fi scal year ended
December 31, 2010 (“Form 10-K”).
 e Company is a global health service organization with subsidiaries
that are major providers of medical, dental, disability, life and
accident insurance and related products and services. In the U.S., the
majority of these products and services are off ered through employers
and other groups (e.g. unions and associations) and in selected
international markets, the Company off ers supplemental health, life
and accident insurance products, expatriate benefi ts and international
health care coverage and services to businesses, governmental and
non-governmental organizations and individuals. In addition to its
ongoing operations described above, the Company also has certain
run-off operations, including a Run-off Reinsurance segment.
NOTE 2 Summary of Signifi cant Accounting Policies
A. Basis of Presentation
 e Consolidated Financial Statements include the accounts of
CIGNA Corporation and its signifi cant subsidiaries. Intercompany
transactions and accounts have been eliminated in consolidation.
 ese Consolidated Financial Statements were prepared in conformity
with accounting principles generally accepted in the United States
of America (“GAAP”). Amounts recorded in the Consolidated
Financial Statements necessarily refl ect management’s estimates and
assumptions about medical costs, investment valuation, interest rates
and other factors. Signifi cant estimates are discussed throughout
these Notes; however, actual results could diff er from those estimates.
 e impact of a change in estimate is generally included in earnings
in the period of adjustment.
In preparing these Consolidated Financial Statements, the Company
has evaluated events that occurred between the balance sheet date
and February 25, 2011 and determined there were no other items
to disclose.
Certain reclassifi cations have been made to prior period amounts to
conform to the current presentation. In addition, certain amounts
have been restated as a result of the adoption of new accounting
pronouncements.
Variable interest entities
As of December 31, 2010 and 2009 the Company determined it was
not a primary benefi ciary in any variable interest entities.
B. Recent Accounting Pronouncements
Deferred acquisition costs
In October 2010, the Financial Accounting Standards Board
(“FASB”) amended guidance (ASU 2010-26) for the accounting
of costs related to the acquisition or renewal of insurance contracts
to require costs such as certain sales compensation or telemarketing
costs that are related to unsuccessful eff orts and any indirect costs to
be expensed as incurred.  is new guidance must be implemented
on January 1, 2012 or may be implemented earlier and any changes
to the Company’s Consolidated Financial Statements may be
recognized prospectively for acquisition costs incurred beginning
in 2012 or through retrospective adjustment of comparative prior
periods.  e Company’s deferred acquisition costs arise from sales
and renewal activities primarily in its International segment and, to
a lesser extent, the Health Care and corporate-owned life insurance
businesses. Because the new requirements further restrict the types of
costs that are deferrable, the Company expects more of its acquisition
costs to be expensed when incurred under the new guidance.  e
Company continues to evaluate these new requirements to determine
the timing, method and estimated eff ects of their implementation.
Credit quality disclosures
Eff ective December 31, 2010, the Company adopted the FASB’s
updated guidance (ASU 2010-20) that requires disclosures about the
credit quality and risks inherent in fi nancing receivables, including
how credit risk is analyzed and assessed on a disaggregated basis (by
portfolio segment and class).  e Company determined it has one
portfolio segment and one class of mortgage loans because all loans
are subject to the same monitoring and risk assessment process, and
are made exclusively to commercial borrowers. Financing receivables
other than mortgage loans are immaterial. See Note 12 (B) for
additional information.
Variable interest entities
Eff ective January 1, 2010, the Company adopted the FASB’s
amended guidance that requires ongoing qualitative analysis to
determine whether a variable interest entity must be consolidated
based on the entity’s purpose and design, the Company’s ability