Cigna 2011 Annual Report Download - page 125

103CIGNA CORPORATION2011 Form10K
PART II
ITEM 8 Financial Statements and Supplementary Data
C. Real Estate
As of December31,2011 and 2010, real estate investments consisted primarily of oce and industrial buildings in California. Investments
with a carrying value of $49million as of December31,2011 and 2010 were non-income producing during the preceding twelve months. As
of December31,2011, the Company had commitments to contribute additional equity of $9million to real estate investments.
D. Other Long-Term Investments
As of December31, other long-term investments consisted of the following:
(In millions) 2011 2010
Real estate entities $ 665 $ 394
Securities partnerships 298 288
Interest rate and foreign currency swaps 12 19
Mezzanine loans 31 13
Other 52 45
TOTAL $ 1,058 $ 759
Investments in real estate entities and securities partnerships with a
carrying value of $171million at December31,2011 and $169million
at December31,2010 were non-income producing during the preceding
twelve months.
As of December31,2011, the Company had commitments to contribute:
• $165million to limited liability entities that hold either real estate
or loans to real estate entities that are diversied by property type
and geographic region; and
•
$242million to entities that hold securities diversied by issuer and
maturity date.
e Company expects to disburse approximately 50% of the committed
amounts in 2012.
E. Short-Term Investments and Cash
Equivalents
Short-term investments and cash equivalents included corporate
securities of $4.1billion, federal government securities of $164million
and money market funds of $40million as of December31,2011.
e Company’s short-term investments and cash equivalents as of
December31,2010 included corporate securities of $1.1billion,
federal government securities of $137million and money market
funds of $40million. e increase during 2011 is primarily due to
proceeds from the Company’s debt and equity issuances that were
used to partially fund the HealthSpring acquisition. See Note3 for
further information.
F. Concentration of Risk
As of December31,2011 and 2010, the Company did not have a concentration of investments in a single issuer or borrower exceeding 10%
of shareholders’ equity.
NOTE 12 Derivative Financial Instruments
e Company has written and purchased reinsurance contracts under
its run-o reinsurance segment that are accounted for as free standing
derivatives. e Company also uses derivative nancial instruments
to manage the equity, foreign currency, and certain interest rate risk
exposures of its run-o reinsurance segment. In addition, the Company
uses derivative nancial instruments to manage the characteristics of
investment assets to meet the varying demands of the related insurance
and contractholder liabilities. See Note2 for information on the
Company’s accounting policy for derivative nancial instruments.
Derivatives in the Company’s separate accounts are excluded from
the following discussion because associated gains and losses generally
accrue directly to separate account policyholders.
Collateral and termination features. e Company routinely monitors
exposure to credit risk associated with derivatives and diversies the
portfolio among approved dealers of high credit quality to minimize this
risk. Certain of the Company’s over-the-counter derivative instruments
contain provisions requiring either the Company or the counterparty
to post collateral or demand immediate payment depending on the
amount of the net liability position and predened nancial strength
or credit rating thresholds. Collateral posting requirements vary by
counterparty. e net liability positions of these derivatives were not
material as of December31,2011 or 2010.
Derivative instruments associated with the Company’s
run-off reinsurance segment
Guaranteed Minimum Income Benefits (GMIB)
Purpose. e Company has written reinsurance contracts with issuers
of variable annuity contracts that provide annuitants with certain
guarantees of minimum income benets resulting from the level of
variable annuity account values compared with a contractually guaranteed
amount (“GMIB liabilities”). According to the contractual terms of the
written reinsurance contracts, payment by the Company depends on
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