Cigna 2011 Annual Report Download - page 161

FS-9CIGNA CORPORATION2011 Form10K
ITEM 15 Exhibits and Financial Statement Schedules
PART IV
e Company may redeem the Notesissued in 2010 at any time, in
whole or in part, at a redemption price equal to the greater of:
•100% of the principal amount of the Notesto be redeemed; or
•
the present value of the remaining principal and interest payments
on the Notesbeing redeemed discounted at the applicable Treasury
Rate plus 25 basis points.
Maturities of debt are as follows (inmillions): none in 2012,
2013,2014,2015, $600 in 2016 and the remainder in years after 2016.
Interest expense on long-term and short-term debt was $195million
in 2011, $176million in 2010, and $160million in 2009. Interest
paid on long-term and short-term debt was $179million in 2011,
$175million in 2010, and $153million in 2009.
Note3—Intercompany liabilities consist primarily of loans payable to
Cigna Holdings,Inc. of $460million as of December31,2011 and
$3.7billion as of December31,2010. e proceeds of the debt issuance
in November2011 of $2.1billion (see Note2) and the equity issuance
of $629million (see Note5) were used to reduce the intercompany loan
payable balance with Cigna Holdings and ultimately used to fund the
HealthSpring acquisition in 2012. Interest was accrued at an average
monthly rate of 0.63% for 2011 and 0.61% for 2010.
Note4—As of December31,2011, the Company had guarantees and
similar agreements in place to secure payment obligations or solvency
requirements of certain wholly owned subsidiaries as follows:
•
e Company has arranged for bank letters of credit in the amount
of $36million in support of its indirect wholly owned subsidiaries.
As of December31,2011, approximately $33million of the letters
of credit were issued to support Cigna Global Reinsurance Company,
an indirect wholly owned subsidiary domiciled in Bermuda. ese
letters of credit primarily secure the payment of insureds’ claims
from run-o reinsurance operations. As of December31,2011,
approximately $3million of the letters of credit were issued to
provide collateral support for various other indirectly wholly owned
subsidiaries of the Company.
•
Various indirect, wholly owned subsidiaries have obtained surety bonds
in the normal course of business. If there is a claim on a surety bond
and the subsidiary is unable to pay, the Company guarantees payment
to the company issuing the surety bond. e aggregate amount of
such surety bonds as of Decemberwas $24million.
•
e Company is obligated under a $27million letter of credit required
by the insurer of its high-deductible self-insurance programs to
indemnify the insurer for claim liabilities that fall within deductible
amounts for policy years dating back to 1994.
•
e Company also provides solvency guarantees aggregating $34million
under state and federal regulations in support of its indirect wholly
owned medical HMOs in several states.
•
e Company has arranged a $55million letter of credit in support
of Cigna Europe Insurance Company, an indirect wholly owned
subsidiary. e Company has agreed to indemnify the banks providing
the letters of credit in the event of any draw. Cigna Europe Insurance
Company is the holder of the letters of credit.
•
In addition, the Company has agreed to indemnify payment of
losses included in Cigna Europe Insurance Company’s reserves
on the assumed reinsurance business transferred from ACE. As of
December31,2011, the reserve was $88million.
In 2011, no payments have been made on these guarantees and none
are pending. e Company provided other guarantees to subsidiaries
that, in the aggregate, do not represent a material risk to the Company’s
results of operations, liquidity or nancial condition.
Note5 - On November16,2011, the Company issued 15.2million shares
of its common stock at $42.75 per share. Proceeds were $650million
($629million net of underwriting discount and fees). e proceeds
were used to reduce the intercompany loan payable balance with Cigna
Holdings and ultimately used to fund the HealthSpring acquisition
in January2012.
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