Cigna 2012 Annual Report Download - page 33

PART I
ITEM 1 Business
grows, Cigna believes it is well positioned to deliver integrated
Industry Developments and Strategic
solutions that address these broad employer and employee needs
Initiatives
through its programs that promote a healthy lifestyle, offer assistance
in returning to work and integrate health care and disability programs.
The group insurance market remains highly competitive as the rising Cigna also believes that its strong disability management portfolio and
cost of providing medical coverage to employees has forced companies fully integrated programs provide employers and employees tools to
to re-evaluate their overall employee benefit spending. Demographic improve health status. This focus on managing the employee’s total
shifts have further driven demand for products and services that are absence enables Cigna to increase the number and likelihood of
sufficiently flexible to meet the evolving needs of employers and interventions and minimize disabling events.
employees who want innovative, cost-effective solutions to their
insurance needs. Employers continue to shift towards greater There is heightened review by state regulators of group disability
employee participatory coverage and voluntary purchases. insurance industry business and reporting practices. Cigna is
frequently the subject of regulatory market conduct and other reviews,
Employers are also expressing a growing interest in employee wellness, audits and investigations by state insurance departments.
absence management and productivity and recognizing a strong link
between health, productivity and their profitability. As this interest
Global Supplemental Benefits
As explained in Item 1A ‘‘Description of Business’’, in the fourth interest in a Chinese joint venture and a 51% interest in a joint
quarter of 2012, Cigna changed its external reporting segments. The venture in Turkey, through which its products and services are offered.
Global Supplemental Benefits segment is comprised of the Cigna continues to work with its partner in India to establish a health
international supplemental health, life and accident businesses insurance company that will operate as a joint venture upon licensing.
(previously reported in the former International segment) as well as Licensing is expected to occur in 2013.
the Medicare supplement business acquired in 2012.
This segment offers supplemental health, life and accident insurance
Medicare Supplement Plans
products in the U.S. and selected international markets. With local Through its 2012 acquisition, Cigna also offers individual Medicare
licenses and partnerships in approximately 20 countries and Supplement plans that provide retirees with federally standardized
jurisdictions, Cigna is able to offer products and services to local Medigap-style plans. Retirees may select amongst the various plans
citizens and globally mobile individuals. These products and services with specific plan options to meet their unique needs and may visit
are provided by subsidiaries of Cigna Corporation, including foreign any health care professional or facility that accepts Medicare
operating entities. throughout the U.S. – with no referrals required.
Cigna continues to distinguish itself in the global supplemental Financial information, including premiums and fees, is presented in
health, life and accident businesses through its differentiated direct to the Global Supplemental Benefits section of the MD&A beginning
consumer distribution, customer insights and marketing capabilities. on page 46 and in Note 23 to Cigna’s Consolidated Financial
Cigna enters new markets when the opportunity to bring its product Statements.
and health solutions is attractive. In 2012, Cigna extended its reach in
Turkey through the joint venture with Finansbank and expanded into
the U.S. Medigap and supplemental lines of business through
Pricing and Reinsurance
acquisition. The 2011 acquisition of FirstAssist in the U.K. added a Premium rates for Cigna’s global supplemental benefits products are
travel insurance product line and expanded the Company’s based on assumptions about mortality, morbidity, customer
distribution channels. acquisition and retention, expenses and target profit margins, as well
as interest rates. The profitability of these products is primarily driven
Principal Products and Services
by the adequacy of mortality and morbidity assumptions used, and
customer retention.
Supplemental Health, Life and Accident Insurance
Fees for variable universal life insurance products consist of mortality,
These insurance products generally provide simple, affordable administrative, asset management and surrender charges assessed
coverage of risks for the health and financial security of individuals. against the contractholder’s fund balance. Mortality charges on
Supplemental health products provide specified payments for a variety variable universal life may be adjusted prospectively to reflect expected
of health risks and include personal accident, accidental death, critical mortality experience. The profitability of these products is primarily
illness, hospitalization, travel, dental, cancer and other dread disease driven by the policyholders’ fund balances on which fees are charged
coverages. Term life and individual private medical insurance as well as well as customer retention.
as variable universal life insurance and other savings products are also
included in the product portfolio. Cigna’s supplemental health, life Premium rates and fees for Medicare supplement products reflect
and accident insurance products are offered in South Korea, Taiwan, assumptions about future claims, customer retention, expenses,
Indonesia, Hong Kong, the United States, the European Union, customer demographics, investment returns, and profit margins.
China, New Zealand, Thailand and Turkey. Cigna owns a 50%
CIGNA CORPORATION - 2012 Form 10-K 11
D.