Cigna 2012 Annual Report Download - page 91

PART II
ITEM 8 Financial Statements and Supplementary Data
Notes to the Consolidated Financial Statements
Description of Business
Cigna Corporation was incorporated in the State of Delaware in security. Its insurance subsidiaries are major providers of medical,
1981. Various businesses that are described in this Annual Report on dental, disability, life and accident insurance and related products and
Form 10-K for the fiscal year ended December 31, 2012 services, the majority of which are offered through employers and
(‘‘Form 10-K’’) are conducted by its insurance and other subsidiaries. other groups (e.g. governmental and non-governmental organizations,
As used in this document, ‘‘Cigna’’, the ‘‘Company’’, ‘‘we’’ and ‘‘our’’ unions and associations). Cigna also offers Medicare and Medicaid
may refer to Cigna Corporation itself, one or more of its subsidiaries, products and health, life and accident insurance coverages primarily to
or Cigna Corporation and its consolidated subsidiaries. individuals in the U.S. and selected international markets. In addition
to its ongoing operations described above, Cigna also has certain
The Company is a global health services organization with a mission run-off operations, including a Run-off Reinsurance segment.
to help its customers improve their health, well-being and sense of
Summary of Significant Accounting Policies
The Consolidated Financial Statements include the accounts of Cigna
Corporation and its significant subsidiaries. Intercompany Fees Paid to the Federal Government by Health Insurers
transactions and accounts have been eliminated in consolidation. (Accounting Standards Update (‘‘ASU’’) 2011-06). In 2011, the
These Consolidated Financial Statements were prepared in Financial Accounting Standards Board (‘‘FASB’’) issued accounting
conformity with accounting principles generally accepted in the guidance for a health insurance industry assessment (the ‘‘fee’’)
United States of America (‘‘GAAP’’). Amounts recorded in the mandated by the Patient Protection and Affordable Care Act of 2010
Consolidated Financial Statements necessarily reflect management’s (‘‘Health Care Reform’’). This fee will be levied on health insurers
estimates and assumptions about medical costs, investment valuation, beginning in 2014 based on a ratio of an insurer’s net health insurance
interest rates and other factors. Significant estimates are discussed premiums written for the previous calendar year compared to the U.S.
throughout these Notes; however, actual results could differ from health insurance industry total. In addition, because these fees will
those estimates. The impact of a change in estimate is generally generally not be tax deductible, the Company’s effective tax rate is
included in earnings in the period of adjustment. expected to be adversely impacted in future periods. Under the
guidance, the liability for the fee will be estimated and recorded in full
In preparing these Consolidated Financial Statements, the Company
each year beginning in 2014 when health insurance is first provided. A
has evaluated events that occurred between the balance sheet date and
corresponding deferred cost will be recorded and amortized over the
February 28, 2013.
calendar year. The amount of these fees is expected to be material,
Certain reclassifications have been made to prior year amounts to although the Company is unable to estimate the impact of these fees
conform to the current presentation. In particular, as a result of the on shareholders’ net income and the effective tax rate because
changes in segment reporting discussed further in Note 23, benefits guidance from the federal department of Health and Human Services
expense amounts previously reported in Other Benefits Expense for for these calculations has not been finalized.
the international health care business have been reclassified to Global
Health Care Medical Claims Expense in the Consolidated Statements Deferred acquisition costs. Effective January 1, 2012, the
of Income. Similarly, insurance liabilities previously classified as Company adopted the FASB’s amended guidance (ASU 2010-26) on
Unpaid Claims for the international health care business have been accounting for costs to acquire or renew insurance contracts. This
reclassified to Global Health Care Medical Claims Payable in the guidance requires certain sales compensation and telemarketing costs
Consolidated Balance Sheets. related to unsuccessful efforts and any indirect costs to be expensed as
incurred. The Company’s deferred acquisition costs arise from sales
Variable interest entities. As of December 31, 2012 and 2011 the and renewal activities primarily in its Global Supplemental Benefits
Company determined it was not a primary beneficiary in any material segment. This amended guidance was implemented through
variable interest entities. retrospective adjustment of comparative prior periods. Summarized
below are the effects of this amended guidance on previously reported
amounts as of December 31, 2011 and for the years ended
December 31, 2011 and 2010. Previously reported amounts
presented below include certain immaterial reclassifications.
CIGNA CORPORATION - 2012 Form 10-K 69
NOTE 1
NOTE 2
A. Basis of Presentation B. Changes in Accounting
Pronouncements