Cigna 2015 Annual Report Download - page 158

PART IV
ITEM 15. Exhibits and Financial Statement Schedules
The Company may redeem the newly issued Notes, at any time, in The Company was in compliance with its debt covenants as of
whole or in part, at a redemption price equal to the greater of: December 31, 2015.
100% of the principal amount of the Notes to be redeemed; or Maturities of long-term debt are as follows (in millions): none in
2016, $250 in 2017, $131 in 2018, none in 2019, $550 in 2020 and
the present value of the remaining principal and interest payments the remainder in years after 2020. Interest expense on long-term and
on the Notes being redeemed discounted at the applicable Treasury short-term debt was $246 million in 2015, $252 million in 2014, and
rate plus 17.5 basis points. $259 million in 2013. The 2015 expense excludes losses on the early
extinguishment of debt.
The following debt transactions occurred in April 2015:
Note 3 – Intercompany liabilities consist primarily of loans payable to
The Company redeemed its 2.75% Notes due 2016, including
Cigna Holdings, Inc. of $875 million as of December 31, 2015 and
accrued interest from November 15, 2014 through the settlement
$877 million as of December 31, 2014. Interest was accrued at an
date of April 13, 2015. The redemption price equaled the present
average monthly rate of 0.60% for 2015 and 0.52% for 2014.
value of the remaining principal and interest payments on the Notes
being redeemed, discounted at a rate equal to the 10-year Treasury Note 4 – As of December 31, 2015, the Company had guarantees and
Rate plus a fixed spread of 30 basis points. The Company paid similar agreements in place to secure payment obligations or solvency
$626 million including accrued interest and expenses, resulting in a requirements of certain wholly-owned subsidiaries as follows:
pre-tax loss on early debt extinguishment of $21 million
($14 million after-tax) that was recognized in the second quarter of Various indirect, wholly-owned subsidiaries have obtained surety
2015. 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
The Company redeemed its 8.50% Notes due 2019, including payment to the company issuing the surety bond. The aggregate
accrued interest from November 1, 2014 through the settlement amount of such surety bonds as of December 31, 2015 was
date of April 13, 2015. The redemption price equaled the present $77 million.
value of the remaining principal and interest payments on the Notes
being redeemed, discounted at a rate equal to the 10-year Treasury The Company is obligated under a $6 million letter of credit
Rate plus a fixed spread of 50 basis points. The Company paid required by the insurer of its high-deductible self-insurance
$329 million including accrued interest and expenses, resulting in a programs to indemnify the insurer for claim liabilities that fall
pre-tax loss on early debt extinguishment of $79 million within deductible amounts for policy years dating back to 1994.
($51 million after-tax) that was recognized in the second quarter of The Company also provides solvency guarantees aggregating
2015. $34 million under state and federal regulations in support of its
The company has a five-year revolving credit and letter of credit indirect wholly-owned medical HMOs in several states.
agreement for $1.5 billion that permits up to $500 million to be used The Company has arranged a $13 million letter of credit in support
for letters of credit. This agreement extends through December 2019 of Cigna Europe Insurance Company, an indirect wholly-owned
and is diversified among 16 banks with three banks each having 12% subsidiary. The Company has agreed to indemnify the banks
of the commitment and the remainder spread among 13 banks. The providing the letters of credit in the event of any draw. Cigna
credit agreement includes options to increase the commitment Europe Insurance Company is the holder of the letters of credit.
amount to $2 billion and to extend the term past December 2019,
subject to consent by the administrative agent and the committing The Company has agreed to indemnify payment of losses included
banks. The credit agreement is available for general corporate in Cigna Europe Insurance Company’s reserves on the assumed
purposes including for the issuance of letters of credit. The credit reinsurance business transferred from ACE. As of December 31,
agreement contains customary covenants and restrictions, including a 2015, the reserve was $16 million.
financial covenant that the Company may not permit its leverage ratio The Company guarantees the payment of up to $10 million for
to be greater than 0.50. The leverage ratio is total consolidated debt to certain expenses of an indirect wholly-owned subsidiary operating as
total consolidated capitalization (each as defined in the credit a Professional Employer Organization in the State of Kansas.
agreement) and excludes net unrealized appreciation in fixed
maturities and the portion of the post-retirement benefits liability The Company operates a global notional currency pool in support
adjustment attributable to pension that is included in accumulated of certain foreign subsidiaries and provides a guarantee of borrowing
other comprehensive loss on the Company’s consolidated balance by subsidiaries from the notional pool. The aggregate amount of
sheet. such borrowing at December 31, 2015 was $20 million.
The Company had $7.9 billion of borrowing capacity within the In 2015, no payments have been made on these guarantees and none
maximum debt coverage covenant in the letter of credit agreement, in are pending. The Company provided other guarantees to subsidiaries
addition to the $5 billion of debt outstanding as of December 31, that, in the aggregate, do not represent a material risk to the
2015. This additional borrowing capacity includes the $1.5 billion Company’s results of operations, liquidity or financial condition.
available under the credit agreement. Letters of credit outstanding as
of December 31, 2015 totaled $19 million.
FS-8 CIGNA CORPORATION - 2015 Form 10-K
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