Cigna 2015 Annual Report Download - page 73

PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
time to time and may also remove such suspensions, generally without
Financing activities
public announcement. We may also repurchase shares at times by
Cash used in financing activities decreased in 2015 compared with using a Rule 10b5-1 trading plan when we otherwise might be
2014, primarily reflecting lower share repurchases. Cash used in precluded from doing so under insider trading laws or because of
financing activities increased in 2014 compared with the same period self-imposed trading block-out periods.
in 2013, primarily due to higher share repurchases. In 2015, we repurchased 5.5 million shares for $683 million. From
January 1, 2016 through February 25, 2016 we repurchased
Share repurchase
0.8 million shares for $110 million. The total remaining share
We maintain a share repurchase program, authorized by our Board of repurchase authorization as of February 25, 2016 was $390 million.
Directors. Under this program, we may repurchase shares from time We repurchased 18.5 million shares for $1.6 billion in 2014 and
to time, depending on market conditions and alternate uses of capital. repurchased 13.6 million shares for $1.0 billion in 2013.
We may suspend activity under our share repurchase program from
Interest Expense
Interest expense on long-term debt, short-term debt and capital leases was as follows:
(In millions) 2015 2014 2013
Interest expense $ 252 $ 265 $ 270
Interest expense reported above for the year ended 2015 excludes parent company’s combined cash obligations are expected to be
losses on the early extinguishment of debt. approximately $365 million to pay for interest, commercial paper
maturities and dividends.
The weighted average interest rate for outstanding short-term debt
(primarily commercial paper) was 0.69% at December 31, 2015 and We expect, based on the parent company’s current cash position,
0.27% at December 31, 2014. current projections for subsidiary dividends, and the ability to
refinance its commercial paper borrowing, to have sufficient liquidity
to meet the obligations discussed above.
Capital Resources
Our cash projections may not be realized and the demand for funds
Our capital resources (primarily retained earnings and proceeds from could exceed available cash if our ongoing businesses experience
the issuance of debt and equity securities) provide protection for unexpected shortfalls in earnings, or we experience material adverse
policyholders, furnish the financial strength to underwrite insurance effects from one or more risks or uncertainties described more fully in
risks and facilitate continued business growth. the Risk Factors section of this Form 10-K. In those cases, we expect
to have the flexibility to satisfy liquidity needs through a variety of
Management, guided by regulatory requirements and rating agency
measures, including intercompany borrowings and sales of liquid
capital guidelines, determines the amount of capital resources that we
investments. The parent company may borrow up to $1.3 billion
maintain. Management allocates resources to new long-term business
from its insurance subsidiaries without additional state approval. As of
commitments when returns, considering the risks, look promising
December 31, 2015, the parent company had $63 million of net
and when the resources available to support existing business are
intercompany loans receivable from its insurance subsidiaries.
adequate.
Alternatively, to satisfy parent company liquidity requirements we
We prioritize our use of capital resources to: may use short-term borrowings, such as the commercial paper
program, the committed revolving credit and letter of credit
provide the capital necessary to support growth and maintain or
agreement of up to $1.5 billion subject to the maximum debt leverage
improve the financial strength ratings of subsidiaries and to fund
covenant in its line of credit agreement. As of December 31, 2015,
pension obligations;
$1.5 billion of short-term borrowing capacity under the credit
consider acquisitions that are strategically and economically agreement was available to us. Within the maximum debt leverage
advantageous; and covenant in the line of credit agreement as described in Note 15, we
have $7.9 billion of borrowing capacity in addition to the $5.2 billion
return capital to investors through share repurchase.
of debt outstanding. This additional borrowing capacity includes the
The availability of capital resources will be impacted by equity and $1.5 billion available under the credit agreement.
credit market conditions. Extreme volatility in credit or equity market
Though we believe we have adequate sources of liquidity, significant
conditions may reduce our ability to issue debt or equity securities.
disruption or volatility in the capital and credit markets could affect
our ability to access those markets for additional borrowings or
Liquidity and Capital Resources Outlook
increase costs associated with borrowing funds.
At December 31, 2015, there was approximately $1.4 billion in cash We maintain a capital management strategy to retain overseas a
and investments available at the parent company level. In 2016, the significant portion of the earnings from our foreign operations. These
CIGNA CORPORATION - 2015 Form 10-K 43
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