Schedule II - Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2013

Condensed Financial Information of Cigna Corporation (Registrant) [Abstract]

Condensed Financial Information of Cigna Corporation (Registrant)

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

STATEMENTS OF INCOME

(in millions)

	For the years ended
	December 31,
	2013			2012			2011
Operating expenses:
Interest	$	264	$		262	$		195
Intercompany interest		2			-			19
Other		69			190			92
Total operating expenses		335			452			306
Loss before income taxes		(335)			(452)			(306)
Income tax benefit		(109)			(143)			(107)
Loss of parent company		(226)			(309)			(199)
Equity in income of subsidiaries		1,702			1,932			1,459
Shareholders' net income		1,476			1,623			1,260
Shareholders' other comprehensive income (loss):
Net unrealized (depreciation) appreciation on securities:
Fixed maturities		(410)			144			210
Equity securities		-			3			(2)
Net unrealized (depreciation) appreciation on securities		(410)			147			208
Net unrealized appreciation (depreciation), derivatives		9			(5)			1
Net translation of foreign currencies		13			66			(22)
Postretirement benefits liability adjustment		539			(92)			(360)
Shareholders' other comprehensive income (loss)		151			116			(173)
Shareholders' comprehensive income	$	1,627		$	1,739		$	1,087

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

BALANCE SHEETS

(in millions)

	As of December 31,
	2013				2012
Assets:
Cash and cash equivalents			$	-			$	115
Investments in subsidiaries				16,932				16,125
Intercompany				40				37
Other assets				435				729
Total assets			$	17,407			$	17,006
Liabilities:
Intercompany			$	1,043			$	289
Short-term debt				100				200
Long-term debt				4,871				4,870
Other liabilities				826				1,878
Total liabilities				6,840				7,237
Shareholders' Equity:
Common stock (shares issued, 366; authorized, 600)				92				92
Additional paid-in capital				3,356				3,295
Net unrealized appreciation — fixed maturities	$	473			$	883
Net unrealized appreciation — equity securities		4				4
Net unrealized depreciation — derivatives		(19)				(28)
Net translation of foreign currencies		82				69
Postretirement benefits liability adjustment		(1,060)				(1,599)
Accumulated other comprehensive loss				(520)				(671)
Retained earnings				13,676				12,330
Less treasury stock, at cost				(6,037)				(5,277)
Total shareholders' equity				10,567				9,769
Total liabilities and shareholders' equity			$	17,407			$	17,006

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

STATEMENTS OF CASH FLOWS

(in millions)

	For the years ended
	December 31,
	2013		2012		2011
Cash Flows from Operating Activities:
Shareholders' Net Income	$	1,476	$	1,623	$	1,260
Adjustments to reconcile shareholders' net income
to net cash provided by operating activities:
Equity in income of subsidiaries		(1,702)		(1,932)		(1,459)
Dividends received from subsidiaries		506		671		1,135
Other liabilities		(245)		(213)		(296)
Other, net		63		191		(92)
Net cash provided by operating activities		98		340		548
Cash Flows from Investing Activities:
Other, net		-		(19)		-
Net cash used in investing activities		-		(19)		-
Cash Flows from Financing Activities:
Net change in amounts due to / from affiliates		751		(208)		(3,258)
Net change in short-term debt		(100)		100		-
Net proceeds on issuance of long-term debt		-		-		2,661
Repayment of long-term debt		-		-		(449)
Issuance of common stock		150		121		734
Common dividends paid		(11)		(11)		(11)
Repurchase of common stock		(1,003)		(208)		(225)
Net cash used in financing activities		(213)		(206)		(548)
Net increase (decrease) in cash and cash equivalents		(115)		115		-
Cash and cash equivalents, beginning of year		115		-		-
Cash and cash equivalents, end of year	$	-	$	115	$	-

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

NOTES TO CONDENSED FINANCIAL STATEMENTS

The accompanying condensed financial statementsshould be read in conjunction with the Consolidated Financial Statements and the accompanying notes thereto contained in this Form 10-K.

Note 1—For purposes of these condensed financial statements, Cigna Corporation's (the Company) wholly owned and majority owned subsidiaries are recorded using the equity basis of accounting.

Note 2—Short-term and long-term debt consisted of the following at December 31:

(In millions)		December 31, 2013		December 31, 2012
Short-term:
Commercial Paper	$	100	$	200
Total short-term debt	$	100	$	200
Long-term:
Uncollateralized debt:
2.75% Notes due 2016	$	600	$	600
5.375% Notes due 2017		250		250
6.35% Notes due 2018		131		131
8.5% Notes due 2019		251		251
4.375% Notes due 2020		249		249
5.125% Notes due 2020		299		299
4.5% Notes due 2021		299		299
4% Notes due 2022		744		743
7.65% Notes due 2023		100		100
8.3% Notes due 2023		17		17
7.875 % Debentures due 2027		300		300
8.3% Step Down Notes due 2033		83		83
6.15% Notes due 2036		500		500
5.875% Notes due 2041		298		298
5.375% Notes due 2042		750		750
Total long-term debt	$	4,871	$	4,870

In December 2012, the Company extended the life of its June 2011 five-year revolving credit and letter of credit agreement for $1.5 billion that permits up to $500 million to be used for letters of credit. This agreement is diversified among 16 banks, with 3 banks having approximately 35% of the commitment and the remainder spread among 13 banks. The credit agreement includes options that are subject to consent by the administrative agent and the committing banks, to increase the commitment amount to $2 billion and to extend the term past December 2017. The credit agreement is available for general corporate purposes, including as a commercial paper backstop and for the issuance of letters of credit. This agreement includes certain covenants, including a financial covenant requiring the Company to maintain a total debt to adjusted capital ratio at or below 0.50 to 1.00. As of December 31, 2013, the Company had $6.0 billion of borrowing capacity within the maximum debt coverage covenant in the agreement in addition to the $5.2 billion of debt outstanding. There were letters of credit of $39 million issued as of December 31, 2013.

On November10, 2011, the Company issued $2.1 billion of long-term debt as follows: $600 million of 5-Year Notes due November 15, 2016 at a stated interest rate of 2.75% ($600 million, net of discount, with an effective interest rate of 2.936% per year), $750 million of 10-Year Notes due February 15, 2022 at a stated interest rate of 4% ($743 million, net of discount, with an effective interest rate of 4.346% per year) and $750 million of 30-Year Notes due February 15, 2042 at a stated interest rate of 5.375% ($750 million, net of discount, with an effective interest rate of 5.542% per year). Interest is payable on May 15 and November 15 of each year beginning May 15, 2012 for the 5-Year Notes and February 15 and August 15 of each year beginning February 15, 2012 for the 10-Year and 30-Year Notes. The proceeds of this debt were used to fund the HealthSpring acquisition in 2012.

The Company may redeem these Notes, 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 30 basis points (5-Year 2.75% Notes due 2016), 35 basis points (10-Year 4% Notes due 2022), or 40 basis points (30-Year 5.375% Notes due 2042).

In March 2011, the Company issued $300 million of 10-Year Notes due March 15, 2021 at a stated interest rate of 4.5% ($298 million, net of discount, with an effective interest rate of 4.683% per year) and $300 million of 30-Year Notes due March 15, 2041 at a stated interest rate of 5.875% ($298 million, net of discount, with an effective interest rate of 6.008% per year). Interest is payable on March 15 and September 15 of each year beginning September 15, 2011. The proceeds of this debt were used for general corporate purposes, including the repayment of debt maturing in 2011.

The Company may redeem these Notes, 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 20 basis points (10-Year 4.5% Notes due 2021) or 25 basis points (30-Year 5.875% Notes due 2041).

Maturities of debt are as follows (in millions): none in 2014and 2015, $600 in 2016,$250 in 2017, $131 in 2018 and the remainder in years after 2018. Interest expense on long-term and short-term debt was $264 million in 2013, $262 million in 2012, and $195 million in 2011. Interest paid on long-term and short-term debt was $259 million in 2013, $242 million in 2012, and $179 million in 2011.

The Company was in compliance with its debt covenants as of December 31, 2013.

Note 3—Intercompany liabilities consist primarily of loans payable to Cigna Holdings, Inc. of $ 1,043 million as of December 31, 2013 and $289million as of December 31, 2012. The proceeds of the debt issuance in November 2011of $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 0.59% for 2013and 0.71% for 2012.

Note 4—As of December 31, 2013, the Company had guarantees and similar agreements in place to secure payment obligations or solvency requirements of certain wholly owned subsidiaries as follows:

• The Company has arranged for bank letters of credit in the amount of $3 million to provide collateral in support of its indirect wholly owned subsidiaries.

• 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. The aggregate amount of such surety bonds as of December 31, 2013 was $75 million.
• The Company is obligated under a $12 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.
• The 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.
• The Company has arranged a $23 million letter of credit in support of Cigna Europe Insurance Company, an indirect wholly-owned subsidiary. The 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.
• 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, 2013, the reserve was $25 million.

In 2013, no payments have been made on these guarantees and none are pending. The 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 financial 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) and used to reduce the intercompany loan payable balance with Cigna Holdings and ultimately used to fund the HealthSpring acquisition in January 2012.