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Schedule II - Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2014

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,
	2014			2013			2012

Operating expenses:
Interest	$	258	$		264	$		262
Intercompany interest		5			2			-
Other		82			69			190
Total operating expenses		345			335			452
Loss before income taxes		(345)			(335)			(452)
Income tax benefit		(89)			(109)			(143)
Loss of parent company		(256)			(226)			(309)
Equity in income of subsidiaries		2,358			1,702			1,932
Shareholders' net income		2,102			1,476			1,623

Shareholders' other comprehensive income (loss):

Net unrealized appreciation (depreciation) on securities		143			(410)			147
Net unrealized appreciation (depreciation), derivatives		11			9			(5)
Net translation of foreign currencies		(144)			13			66
Postretirement benefits liability adjustment		(426)			539			(92)
Shareholders' other comprehensive income (loss)		(416)			151			116
Shareholders' comprehensive income	$	1,686		$	1,627		$	1,739

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

BALANCE SHEETS

(in millions)

	As of December 31,
	2014			2013

Assets:
Cash and cash equivalents		$	51		$	-
Investments in subsidiaries			17,645			16,932
Intercompany			74			40
Other assets			553			435
Total assets		$	18,323		$	17,407


Liabilities:
Intercompany		$	1,138		$	1,043
Short-term debt			100			100
Long-term debt			4,885			4,871
Other liabilities			1,426			826
Total liabilities			7,549			6,840


Shareholders' Equity:
Common stock (shares issued, 296; authorized, 600)			74			92
Additional paid-in capital			2,769			3,356
Accumulated other comprehensive loss			(936)			(520)
Retained earnings			10,289			13,676
Less treasury stock, at cost			(1,422)			(6,037)
Total shareholders' equity			10,774			10,567
Total liabilities and shareholders' equity		$	18,323		$	17,407

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,
	2014		2013		2012

Cash Flows from Operating Activities:
Shareholders' Net Income	$	2,102	$	1,476	$	1,623
Adjustments to reconcile shareholders' net income
to net cash provided by operating activities:
Equity in income of subsidiaries		(2,358)		(1,702)		(1,932)
Dividends received from subsidiaries		1,648		506		671
Other liabilities		(73)		(245)		(213)
Other, net		173		63		191
Net cash provided by operating activities		1,492		98		340

Cash Flows from Investing Activities:
Other, net		11		-		(19)
Net cash provided by / (used in) investing activities		11		-		(19)

Cash Flows from Financing Activities:
Net change in amounts due to / from affiliates		61		751		(208)
Net change in short-term debt		-		(100)		100
Issuance of common stock		110		150		121
Common dividends paid		(11)		(11)		(11)
Repurchase of common stock		(1,612)		(1,003)		(208)
Net cash used in financing activities		(1,452)		(213)		(206)
Net increase (decrease) in cash and cash equivalents		51		(115)		115
Cash and cash equivalents, beginning of year		-		115		-
Cash and cash equivalents, end of year	$	51	$	-	$	115

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

NOTES TO CONDENSED FINANCIAL STATEMENTS

The accompanying condensed financial statements should 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, 2014		December 31, 2013
Short-term:
Commercial Paper	$	100	$	100
Total short-term debt	$	100	$	100
Long-term:
Uncollateralized debt:
$600 million, 2.75% Notes due 2016	$	600	$	600
$250 million, 5.375% Notes due 2017		250		250
$131 million, 6.35% Notes due 2018		131		131
$251 million, 8.5% Notes due 2019		251		251
$250 million, 4.375% Notes due 2020⁽¹⁾		254		249
$300 million, 5.125% Notes due 2020 ⁽¹⁾		303		299
$300 million, 4.5% Notes due 2021 ⁽¹⁾		303		299
$750 million, 4% Notes due 2022		745		744
$100 million, 7.65% Notes due 2023		100		100
$17 million, 8.3% Notes due 2023		17		17
$300 million, 7.875 % Debentures due 2027		300		300
$83 million, 8.3% Step Down Notes due 2033		83		83
$500 million, 6.15% Notes due 2036		500		500
$300 million, 5.875% Notes due 2041		298		298
$750 million, 5.375% Notes due 2042		750		750
Total long-term debt	$	4,885	$	4,871
⁽¹⁾ In 2014, the Company entered into interest rate swap contracts hedging a portion of these fixed-rate debt instruments.

In December, 2014, the Company entered into an updated 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 extends through December 2019 and is diversified among 16 banks, with three banks each having 12% of the commitment and the remainder spread among 13 banks. The credit agreement includes options, 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 2019. The credit agreement is available for general corporate purposes, including for the issuance of letters of credit. This agreement has certain covenants, including a financial covenant requiring the Company to maintain a leverage ratio of total consolidated debt-to-consolidated capitalization (each as defined in the credit agreement) at or below 0.50. As of December 31, 2014, the Company had $6.5 billion of borrowing capacity within the maximum debt coverage covenant in the agreement, in addition to the $5.2 billion of debt outstanding. Letters of credit outstanding as of December 31, 2014 totaled $23 million. The Company was in compliance with its debt covenants as of December 31, 2014.

Maturities of debt are as follows (in millions): none in 2015, $600 in 2016, $250 in 2017, $131 in 2018, $251 in 2019 and the remainder in years after 2019. Interest expense on long-term and short-term debt was $258 million in 2014, $264 million in 2013, and $262 million in 2012. Interest paid on long-term and short-term debt was $252 million in 2014, $259 million in 2013, and $242 million in 2012.

Note 3—Intercompany liabilities consist primarily of loans payable to Cigna Holdings, Inc. of $877 million as of December 31, 2014 and $1,043 million as of December 31, 2013. Interest was accrued at an average monthly rate of 0.52% for 2014 and 0.59% for 2013.

Note 4—As of December 31, 2014, 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 $4 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, 2014 was $79 million.
The Company is obligated under a $6 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 $13 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, 2014, the reserve was $22 million.

In 2014, 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.

- Definition

The entire disclosure for condensed financial information, including the financial position, cash flows, and the results of operations of the registrant (parent company) as of the same dates or for the same periods for which audited consolidated financial statements are being presented. Alternatively, the details of this disclosure can be reported by the specific parent company taxonomy elements, indicating the appropriate date and period contexts in an instance document.

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