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Schedule II - Condensed Financial Information of Registrant
 12 Months Ended
Dec. 31, 2015
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,
  2015 2014 2013
          
Operating expenses:         
Interest  $ 246$  258$  264
Intercompany interest    2   5   2
Loss on early extinguishment of debt   100   -   -
Other    147   82   69
Total operating expenses    495   345   335
Loss before income taxes    (495)   (345)   (335)
Income tax benefit    (135)   (89)   (109)
Loss of parent company    (360)   (256)   (226)
Equity in income of subsidiaries   2,454   2,358   1,702
Shareholders' net income    2,094   2,102   1,476
          
Shareholders' other comprehensive income (loss):         
          
Net unrealized appreciation (depreciation) on securities   (202)   143   (410)
Net unrealized appreciation on derivatives   15   11   9
Net translation of foreign currencies   (212)   (144)   13
Postretirement benefits liability adjustment   85   (426)   539
Shareholders' other comprehensive income (loss)   (314)   (416)   151
Shareholders' comprehensive income $ 1,780 $ 1,686 $ 1,627
          
          

CIGNA CORPORATION AND SUBSIDIARIES
 
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION
(REGISTRANT)
BALANCE SHEETS
(in millions)
 
 

 As of December 31,
 2015 2014
          
Assets:         
Cash and cash equivalents   $ 16   $ 51
Short term investments    54     -
Investments in subsidiaries     18,799     17,645
Intercompany    182     74
Other assets     497     526
Total assets   $ 19,548   $ 18,296
          
          
Liabilities:         
Intercompany   $ 1,086   $ 1,138
Short-term debt    100     100
Long-term debt     4,910     4,858
Other liabilities     1,417     1,426
Total liabilities     7,513     7,522
          
          
Shareholders' Equity:         
Common stock (shares issued, 296; authorized, 600)    74     74
Additional paid-in capital     2,859     2,769
Accumulated other comprehensive loss    (1,250)     (936)
Retained earnings     12,121     10,289
Less treasury stock, at cost     (1,769)     (1,422)
Total shareholders' equity     12,035     10,774
Total liabilities and shareholders' equity   $ 19,548   $ 18,296

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,
  2015 2014 2013
          
Cash Flows from Operating Activities:        
Shareholders' Net Income $ 2,094 $ 2,102 $ 1,476
Adjustments to reconcile shareholders' net income        
to net cash provided by operating activities:        
Equity in income of subsidiaries   (2,454)   (2,358)   (1,702)
Dividends received from subsidiaries   880   1,648   506
Other liabilities   112   (73)   (245)
Loss on early extinguishment of debt   100   -   -
Other, net   33   173   63
Net cash provided by operating activities    765   1,492   98
         
Cash Flows from Investing Activities:        
Short term investment purchased   (54)   -   -
Other, net   (14)   11   -
Net cash provided by / (used in) investing activities   (68)   11   -
         
Cash Flows from Financing Activities:        
Net change in amounts due to / from affiliates   (161)   61   751
Net change in short-term debt   -   -   (100)
Net proceeds on issuance of long-term debt    894   -   -
Repayment of long-term debt    (938)   -   -
Issuance of common stock   154   110   150
Common dividends paid   (10)   (11)   (11)
Repurchase of common stock   (671)   (1,612)   (1,003)
Net cash used in financing activities   (732)   (1,452)   (213)
Net increase (decrease) in cash and cash equivalents   (35)   51   (115)
Cash and cash equivalents, beginning of year   51   -   115
Cash and cash equivalents, end of year $ 16 $ 51 $ -

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.

 

In fourth quarter 2015, the Company implemented the Financial Accounting Standards Board's amended guidance to simplify the presentation of debt issuance costs (Accounting Standards Update (“ASU”) 2015-03) by reclassifying debt issuance costs from other assets to long-term debt. Amounts reported as of December 31, 2014 have been retrospectively adjusted. The effect was not material to either caption.

 

 

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

 

(In millions)  December 31, 2015 December 31, 2014 (1)
Short-term:     
Commercial Paper $ 100$ 100
Total short-term debt $ 100$ 100
Long-term:     
Uncollateralized debt:     
$600 million, 2.75% Notes due 2016 $ -$ 598
$250 million, 5.375% Notes due 2017   249  249
$131 million, 6.35% Notes due 2018   131  131
$251 million, 8.5% Notes due 2019   -  250
$250 million, 4.375% Notes due 2020 (2)   254  253
$300 million, 5.125% Notes due 2020 (2)   303  302
$300 million, 4.5% Notes due 2021 (2)   304  301
$750 million, 4% Notes due 2022   743  741
$100 million, 7.65% Notes due 2023   100  100
$17 million, 8.3% Notes due 2023   17  17
$900 million, 3.25% Notes due 2025   892  -
$300 million, 7.875 % Debentures due 2027   299  298
$83 million, 8.3% Step Down Notes due 2033   82  82
$500 million, 6.15% Notes due 2036   498  498
$300 million, 5.875% Notes due 2041   295  295
$750 million, 5.375% Notes due 2042   743  743
Total long-term debt $ 4,910$ 4,858
(1) As explained in Note 1, in the fourth quarter of 2015, the Company retrospectively adopted ASU 2015-03 that requires debt issuance costs to be netted against the carrying value of the debt. The impact on 2014 balances was not material.
(2) In 2014, the Company entered into interest rate swap contracts hedging a portion of these fixed-rate debt instruments.

On March 11, 2015, the Company issued $900 million of 10-Year Notes due April 15, 2025 at a stated interest rate of 3.25% ($892 million, net of discount and issuance costs, with an effective annual interest rate of 3.36%). Interest is payable on April 15 and October 15 of each year beginning October 15, 2015. The proceeds of this debt were used to repay debt maturing in 2016 and in 2019 as described below.

 

The Company may redeem the newly issued 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 17.5 basis points.

 

The following debt transactions occurred in April 2015:

  • The Company redeemed its 2.75% Notes due 2016, including accrued interest from November 15, 2014 through the settlement date of April 13, 2015. The redemption price equaled the present value of the remaining principal and interest payments on the Notes being redeemed, discounted at a rate equal to the 10-year Treasury Rate plus a fixed spread of 30 basis points. The Company paid $626 million including accrued interest and expenses, resulting in a pre-tax loss on early debt extinguishment of $21 million ($14 million after-tax) that was recognized in the second quarter of 2015.
  • The Company redeemed its 8.50% Notes due 2019, including accrued interest from November 1, 2014 through the settlement date of April 13, 2015. The redemption price equaled the present value of the remaining principal and interest payments on the Notes being redeemed, discounted at a rate equal to the 10-year Treasury Rate plus a fixed spread of 50 basis points. The Company paid $329 million including accrued interest and expenses, resulting in a pre-tax loss on early debt extinguishment of $79 million ($51 million after-tax) that was recognized in the second quarter of 2015.

 

The company has a 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 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 to increase the commitment amount to $2 billion and to extend the term past December 2019, subject to consent by the administrative agent and the committing banks. The credit agreement is available for general corporate purposes including for the issuance of letters of credit. The credit agreement contains customary covenants and restrictions, including a financial covenant that the Company may not permit its leverage ratio to be greater than 0.50. The leverage ratio is total consolidated debt to total consolidated capitalization (each as defined in the credit agreement) and excludes net unrealized appreciation in fixed maturities and the portion of the post-retirement benefits liability adjustment attributable to pension that is included in accumulated other comprehensive loss on the Company's consolidated balance sheet.

 

The Company had $7.9 billion of borrowing capacity within the maximum debt coverage covenant in the letter of credit agreement, in addition to the $5 billion of debt outstanding as of December 31, 2015. This additional borrowing capacity includes the $1.5 billion available under the credit agreement. Letters of credit outstanding as of December 31, 2015 totaled $19 million.

 

The Company was in compliance with its debt covenants as of December 31, 2015.

 

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 remainder in years after 2020. Interest expense on long-term and short-term debt was $246 million in 2015, $252 million in 2014, and $259 million in 2013. The 2015 expense excludes losses on the early extinguishment of debt.

 

Note 3—Intercompany liabilities consist primarily of loans payable to Cigna Holdings, Inc. of $875 million as of December 31, 2015 and $877 million as of December 31, 2014. Interest was accrued at an average monthly rate of 0.60% for 2015 and 0.52% for 2014.

Note 4—As of December 31, 2015, the Company had guarantees and similar agreements in place to secure payment obligations or solvency requirements of certain wholly-owned subsidiaries as follows:

 

  • 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, 2015 was $77 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, 2015, the reserve was $16 million.

     

  • The Company guarantees the payment of up to $10 million for certain expenses of an indirect wholly-owned subsidiary operating as a Professional Employer Organization in the State of Kansas.

     

  • The Company operates a global notional currency pool in support of certain foreign subsidiaries and provides a guarantee of borrowing by subsidiaries from the notional pool. The aggregate amount of such borrowing at December 31, 2015 was $20 million.

 

In 2015, 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.