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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-8323
CIGNA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 06-1059331
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE LIBERTY PLACE, PHILADELPHIA, PENNSYLVANIA 19192-1550
(Address of principal executive offices) (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (215) 761-1000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ------------------------------- ----------------------------------
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Common Stock, Par Value $1; New York Stock Exchange, Inc.
Preferred Stock Pacific Stock Exchange, Inc.
Purchase Rights; Philadelphia Stock Exchange, Inc.
and
8.20% Convertible Subordinated New York Stock Exchange, Inc.
Debentures due July 10, 2010
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 14, 1994, was approximately $4.4 billion.
As of March 14, 1994, 72,359,080 shares of the registrant's Common Stock
were outstanding.
Parts I and II of this Form 10-K incorporate by reference information from
the registrant's annual report to shareholders for the year ended December 31,
1993 (the "1993 Annual Report"). Part III of this Form 10-K incorporates by
reference information from the registrant's proxy statement dated March 21,
1994.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.................................................................. 1
A. Description of Business............................................... 1
B. Financial Information about Industry Segments......................... 2
C. Employee Life and Health Benefits..................................... 3
D. Employee Retirement and Savings Benefits.............................. 6
E. Individual Financial Services......................................... 9
F. Property and Casualty................................................. 13
G. Investments and Investment Income..................................... 27
H. Regulation............................................................ 32
I. Miscellaneous........................................................ 34
Item 2. Properties................................................................ 34
Item 3. Legal Proceedings......................................................... 35
Item 4. Submission of Matters to a Vote of Security Holders....................... 35
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters................................................................... 36
Item 6. Selected Financial Data................................................... 36
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 36
Item 8. Financial Statements and Supplementary Data............................... 36
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure................................................................ 36
PART III
Item 10. Directors and Executive Officers of the Registrant........................ 36
A. Directors of the Registrant........................................... 36
B. Executive Officers of the Registrant.................................. 36
C. Compliance with Section 16(a) of the Securities Exchange Act.......... 37
Item 11. Executive Compensation.................................................... 37
Item 12. Security Ownership of Certain Beneficial Owners and Management............ 37
Item 13. Certain Relationships and Related Transactions............................ 37
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......... 38
Signatures............................................................................ 39
Index to Financial Statement Schedules................................................ FS-1
Index to Exhibits..................................................................... E-1
</TABLE>
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PART I
Item 1. BUSINESS
A. Description of Business
With shareholders' equity of $6.6 billion, revenues of $18.4 billion and
assets of $85.0 billion as of December 31, 1993, CIGNA Corporation and its
subsidiaries constitute one of the largest investor-owned insurance
organizations in the United States and one of the principal United States
companies in the financial services industry. Unless the context otherwise
indicates, the terms "CIGNA" and the "Company," when used herein, refer to one
or more of CIGNA Corporation and its consolidated subsidiaries. Although CIGNA
Corporation is not an insurance company, its subsidiaries are major providers of
group life and health insurance, managed care products and services, retirement
products and services, individual financial services, and property and casualty
insurance. CIGNA is one of the largest international insurance organizations
based in the United States, measured by international revenues, and the largest
investor-owned health maintenance organization ("HMO") in the United States,
measured by number of enrollees. CIGNA's major insurance subsidiaries,
Connecticut General Life Insurance Company ("CG Life") and Insurance Company of
North America ("ICNA"), are among the oldest insurance companies in the United
States, with ICNA tracing its origins to 1792 and CG Life to 1865. CIGNA
Corporation was incorporated in the State of Delaware in 1981.
CIGNA's revenues are derived principally from premiums and fees and
investment income. CIGNA conducts its business through the following operating
divisions, the financial results of which are reported in the following
segments:
Employee Life and Health Benefits Segment (beginning on page 3)
CIGNA HealthCare
CIGNA Group Insurance - Life-Accident-Disability(1)
Employee Retirement and Savings Benefits Segment (beginning on page 6)
CIGNA Retirement & Investment Services
Individual Financial Services Segment (beginning on page 9)
CIGNA Individual Insurance
CIGNA Reinsurance - Life-Accident-Health
Property and Casualty Segment (beginning on page 13)
CIGNA Property & Casualty
CIGNA International
CIGNA Reinsurance - Property & Casualty
- ---------------
(1) Portions of this division are reported in the Individual Financial Services
and Property and Casualty Segments.
Investment results produced by CIGNA Investment Management on behalf of
CIGNA's insurance operations are reported in each segment's results or in Other
Operations. The other businesses of CIGNA Investment Management are described on
page 32 and financial results for these businesses are reported in Other
Operations.
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CIGNA and its major insurance subsidiaries are rated by nationally
recognized rating agencies. Insurance company ratings represent the opinions of
the rating agencies of the financial strength of the Company and its capacity to
meet the obligations of insurance policies. Corporate credit ratings are
assessments of the likelihood that a borrower will make timely payments of
principal and interest. As of March 25, 1994, the principal ratings obtained
through a contractual relationship with the agencies were as follows:
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RATING AGENCIES
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MOODY'S
A. M. DUFF & INVESTORS STANDARD
BEST PHELPS SERVICES & POOR'S
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Insurance Company Ratings
CG Life............................................ A+ AAA Aa3 AA+
Life Insurance Company of North America............ A+ * * *
Property & Casualty Domestic Pool Group(1)......... A- * A2 *
Corporate Credit Ratings
Senior Debt........................................ * * A2 A
Subordinated Debt.................................. * * A3 A
Commercial Paper................................... * * P-1 A-1
</TABLE>
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* Not rated.
(1) A group of subsidiaries rated on a combined basis.
Rating agencies generally assign ratings to insurance companies along a
scale. While the significance of individual ratings varies from agency to
agency, companies assigned ratings at the top end of the scale have, in the
opinion of the rating agency, the strongest capacity for repayment of debt or
payment of claims, while companies at the bottom end of the scale have the
weakest capacity.
Insurance company rating scales of the principal agencies that rate the
Company's insurance subsidiaries are characterized as follows: A.M. Best
Company, Inc. ("A.M. Best"), A++ to F ("Superior" to "In Liquidation"); Duff &
Phelps, AAA ("Highest") to Substantial Risk; Moody's Investor Services
("Moody's"), Aaa to C ("Exceptional" to "Lowest"); and Standard & Poor's
("S&P"), AAA to R ("Superior" to "Regulatory Action").
The scales of corporate credit ratings of the principal agencies that rate
CIGNA are characterized as follows: Moody's, Aaa to C ("Best" to "Lowest"); and
S&P, AAA to D ("Extremely Strong" to "Default"). Commercial paper ratings for
Moody's range from Prime 1 to Not Prime ("Superior" to "Speculative"). S&P's
commercial paper ratings run from A-1+ to D ("Highest" to "Default").
The ratings of CG Life are characterized as "superior", "highest" or
"excellent" and the property and casualty ratings as "excellent" or "good" by
the rating agencies. The corporate credit ratings are characterized as "upper
medium" or "strong" by the rating agencies, and allow CIGNA ready access to the
capital markets. The ratings are reviewed routinely by the rating agencies and
may be changed at their discretion. In February 1994, Moody's informed CIGNA
that it is reviewing for possible downgrade the credit ratings of CIGNA
Corporation and the insurance company ratings of CG Life and the Property &
Casualty Domestic Pool Group. The outcome of this review is not expected to have
a material adverse effect on CIGNA's financial condition.
B. Financial Information about Industry Segments
All financial information in the tables that follow is presented in
conformity with generally accepted accounting principles ("GAAP"), unless
otherwise indicated. Certain reclassifications have been made to 1992 and 1991
financial information to conform with the 1993 presentation. Industry rankings
and percentages set forth below are for the year ended December 31, 1992, unless
otherwise indicated. Unless otherwise noted, statements set forth in this
document concerning CIGNA's rank or position in an industry or particular line
of business have been developed internally based on publicly available
information.
Revenues; income (loss) before income taxes, extraordinary item and
cumulative effect of accounting changes; and identifiable assets attributable to
each of CIGNA's business segments, other operations and foreign operations are
set forth in Notes 12 and 13 to CIGNA's 1993 Financial Statements and are
incorporated by reference from pages 45 and 46 of CIGNA's 1993 Annual Report.
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C. Employee Life and Health Benefits
Principal Products and Markets
CIGNA's Employee Life and Health Benefits operations offer a wide range of
traditional indemnity insurance products and are a leading provider of managed
care and cost containment products and services. The following table sets forth
the principal products of this segment and their related net earned premiums and
fees.
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YEAR ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
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(IN MILLIONS)
<S> <C> <C> <C>
Indemnity:
Medical................................................... $1,983 $1,946 $2,148
Life...................................................... 1,627 1,580 1,384
Long-term Disability...................................... 427 435 475
Dental.................................................... 324 329 375
Accidental Death and Dismemberment........................ 260 243 233
Short-term Disability..................................... 91 100 112
Other..................................................... 18 13 11
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Total................................................... 4,730 4,646 4,738
Prepaid Health and Dental Care.............................. 2,708 2,528 2,399
------ ------ ------
Total Premiums and Fees..................................... $7,438 $7,174 $7,137
------ ------ ------
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</TABLE>
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Amounts in table do not include "premium equivalents," which are the
industry's measure of the additional premiums that would have been earned
under minimum premium and ASO contracts (described below under "Principal
Products and Markets") if they had been written as traditional indemnity or
health maintenance organization ("HMO") programs.
CIGNA's Employee Life and Health Benefits customers range in size from some
of the largest United States corporations to small enterprises, and include
employers, multiple employer groups, unions, professional and other
associations, and other groups. Products are marketed in all 50 states, the
District of Columbia and Puerto Rico.
Most of the indemnity products listed in the above table are sold on an
experience-rated basis and all are provided through traditional insurance
arrangements, in which CIGNA assumes the full insurance risk for a set premium.
Certain group indemnity coverages, primarily medical and dental, also are
provided through alternative funding programs under which the customer assumes
all or a portion of the responsibility for funding claims, with CIGNA providing
combinations of administrative and claim services and insurance for a fee or
premium charge. These alternative funding programs, primarily consisting of
"minimum premium" arrangements and administrative services only ("ASO") plans,
constituted 57% of business volume (premiums and fees plus premium equivalents)
in 1993. In minimum premium business, the policyholder funds claims up to a
predetermined aggregate amount and CIGNA funds claims exceeding that amount.
Under ASO plans, the policyholder is responsible for funding all claims and
CIGNA provides administrative services for a fee; CIGNA may also provide
stop-loss insurance for claims in excess of a predetermined amount. Alternative
funding programs and their effect on CIGNA's results are more fully described on
page 16 of the Management's Discussion and Analysis ("MD&A") section of CIGNA's
1993 Annual Report.
CIGNA markets various disability products, including long-term and
short-term disability, in all states and statutorily required disability plans
in certain states. These products generally provide a fixed level of income to
replace a portion of earned income lost because of disability. Personal accident
coverages, which consist primarily of accidental death and dismemberment and
travel accident insurance, are provided to employers, associations and other
groups.
Disability management and medical cost containment services provided by
CIGNA help insurers and employers reduce the cost of their benefit programs.
CIGNA also provides managed mental health and
3
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substance abuse coverage and services to HMOs, insurers and employers through a
national network of mental health specialists, some of whom are employees of
CIGNA.
CIGNA had outstanding approximately 8,100 group life insurance policies
covering approximately 14 million lives as of December 31, 1993. The following
table shows group life insurance in force and termination data.
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YEAR ENDED DECEMBER 31
-----------------------------------
1993 1992 1991
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(DOLLARS IN ROUNDED MILLIONS)
<S> <C> <C> <C>
In force, end of year.................................... $ 512,000 $ 490,000 $ 430,000
--------- --------- ---------
--------- --------- ---------
Cancellations (lapses and expirations)................... $ 53,000 $ 37,000 $ 56,000
--------- --------- ---------
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</TABLE>
To control their health care costs, many employers have changed and others
are changing their benefit plan design by introducing or expanding managed care
features. Managed care products promote effective, efficient use of health care
services by coordinating utilization of care and controlling unit costs through
provider contracts. While HMOs are generally the most cost-efficient form of
managed care, many employers offer their employees a choice of benefit and cost
options. CIGNA provides these options through HMOs, preferred provider
organizations ("PPOs") and traditional indemnity coverage as well as through
integrated products, which include all three. Integrated products are available
under alternative funding as well as traditional insurance arrangements. These
products may include contract provisions that provide that costs to the customer
will not exceed specified levels. In the aggregate, there was essentially no net
effect on CIGNA's 1993 results associated with these contract provisions.
CIGNA's prepaid health care operations provide medical services through
HMOs. CIGNA's HMOs include (1) staff models, in which physicians and other
providers are employees of the HMO, (2) individual practice association ("IPA")
models, in which independent physicians and hospitals are under contract with
CIGNA to provide services and (3) mixed models, in which attributes of IPA and
staff model HMOs are combined. Staff model HMOs offer a greater opportunity for
direct control of medical costs, quality and service, but require more capital
investment. IPAs may cover wider geographic areas with lower fixed costs, but
must rely on cost-effective contracts with providers and appropriate utilization
management to control medical costs. Staff models generally offer lower costs to
the consumer, whereas IPAs may offer broader provider choice and greater
accessibility.
CIGNA had 48 HMO networks serving approximately 2.7 million members as of
December 31, 1993, 48 serving approximately 2.3 million members as of December
31, 1992, and 44 serving approximately 2.2 million members as of December 31,
1991. As of December 31, 1993, 40 of CIGNA's HMO networks were IPA models (with
60% of total members); 3 were staff models (with 24% of total members); and 5
were mixed models (with 16% of total members).
CIGNA's indemnity business includes contracts with doctors, hospitals and
other independent providers to form PPOs in 71 networks as of December 31, 1993
and 53 as of December 31, 1992. Under a PPO arrangement, CIGNA reimburses PPO
participants for the costs of medical care obtained from contracted providers,
who charge on a discounted rate basis. CIGNA's PPOs served approximately 900,000
individuals as of December 31, 1993 and approximately 780,000 individuals as of
December 31, 1992.
CIGNA also offers prepaid dental coverage, using networks of independent
providers in most states, serving approximately 1.7 million, 1.3 million and 1.1
million participants as of December 31, 1993, 1992 and 1991, respectively.
Distribution
The products of this segment are distributed primarily by employed group
sales representatives through national and other insurance brokers and insurance
consultants and, to a lesser extent, by CIGNA's career agents. Sales of prepaid
health care products are made primarily to employers by CIGNA's sales
representatives and also through insurance brokers. During 1993, a new direct
sales force began marketing HMOs on a
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guaranteed-cost basis to smaller companies. Salaried marketing representatives
sell disability management, medical and disability cost containment, and managed
mental health and substance abuse services directly to insurance companies, HMOs
and employer groups. Salaried enrollment specialists enroll employees in group
life insurance, HMOs and related programs at the worksite. As of December 31,
1993, the field sales force for the products of this segment consisted of
approximately 540 sales representatives in 106 field locations.
Pricing and Reserves
Premiums and fees charged for group indemnity and prepaid products reflect
assumptions about future claims, expenses, credit risk, investment returns,
competitive considerations and target profit margins. Premiums and fees charged
for HMOs and PPOs also reflect assumptions about the impact of provider
contracts and utilization management. Most of the premium volume for the
indemnity business is established on an experience-rated basis, in which
premiums may be adjusted to reflect actual claims experience, administrative
expenses and income from investable funds attributable to a given policyholder.
All other premiums are based on a guaranteed-cost method, for which there is no
retrospective adjustment for actual experience. Both guaranteed-cost and
experience-rated contracts generally permit annual rate adjustments.
In addition to paying current benefits and expenses, CIGNA establishes
reserves in amounts estimated to be sufficient to discharge reported claims not
yet paid, as well as claims incurred but not yet reported. Also, reserves are
established for estimated experience refunds based on the results of
experience-rated policies.
Interest on reserve and fund balances is credited to experience-rated
policyholders through rates that are either set at the Company's discretion or
based on actual investment performance. For rates set at the Company's
discretion, several interest-crediting rates are in effect on different types of
reserves; generally, higher rates are credited to long-term funds than to
short-term funds, reflecting the fact that higher yields are generally available
on investments of longer maturities. For 1993, the rates of interest credited
ranged from 2.9% to 8.5%.
Approximately one-third of the reserves comprise liabilities that will be
paid within one year, primarily for group life and medical and prepaid health
claims. The remainder primarily include liabilities for long-term disability
benefits and group life insurance benefits for disabled individuals.
The profitability of medical and dental indemnity and prepaid health care
products is largely dependent upon the accuracy of projections for health care
cost inflation and utilization, and the adequacy of fees charged for
administration and risk assumption. The profitability of other indemnity
products depends on the adequacy of premiums charged relative to claims and
expenses. Also, particularly in the case of prepaid health care products,
control of claim costs can significantly affect profitability.
CIGNA reduces its exposure to large individual and catastrophe losses under
group life, disability and accidental death contracts by purchasing reinsurance
from unaffiliated insurers.
Competition
Group indemnity insurance and prepaid health care are highly competitive,
and no one competitor or small number of competitors is dominant across the
country, although some regions are dominated by local HMOs. A large number of
insurance companies and other entities compete in offering similar products.
Competition exists both for employer-policyholders and for the employees in
those instances where the employer offers the products of more than one company.
Most group policies are subject to Company review and renewal on an annual
basis, and policyholders may seek competitive quotations from several sources
prior to renewal.
The principal competitive factors that affect this segment are: (i) price;
(ii) quality of service; (iii) scope, cost-effectiveness and quality of provider
networks; (iv) product responsiveness to customers' needs; (v) cost-containment
services; and (vi) effectiveness of marketing and sales.
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The principal competitors of group insurance and prepaid health care
businesses are the large life and health insurance companies that provide group
insurance, numerous Blue Cross and Blue Shield organizations, stand-alone HMOs,
and HMOs sponsored by major insurance companies and hospitals. Competition also
arises from smaller regional or specialty companies with strength in a
particular geographic area or product line, administrative service firms and
self-insurers. Addressing the needs of employee-consumers as well as of
employers is increasingly important for success in these markets.
CIGNA is one of the largest investor-owned insurance company providers of
group life and health indemnity insurance, based on premiums and premium
equivalents. It is the largest investor-owned HMO, based on the number of
members. CIGNA is the second largest provider of group long-term disability
coverages, based on premiums.
Health Care Reform
Reform of the United States health care system to address issues of cost,
access, universal coverage and quality is widely predicted for 1994. A number of
proposals are on the federal and state legislative agendas that would change the
way health care is financed and delivered. Many reform proposals contain
elements of managed competition. Some include global budgets or some form of
price controls as a short-term means to restrain health care costs. Managed
competition is a market-based approach to the delivery of health care and health
insurance. Other reform proposals include a national standard benefit package,
limits on the use of pre-existing conditions to exclude coverage, limits on the
tax deductibility of health insurance, and provisions for purchasing pools that
are intended to give employers and employees greater purchasing power for health
insurance and health care. Certain proposals, including the Clinton
Administration's, would create increased levels of regulation to accomplish the
goal of health care reform. Reform may provide flexibility for the states to
adopt their own programs, which would result in multiple layers of regulation.
The proposals are complex and will be actively debated by Congress and the
individual states. Health care reform could cause some companies to leave health
care-related markets and enter or increase their commitment to other markets,
such as for life, accident or disability insurance. Because the reform measures
that will ultimately be adopted are not known, CIGNA cannot predict the effect
that health care reform will have on its business operations.
AIDS
The impact of Acquired Immune Deficiency Syndrome ("AIDS") claims to date
has not been material for CIGNA. However, the U.S. Center for Disease Control
has projected substantial increases in the number of AIDS cases and related
deaths in the general population. If such projected increases occur, they will
result in higher life and health benefits claims. CIGNA anticipates that most
AIDS claims in its Employee Life and Health Benefits business should be
recoverable through the experience-rating process and appropriate rate increases
for guaranteed-cost and prepaid products.
D. Employee Retirement and Savings Benefits
General
CIGNA's Employee Retirement and Savings Benefits businesses provide
investment products and professional services primarily to sponsors of qualified
pension, profit-sharing and retirement savings plans. These products and
services are marketed through CG Life and certain other subsidiaries.
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Net earned premiums and fees for, and deposits to, general, separate and
investment advisory accounts for this segment for the year ended December 31,
were as follows:
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1993 1992 1991
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(IN MILLIONS)
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Premiums and Fees:
General Account:
Guaranteed................................................ $ 151 $ 110 $ 169
Experience-rated.......................................... 99 96 89
-------- -------- --------
250 206 258
Separate Accounts........................................... 46 42 42
-------- -------- --------
Total Premiums and Fees................................... $ 296 $ 248 $ 300
-------- -------- --------
-------- -------- --------
Deposits:
General Account:
Guaranteed................................................ $ 102 $ 411 $ 558
Experience-rated.......................................... 1,457 1,640 2,564
-------- -------- --------
1,559 2,051 3,122
Separate Accounts........................................... 1,177 512 482
Investment Advisory Accounts................................ 75 43 54
-------- -------- --------
Total Deposits............................................ $ 2,811 $ 2,606 $ 3,658
-------- -------- --------
-------- -------- --------
</TABLE>
Assets under management for this segment as of December 31 were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
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(IN MILLIONS)
<S> <C> <C> <C>
Assets under management:
General Account:
Guaranteed................................................ $ 4,369 $ 3,933 $ 3,460
Experience-rated.......................................... 17,171 16,937 16,882
-------- -------- --------
21,540(1) 20,870 20,342
Separate Accounts........................................... 12,301 11,223 10,847
Investment Advisory Accounts................................ 628 643 637
-------- -------- --------
Total................................................... $ 34,469(1) $ 32,736 $ 31,826
-------- -------- --------
-------- -------- --------
</TABLE>
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(1) General Account assets under management increased $521 million as a result
of implementing SFAS No. 115.
Principal Products and Markets
CIGNA offers a broad range of products to both defined benefit and defined
contribution pension plans, profit-sharing plans and retirement savings plans.
CIGNA's primary marketing emphasis is on defined contribution plans, which
provide for participant accounts with benefits based upon the value of
contributions to, and investment returns on, the individual's account. This has
been the fastest growing portion of the pension marketplace in recent years.
Defined contribution plan assets amounted to approximately $15.9 billion or 46%
of assets under management for this segment as of December 31, 1993, compared
with $13.8 billion or 42% as of December 31, 1992. The balance of this segment's
assets under management relate primarily to defined benefit plans, under which
annual retirement benefits are fixed or defined by a benefit formula. CIGNA is
increasing its marketing efforts for defined benefit plans.
CIGNA sells investment products and investment management services, either
separately or as full-service packages with administrative and other
professional services, to pension plan sponsors. Traditionally, CIGNA's
marketing emphasis has been on sales of full-service products that include
investment management and pension services to middle market customers with plan
assets of $500,000 to $50 million. In recent years, however, this emphasis has
expanded to include sales to sponsors of larger plans that look to more than one
entity to provide actuarial, administrative or investment services and products,
or combinations
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thereof. For defined contribution plans, principally 401(k) plans, CIGNA markets
products that provide both investment management services and plan level and
participant recordkeeping, as well as employee communications, enrollment, plan
design and other consulting services. For defined benefit plans, CIGNA provides
investment, administrative and professional services, including recordkeeping,
plan documentation, and actuarial valuation and consulting. In addition, CIGNA
offers single premium annuities, both on guaranteed and experience-rated bases;
and guaranteed investment contracts ("GICs"), which provide guarantees of
principal and interest with a fixed maturity date.
Pension products are supported by the general asset account ("General
Account") and segregated accounts ("Separate Accounts") of CG Life. The General
Account supports both guaranteed and experience-rated contracts. Guaranteed
contracts comprise single premium annuities and GICs. As of December 31, 1993,
guaranteed single premium annuities accounted for $2.9 billion, and GICs
accounted for $1.5 billion, of General Account assets under management for the
Employee Retirement and Savings Benefits segment.
For 1993, the interest rate on reserves for guaranteed single premium
annuities ranged from 3.25% to 12.75%, with a weighted average of 8.6%. The rate
of interest credited in 1993 on CIGNA's GICs ranged from 5% to 13%, with a
weighted average rate of 9.6%. CIGNA's GICs and single premium annuities
generally do not permit withdrawal by the plan sponsor prior to maturity, except
that GICs permit withdrawal at market value in the event of plan termination.
None of the GICs include renewal clauses. Payouts associated with GICs have not
been material to the Company's liquidity and capital resources.
Experience-rated contracts that are supported by the General Account
("policyholder contracts") have no fixed maturity dates and provide for transfer
of net investment experience (including impairments and non-accruals) to
policyholders through credited interest and termination provisions.
Credited interest rates on policyholder contracts are generally declared
annually in advance and may be changed prospectively by the Company from time to
time. Credited interest rates reflect investment income and realized gains and
losses. Credited interest rates on policyholder contracts for 1993 ranged from
6% to 10%, with a weighted average rate of 7.4%.
The termination provisions of $4.8 billion, or 100%, of the Company's
defined benefit policyholder contract liabilities that are subject to
withdrawal, and the termination provisions of $3.8 billion, or 38%, of the
Company's liability for defined contribution policyholder contracts, provide the
policyholder with essentially two options for withdrawal of assets upon election
to terminate: (a) a lump sum at market value; or (b) annual installments. Under
the market value method, the Company approximates the market value of the
underlying investments by discounting expected future investment cash flows from
investment income (including the effect of non-accruals) and repayment of
principal, including the effect of impaired assets. The discount rate assumed is
based on current market interest rates. Under the installment method, 100% of
the contractholder book value is paid, usually over not more than 10 years.
Interest is credited over the installment period under a formula derived to pass
investment gains and losses (reflecting non-accruals and impairments) through to
policyholders. Withdrawals under the installment method have been insignificant
to the Company.
The termination provisions of $6.2 billion, or 62%, of the Company's
liability for defined contribution policyholder contracts contain a book value
mechanism for withdrawals at policyholder termination. Under certain
circumstances, payout of book value is subject to deferral and the rate of
interest credited may be reduced for the recovery of investment losses
(including non-accruals and impairments).
The Separate Accounts allow customers the flexibility to invest in specific
portfolios and participate directly in the investment results. Investment
options include publicly traded bonds, private placement bonds, equities, real
estate, mutual funds and short-term securities. Approximately $7.4 billion, or
60%, of the assets in the Separate Accounts support experience-rated contracts
under which the risks and benefits of investment performance are borne entirely
by the customers.
The remaining assets in the Separate Accounts are held under
experience-rated contracts that guarantee a minimum level of benefits. As of
December 31, 1993 and 1992, the amount of minimum benefit guarantees under these
contracts was $4.9 billion and $4.5 billion, respectively. Reserves in addition
to the
8
<PAGE> 11
Separate Account liabilities are established when CIGNA believes a payment will
be required under one of these guarantees. As of December 31, 1993, reserves of
$6 million had been established to provide for the cost of interest guarantees.
For additional information, see Note 17 to CIGNA's 1993 Financial Statements.
CIGNA monitors contract termination experience on an ongoing basis. Of
those assets subject to withdrawal, persistency for 1993 was 94%, compared with
93% and 85% in 1992 and 1991, respectively. The lower persistency rate in 1991
primarily reflected the termination of a large defined benefit plan by a single
customer.
Distribution
CIGNA's retirement products and services are distributed primarily through
CG Life salaried group pension representatives both directly and through career
agents, independent insurance agents and brokers, pension plan consultants,
investment advisors, and other service providers. As of December 31, 1993, CG
Life had a field organization consisting of 51 pension sales representatives and
155 service consultants and administrative personnel located in 25 sales and
service offices throughout the United States.
Pricing and Reserves
CIGNA establishes reserves for experience-rated contracts in an amount
equivalent to the contractholder funds on deposit with it, including liability
for estimated experience refunds based upon the results of each contract.
Profitability on these contracts is based primarily on margins included in
charges for investment and administrative services and risk assumption. Premiums
and fees for annuity products are based on assumptions as to mortality
experience, investment returns, expenses and target profit margins. For
guaranteed-cost contracts, the reserve established is the present value of
expected future obligations based on these assumptions, with a margin for
adverse deviation. Profitability on guaranteed-cost contracts is affected by the
degree to which future experience deviates from these assumptions.
Competition
The pension marketplace is highly competitive. CIGNA's competitors include
other insurance companies, banks, investment advisors, certain service and
professional organizations, and increasingly, mutual funds. No one competitor or
small number of competitors is dominant. Competition focuses on service,
technology, cost, variety of investment options, investment performance and,
more recently, vendor financial condition as indicated by ratings issued by
nationally recognized rating agencies. Business growth may be constrained by
withdrawals and lower deposits resulting from decisions by pension plan sponsors
to diversify assets and fund management.
The largest single pension manager holds less than a 5% market share, as
measured by assets under management. According to a survey published in
"Pensions & Investments," CIGNA ranked 5th among insurers, and 15th among
pension managers overall, in terms of pension and employee retirement savings
plan assets under management.
E. Individual Financial Services
General
CIGNA's Individual Financial Services businesses market a broad range of
insurance and investment products and services to individuals and corporations.
CIGNA also assumes reinsurance of certain risks under policies written by other
insurance companies.
9
<PAGE> 12
The following table sets forth the net earned premiums and fees, and
deposits, for this segment.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Premiums and Fees:
Life........................................... $ 513 $ 392 $ 378
Health......................................... 55 57 74
Reinsurance.................................... 246 261 247
-------- -------- --------
Total premiums and fees...................... $ 814 $ 710 $ 699
-------- -------- --------
-------- -------- --------
Deposits, primarily for universal life
products....................................... $ 2,506 $ 1,040 $ 928
-------- -------- --------
-------- -------- --------
</TABLE>
The following table provides data on sales and additions, terminations and
life insurance in force for this segment, including assumed reinsurance, and
reinsurance ceded to other companies.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
-------- -------- --------
(DOLLAR AMOUNTS IN MILLIONS EXCEPT
AVERAGE SIZE POLICY IN FORCE)
<S> <C> <C> <C>
In force, beginning of the year.................. $ 60,749 $ 56,510 $ 48,208
-------- -------- --------
Sales and Additions(1):
Permanent.................................... 23,551 7,055 11,042
Term......................................... 3,857 4,279 3,211
-------- -------- --------
Total.......................................... 27,408 11,334 14,253
-------- -------- --------
Less Terminations:
Surrenders and conversions................... 1,813 2,139 1,199
Lapses....................................... 2,549 2,921 2,707
Other........................................ 2,522 2,035 2,045
-------- -------- --------
Total.......................................... 6,884 7,095 5,951
-------- -------- --------
In force, end of the year:
Permanent...................................... 61,210 40,623 36,557
Term........................................... 20,063 20,126 19,953
-------- -------- --------
Total........................................ $ 81,273 $ 60,749 $ 56,510
-------- -------- --------
-------- -------- --------
Reinsurance ceded included above................. $ 10,700 $ 9,971 $ 9,457
-------- -------- --------
-------- -------- --------
Number of policies in force:
Participating.................................. 79,042 29,813 31,647
Non-participating.............................. 410,633 414,389 422,913
-------- -------- --------
Total........................................ 489,675 444,202 454,560
-------- -------- --------
-------- -------- --------
Average size policy in force:
By type:
Participating.................................. $243,239 $ 77,797 $ 74,005
-------- -------- --------
-------- -------- --------
Non-participating.............................. $151,101 $141,003 $128,083
-------- -------- --------
-------- -------- --------
By division:
CIGNA Individual Insurance..................... $178,639 $141,987 $126,538
-------- -------- --------
-------- -------- --------
CIGNA Reinsurance - Life-Accident-Health....... $132,748 $124,213 $116,747
-------- -------- --------
-------- -------- --------
Total.......................................... $165,974 $136,879 $124,318
-------- -------- --------
-------- -------- --------
</TABLE>
- ---------------
(1) For 1993, $17 billion of sales and additions were participating, with the
remainder non-participating. For 1992 and 1991, substantially all sales and
additions were non-participating.
10
<PAGE> 13
As of December 31, 1993, total life insurance in force for this segment
included assumed reinsurance of approximately $16.6 billion, compared with $16.4
billion as of December 31, 1992 and $15.9 billion as of December 31, 1991. In
1993, assumed reinsurance (included in sales and additions) totaled $3.6 billion
compared with $3.9 billion and $2.7 billion in 1992 and 1991, respectively.
Individual Products
CIGNA's individual insurance products include term and permanent life
insurance, disability insurance, and annuities. Term life insurance provides
coverage for a stated period and pays a death benefit only if the insured dies
within the period. Permanent life insurance, offered on a participating or
non-participating basis, provides coverage that does not expire after a term of
years and builds a cash value that equals the full policy amount if the insured
is alive on the policy maturity date. In participating insurance, policyholders
directly participate in policy earnings through dividends. Non-participating
insurance does not pay dividends, but deviations from assumed experience may be
reflected in the policyholder's future premium payments.
Products that provide permanent coverages include whole life, universal
life and variable universal life. Whole life provides fixed benefits and level
premium payments. Universal life provides benefits that fluctuate with the
amount of variable premiums paid, and interest credits, mortality and expense
charges made, to the policy. Premiums and benefits in universal life products
vary with the design of the benefits being funded. Variable universal life
provides benefits that also fluctuate, but with the performance of one or more
investment accounts.
CIGNA offers both fixed and variable annuity products. Fixed annuities
accumulate value at a fixed rate of interest on the invested premium (less
applicable expenses and contract charges). Variable annuities accumulate value
at levels determined by the contractholder's allocation of premium among a
portfolio of mutual funds and fixed rate accounts, and the underlying investment
performance of the selected funds (less applicable expenses and contract
charges). CIGNA also markets a number of individual investment products and
services, including mutual funds, and fee-based financial planning.
Principal markets for products and services sold to individuals are
affluent executives, professionals and small business owners (typically with
incomes above $100,000 and net worths of $1.5 million or more).
Individual insurance products are also sold to corporations to provide
coverage on the lives of certain of their employees. Principal markets for
corporate-owned life insurance ("COLI") are Fortune 1000 companies. The COLI
market, and sales volume for COLI products, tend to be volatile. During 1993 the
face amount of new sales (as shown in the preceding tables) of COLI universal
life business issued on a participating basis was approximately $17 billion,
accounting for the increases in deposits, permanent sales and in force, and the
number and average size of participating policies.
As of December 31, 1993 and 1992, approximately 64% and 85%, respectively,
of CIGNA's individual life insurance in force was non-participating permanent,
which includes interest-sensitive products such as universal life. The
year-over-year decline was due to the large COLI sales mentioned above.
Interest credited on whole life products is at a minimum guaranteed rate.
For interest-sensitive products, credited interest rates vary with the
characteristics of each product and the anticipated investment results of the
assets backing these products. Where credited interest exceeds the guaranteed
rate, the excess is used to purchase additional insurance or increase cash
values. Credited interest rates on interest-sensitive products for 1993 ranged
from 4% to 9.5%.
Interest rates for policy loans on individual life insurance products are
defined in the contract and are either variable or fixed. Variable interest
rates are tied to an external index specified in the contract and are subject to
a specified minimum rate. The interest rates charged to the policyholder on
borrowed funds ("loan rates") are generally greater than the interest rates
credited to the policyholder on those funds, and such loan rates and the related
credited interest rates tend to move in tandem as interest rates fluctuate. A
large portion of the contracts that provide for fixed rates also provide for a
relatively constant spread between the policy loan rate and the related credited
interest rate.
11
<PAGE> 14
Most individual life insurance products have surrender charges to recover
policy acquisition costs and to encourage persistency. Persistency for these
products was approximately 95% in 1993, 1992 and 1991.
Reinsurance Products
Reinsurance products sold through this segment include coverages for part
or all of the risks under policies written by other insurance companies for
group life and health, individual life and health, and special risks, such as
travel accident and workers' compensation catastrophe coverages. The principal
markets for these products are individual and group life and health insurers and
special risk and workers' compensation units of property-casualty insurers.
Reinsurance coverages generally extend for the same duration as the
underlying direct policies: from one year or less for group, special risk and
individual life term policies, to time of lapse or expiration at death for
permanent individual life and individual health policies. Most permanent
reinsurance coverages have recapture charges to recover policy acquisition costs
and to encourage persistency.
Distribution
As of December 31, 1993, CG Life sold individual insurance products
primarily through approximately 875 full-time career agents and through brokers
specializing in COLI products. Investment products are sold through the career
agents, who are also registered representatives of a CIGNA broker-dealer.
Annuities are distributed through stockbrokers and banks as well as through
career agents.
The COLI marketplace is dominated by a limited number of brokers. The
volume of business from each of the brokers with whom CIGNA has a relationship
tends to fluctuate over time. The participating COLI sales in 1993 were placed
through one broker, the loss of which would have a significant adverse effect on
new sales of corporate-owned participating universal life insurance.
Reinsurance products are sold in the United States, Canada and Europe
through a small sales force and through domestic and foreign brokers.
Pricing, Reserves and Reinsurance
Premiums for life and disability insurance, annuities and assumed
reinsurance are based on assumptions about mortality, morbidity, persistency,
expenses and target profit margins as well as interest rates and competitive
considerations. The long-term profitability of individual products is affected
by the degree to which future experience deviates from these assumptions. Fees
for universal life insurance products consist of mortality, administration and
surrender charges assessed against the policyholder's fund balance. Interest
credits and mortality charges for universal life, and mortality charges on
variable premium products, may be adjusted prospectively to reflect expected
interest and mortality experience. Dividends on participating insurance products
may be adjusted to reflect prior experience.
For individual disability, annuity, traditional and variable premium life
insurance and individual life and health reinsurance in force, CIGNA establishes
policy reserves that reflect the present value of expected future obligations
less the present value of expected future premiums. For universal life
insurance, CIGNA establishes reserves for deposits received and investment
income credited to the policyholder, less mortality, administration and
surrender charges assessed against the policyholder's fund balance. In addition,
for all individual and reinsurance products, CIGNA establishes claim reserves
for claims received but not yet paid, based on the amount of the claim received,
and for claims incurred but not reported, based on prior claim experience.
CIGNA maintains a variety of reinsurance agreements with non-affiliated
insurers to limit its exposure to large life and health losses and to multiple
losses arising out of a single occurrence. Although such reinsurance does not
discharge CIGNA from its obligations on insured risks, CIGNA's exposure to
losses is reduced by the amount of reinsurance ceded, provided that reinsurers
meet their obligations.
12
<PAGE> 15
Competition
The individual insurance, annuity and investment business is highly
competitive. No one competitor or small number of competitors dominates. More
than 1,000 domestic life insurance companies may offer one or more individual
insurance and annuity products, and approximately 40 companies may offer one or
more reinsurance products, similar to those offered by CIGNA. In addition, some
of CIGNA's individual financial businesses compete with non-insurance
organizations, including commercial and savings banks, investment advisory
services, investment companies and securities brokers. Competition focuses on
product, service, price, distribution method and, more recently, the financial
strength of the vendor as indicated by ratings issued by nationally recognized
rating agencies. CIGNA has benefited competitively from CG Life's financial
strength and stability, and from the quality of its distribution systems.
The COLI marketplace is also highly competitive. The Company principally
competes with approximately half of the 25 largest domestic life insurance
companies that may offer one or more COLI products. Competition in this market
focuses primarily on product design, underwriting, price and administrative
servicing capabilities, as well as vendor financial strength.
Based on information published by A.M. Best, CG Life was the 32nd largest
individual life insurer in terms of aggregate individual life insurance in
force, and the 7th largest in terms of direct premiums, in the United States.
Other Matters
CIGNA does not expect AIDS claims, discussed on page 6, to have a
significant effect on the results of operations of this segment. Where
appropriate, CIGNA tests for AIDS antibodies and considers AIDS information in
underwriting coverages and setting rates.
Legislation may be proposed that could change the policyholder tax
treatment of certain of the Company's interest-sensitive products and, thus,
adversely affect future sales and persistency of such products.
F. Property and Casualty
Principal Products and Markets
CIGNA provides property and casualty insurance and reinsurance for
customers in the United States and international markets, primarily Europe,
Canada, the Pacific region and Latin America. During 1993, United States and
international markets constituted approximately 56% and 44%, respectively, of
the total earned premiums and fees for this segment. CIGNA provides insurance
coverage under standard risk transfer arrangements and provides coverages and
services for customers who wish to increase their levels of risk retention or to
self-insure. Principal product lines include workers' compensation, commercial
packages, casualty (including commercial automobile and general liability),
property, and marine and aviation. CIGNA also markets life, accident and health
insurance coverages in a number of international markets.
CIGNA also reinsures risks written by other insurance companies. It offers
treaty reinsurance on both a full risk and finite risk basis. Treaty reinsurance
is the reinsurance of a specified type, category or class of risks defined in a
reinsurance agreement (a "treaty") between a primary insurer or other reinsured
and a reinsurer. CIGNA also writes facultative reinsurance, which is the
reinsurance of all or a portion of the insurance provided by a single policy.
During 1993, approximately 90% of reinsurance premiums in the Property and
Casualty segment were written on a treaty basis and 10% on a facultative basis.
Approximately 77% of CIGNA's treaty reinsurance premium and all of its
facultative reinsurance premium currently written is for property coverage.
In recent years and increasingly during 1993, CIGNA has implemented
strategies to change the business mix of its domestic operations. In the
specialty insurance market, CIGNA has discontinued writing domestic-based
airlines and most professional liability coverages and has divested its contract
surety bond
13
<PAGE> 16
business. In this market, CIGNA is focusing on excess casualty and homeowners
business. In the medium-sized risk market, CIGNA intends to reduce the number of
individual risks written, and increase production of group business, such as
through affinity groups, associations and national broker blocks of business. In
addition, CIGNA is focusing on writings of workers' compensation business that
involves standard risk transfer in states with regulatory climates in which the
Company believes it can operate profitably. Since 1990, CIGNA has implemented
more restrictive risk selection and raised prices for its international property
coverages. Also, CIGNA has withdrawn substantially from the domestic voluntary
personal automobile insurance market and the London property and casualty
assumed reinsurance market. The Company routinely re-evaluates the regulatory
and reserving environment associated with these automobile and London
reinsurance lines of business, and future changes in related reserves could
occur.
CIGNA generally attempts to protect itself from economic loss arising from
foreign exchange exposure in its international operations by maintaining
invested assets abroad that are currency specific in support of its foreign
obligations. For information on the effect of foreign exchange exposure on
CIGNA, see Notes 1(N) and 13 to CIGNA's 1993 Financial Statements.
Until recently, CIGNA wrote financial guarantees on municipal bonds and
certain corporate debt obligations (which are reported in the Property and
Casualty segment) and on industrial revenue bonds (which are reported in other
segments). For additional information, see Note 17 to CIGNA's 1993 Financial
Statements.
CIGNA's domestic subsidiaries are members of, or participate in, various
voluntary associations and syndicates that facilitate the underwriting of large
or highly concentrated risks. The associations distribute the risks assumed
among the members, provide specialized inspection and engineering services and
may use special forms of coverage to control overall exposures.
In addition, regulatory authorities require the participation of CIGNA's
domestic subsidiaries in various joint underwriting associations and pools,
including workers' compensation pools that are unprofitable and represent a cost
of conducting business in certain jurisdictions. Underwriting losses in these
pools are the result of inadequate rate levels, the failure of states to
institute workers' compensation reforms and reduced levels of voluntary writings
by the industry.
14
<PAGE> 17
The following table sets forth geographic distribution of GAAP net earned
premiums and fees for the products of this segment.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1993 1992
---------------- ----------------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C>
Domestic:
California...................................................... $ 408 8% $ 439 8%
New York........................................................ 287 6 383 7
New Jersey...................................................... 252 5 259 4
Texas........................................................... 233 5 292 5
Pennsylvania.................................................... 205 4 214 4
Florida......................................................... 154 3 184 3
Massachusetts................................................... 122 2 160 3
Illinois........................................................ 115 2 145 2
All other....................................................... 1,088 21 1,336 23
------ ---- ------ ----
Total Domestic................................................ 2,864 56 3,412 59
------ ---- ------ ----
Foreign:
Japan........................................................... 810 16 650 11
United Kingdom.................................................. 412 8 482 8
Belgium......................................................... 169 3 196 4
France.......................................................... 101 2 142 3
All other....................................................... 780 15 878 15
------ ---- ------ ----
Total Foreign................................................. 2,272 44 2,348 41
------ ---- ------ ----
Total......................................................... $5,136 100% $5,760 100%
------ ---- ------ ----
------ ---- ------ ----
</TABLE>
- ---------------
For 1993 and 1992, earned premiums and fees were substantially the same as
written premiums.
CIGNA's property and casualty insurance subsidiaries provide loss
protection to insureds in exchange for premiums. If earned premiums exceed the
sum of losses, commissions to agents or brokers, other operating expenses and
policyholders' dividends, underwriting profits are realized. The "combined
ratio" is a frequently used measure of property and casualty underwriting
performance. On a GAAP basis, this ratio is the sum of (i) the ratio of incurred
losses and associated loss expenses to earned premiums (the "loss and loss
expense ratio"), (ii) the ratio of expenses incurred for sales commissions,
premium taxes, administrative and other operating expenses to earned premiums
(the "expense ratio") and (iii) the ratio of policyholders' dividends to earned
premiums (the "policyholder dividend ratio"), each of these three ratios being
expressed as a percentage. The statutory combined ratio differs from the GAAP
ratio primarily in that the expense ratio and the policyholder dividend ratio
are calculated as a percent of written premiums, rather than earned premiums.
When the combined ratio is over 100%, underwriting results are not profitable.
The combined ratios for CIGNA's property and casualty product lines and total
property and casualty operations are shown in the table on page 16.
Because time normally elapses between the receipt of premiums and the
payment of claims and certain related expenses, funds become available for
investment by CIGNA. The combined ratio does not reflect investment income from
these funds, investment gains and losses, results of non-insurance business, or
federal income tax expenses or benefits. Such investment income, when added to
underwriting profits or losses, other items (including federal income tax
expenses or benefits), investment income from accumulated earnings and capital,
and realized investment gains and losses, produces net income or loss. For
information concerning investment income, see "Investments and Investment
Income -- Property and Casualty Investments" on pages 31 and 32.
15
<PAGE> 18
The following tables set forth GAAP net earned premiums and fees,
underwriting results, combined ratios and net investment income for the products
of this segment.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1993 1992 1991
---------------- ---------------- ---------------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Premiums and Fees/Percent of Total Premiums and Fees:
Domestic Lines:
Workers' compensation............................. $ 710 14% $ 1,045 18% $1,230 20%
Commercial packages............................... 611 12 737 13 819 14
Casualty.......................................... 457 9 669 12 676 11
Property.......................................... 243 5 223 4 278 5
Marine and aviation............................... 181 3 146 3 134 2
Personal automobile............................... 129 2 126 2 191 3
Homeowners........................................ 102 2 110 2 127 2
Other............................................. 95 2 72 1 78 1
------- ----- ------- ----- ------ -----
Total........................................... 2,528 49 3,128 55 3,533 58
International (excluding international
reinsurance)...................................... 1,293 25 1,403 24 1,470 24
Reinsurance (including international reinsurance)... 537 11 601 10 616 10
International life and health....................... 778 15 628 11 495 8
------- ----- ------- ----- ------ -----
Total Premiums and Fees...................... $ 5,136 100% $ 5,760 100% $6,114 100%
------- ----- ------- ----- ------ -----
------- ----- ------- ----- ------ -----
Underwriting Loss/Combined Ratios:
Domestic Lines:
Workers' compensation............................. $ (130) 118.4% $ (197) 118.8% $ (299) 124.4%
Commercial packages............................... (334) 154.6 (254) 134.5 (117) 114.2
Casualty.......................................... (684) 249.5 (196) 129.4 (144) 121.3
Property.......................................... (101) 141.7 (127) 156.7 (29) 110.4
Marine and aviation............................... (30) 116.9 (50) 134.2 (5) 103.4
Personal automobile............................... (64) 149.9 (76) 159.9 (38) 119.8
Homeowners........................................ (14) 113.9 (15) 113.6 (20) 115.7
Other............................................. (5) 105.0 (7) 109.2 (9) 112.4
------- ------- ------
Total........................................... (1,362) 153.9 (922) 129.4 (661) 118.8
International (excluding international
reinsurance)...................................... (69) 105.4 (183) 113.0 (209) 114.2
Reinsurance (including international reinsurance)... (200) 137.1 (499) 183.1 (103) 116.7
------- ------- ------
Underwriting Loss/Combined Ratio:
After Policyholders' Dividends........... $(1,631) 137.4 $(1,604) 131.3 $ (973) 117.3
------- ------- ------
------- ------- ------
Before Policyholders' Dividends.......... $(1,501) 134.4 $(1,615) 131.5 $ (966) 117.2
------- ------- ------
------- ------- ------
Net investment income, pre-tax:
Domestic lines...................................... $ 486 $ 556 $ 593
International....................................... 186 185 195
Reinsurance......................................... 81 101 110
------- ------- ------
Total........................................... $ 753 $ 842 $ 898
------- ------- ------
------- ------- ------
</TABLE>
The above table is presented on a GAAP basis. Industry results are more
readily available on a statutory basis. CIGNA's statutory combined ratio after
policyholders' dividends was 126.5 for 1993. CIGNA's 1993 statutory ratio was
favorably affected by 9 points due to changes in the discounting of certain
workers' compensation reserves.
CIGNA's results have been adversely affected in recent years by a highly
competitive pricing environment, which has resulted in general deterioration in
its combined ratio. (The significance of the combined ratio is explained on page
15.) CIGNA's statutory combined ratio for 1993 was adversely affected by 9.0
points for environmental pollution losses and 3.9 points for asbestos-related
losses, with the remainder primarily attributable to price deterioration and
unfavorable underwriting.
16
<PAGE> 19
It is not known to what extent the types of losses reflected in CIGNA's
combined ratio are also reflected in the combined ratios of other companies. The
average statutory combined ratio for the nine months ended September 30, 1993
for companies that write at least 70% commercial coverage and file data with the
Insurance Services Office was 112.5%. However, caution should be exercised in
using this data because it is not possible to compare meaningfully an individual
company's combined ratio with an industry average due to numerous variables,
including product mix and amounts of fee for service business, which differ
between companies.
Competition
The principal competitive factors that affect the property and casualty
products of this segment are (i) pricing; (ii) underwriting; (iii) quality of
claims and policyholder services; (iv) operating efficiencies; and (v) product
differentiation and availability. In the highly competitive environment of the
past several years, CIGNA has reduced its premium volume rather than maintain
business at inadequate prices, and its share of domestic and international
markets has declined. Competition has intensified due to increased capacity in
the direct insurance market resulting from growing capital supporting the
industry. In international markets, particularly western Europe, price
competition is intense as companies compete for market share.
Perception of financial strength, as reflected in the ratings assigned to
an insurance company, especially by A.M. Best, is also a factor in the Company's
competitive position. Continued pressure on ratings of the domestic Pool Group
is expected because of continued losses. If the A.M. Best rating of the Pool
Group drops from its current A- level, the Company's ability to write the
domestic lines at present levels would be adversely affected, although the
effects cannot be reasonably estimated.
In its international life insurance operations, CIGNA focuses on those
market segments where it can compete effectively based on service levels and
product design, and achieve an adequate level of profitability in the long term.
It generally does not attempt to compete with large, entrenched local companies.
Property and casualty insurance can be obtained through national and
regional companies that use an agency distribution system, direct writers (who
may have an employed agency force) or brokers, or through self-insurance,
including the use by corporations of subsidiary captive insurers. Approximately
3,900 companies compete for this business in the United States and no single
company or group of affiliated companies is dominant. In 1993 and 1992, CIGNA's
domestic property and casualty statutory net written premiums amounted to
approximately 1.1% and 1.2%, respectively, of the total market. Internationally,
CIGNA competes directly with foreign insurance companies as well as with other
U.S.-based companies. CIGNA's reinsurance operations compete with over 100
reinsurers around the world.
Based on information published by A.M. Best, CIGNA's domestic property and
casualty insurance subsidiaries rank 16th in annual net premiums written, CIGNA
is the 3rd largest U.S. writer of commercial multi-peril coverages, 13th largest
of workers' compensation coverages and 12th largest of commercial auto
coverages.
Based on revenues, CIGNA's international operations are the second largest
U.S.-based provider of insurance products and services. CIGNA's reinsurance
operations rank 14th domestically and 24th worldwide in annual net premiums
written.
Distribution
In the United States, CIGNA markets its insurance products principally
through independent agents and brokers. CIGNA is reducing the number of
producers through which it markets its products to focus on those producers who
historically have provided more profitable business, to better manage the change
in business mix described on pages 13 and 14 and to reduce expenses associated
with writing the business. The current producer force of approximately 3,000 is
expected to be reduced to about 2,500 during 1994. In addition, CIGNA is
increasing the use of brokers in the medium-sized risk market in an effort to
increase the amount of group business that is written.
17
<PAGE> 20
Property and casualty direct coverage is sold in the international
marketplace primarily through brokers. A network of offices in about 50
jurisdictions provides claims and account services to international customers
and brokers. Life, accident and health insurance products are sold in the
international marketplace through approximately 7,000 brokers and agents.
Reinsurance products are sold worldwide, with approximately 52% of 1993 business
volume sold directly to client companies and the remainder through reinsurance
brokers. About 56% of the brokered reinsurance business was sold through 30
broker organizations.
Ceded Reinsurance
To protect against losses greater than the amount that it is willing to
retain on any one risk or event, CIGNA purchases reinsurance from unaffiliated
insurance companies. The Company is not substantially dependent upon any single
reinsurer. The Company's largest aggregation of reinsurance recoverables as of
December 31, 1993 and 1992, at approximately 9% and 6%, respectively, was with
syndicates affiliated with Lloyd's of London, with such recoverables spread over
in excess of 100 syndicates. Although reinsurance does not discharge CIGNA from
its obligations on insured risks, CIGNA's exposure to losses is reduced by the
amount ceded, and thus will be limited to the amount of risk retained, provided
that reinsurers meet their obligations. In recent years, in order to improve the
long-term cost effectiveness of its reinsurance program, CIGNA has generally
purchased less reinsurance and retained more risk. Changes in CIGNA's property
catastrophe reinsurance program for domestic and international business are
described on page 19 of the MD&A section of its 1993 Annual Report.
The collectibility of reinsurance is largely a function of the solvency of
reinsurers. CIGNA cedes risk to reinsurers who meet certain financial security
standards and monitors their quality and financial condition. In its selection
and monitoring process, CIGNA examines its reinsurers' financial performance and
reserve adequacy; considers factors such as the quality of their management; and
considers ratings and reviews of them by independent sources. When deemed
appropriate, CIGNA seeks collateral from reinsurers; reassumes, in return for a
settlement, risks for which it had previously purchased reinsurance; and
establishes allowances for potentially unrecoverable reinsurance. Reinsurance
disputes can delay recovery of reinsurance and, in some cases, affect its
collectibility. Disputes resulting in such delays have increased in recent
years, particularly on larger and more complex claims, such as those related to
professional liability, asbestos and London reinsurance market exposures. Losses
for unrecoverable reinsurance were $28 million, $89 million and $28 million for
1993, 1992 and 1991, respectively. Of the loss for 1992, $62 million related to
CIGNA's London reinsurance market exposures. Additional losses from
unrecoverable reinsurance are likely to affect CIGNA's future results adversely,
although the amounts and timing cannot be reasonably estimated.
Reserves
General
Significant periods of time may elapse between the occurrence of an insured
loss, the reporting of the loss to the insurer and the insurer's payment of that
loss. To recognize liabilities for unpaid losses, insurers establish "reserves,"
which are liabilities representing estimates of future amounts needed to pay
claims and related expenses with respect to insured events that have occurred,
including events that have not been reported to the insurer.
After a claim is reported, except for a class of very small claims that
typically are settled quickly, a "case reserve" is established by claims
personnel for the estimated amount of the ultimate payment. The estimate
reflects the informed judgment of such personnel, based on their experience and
knowledge regarding the nature and value of the specific claim. Claims personnel
review and update their estimates as additional information becomes available
and claims proceed toward resolution.
"Bulk reserves" are established on an aggregate basis (i) to provide for
losses incurred but not yet reported to and recorded by the insurer; (ii) to
provide for the estimated expenses of settling claims, including legal and other
fees and general expenses of administering the claims adjustment process; and
18
<PAGE> 21
(iii) to adjust for the fact that, in the aggregate, case reserves may not
accurately estimate the ultimate liability for reported claims. As part of the
bulk reserving process, CIGNA's historical claims data and other information are
reviewed and consideration is given to the anticipated impact of various factors
such as legal developments, economic conditions and changes in social attitudes.
Insurance industry experience is also considered.
With respect to asbestos-related, environmental pollution and certain other
long-term exposure claims, CIGNA does not establish bulk reserves, except for
the estimated expenses of settling reported claims and except for claims related
to certain major asbestos manufacturers' policies. See below for a more detailed
discussion of reserving for these claims.
The reserving process relies on the basic assumption that past experience
is an appropriate basis for predicting future events. The probable effects of
current developments, trends and other relevant matters are also considered.
Because the eventual deficiency or redundancy of reserves is affected by many
factors, some of which are interdependent, there is no precise method for
evaluating the adequacy of the consideration given to inflation or to any other
specific factor affecting claims payments. However, the reserving process
provides implicit recognition of the impact of inflation and other factors by
taking into account changes in historic claims reporting and payment patterns. A
number of analytical reserving techniques are used, which often yield differing
results. Accordingly, estimating future claims costs is a complex and uncertain
process. Because available claims data and other information are rarely
definitive, the evaluation of such data's implications with respect to future
losses requires the use of informed estimates and judgments.
As additional experience and other data become available and are reviewed,
the Company's estimates and judgments are revised and appropriate action is
taken, which may include increases or decreases in CIGNA's estimate of ultimate
liabilities for insured events of prior years. These increases or decreases, net
of reinsurance, are reflected in results for the period in which the estimates
are changed.
CIGNA continually attempts to improve its loss estimation process by
refining its ability to analyze loss development patterns, claims payments and
other information, but there remain many reasons for adverse development of
estimated ultimate liabilities. For example, the uncertainties inherent in the
loss estimation process have grown in the last decade as loss estimates have
become increasingly subject to changes in social and legal trends that expand
the liability of insureds, establish new liabilities, and reinterpret insurance
contracts to provide unanticipated coverage long after the related policies were
written. As noted in the discussion below of asbestos-related, environmental
pollution, and other long-term exposure claims, such changes from past
experience significantly affect the ability of insurers to estimate liabilities
for unpaid losses and related expenses.
In management's judgment, information currently available has been
appropriately considered in estimating CIGNA's loss reserves. However, future
changes in estimates of claims costs will adversely affect results in future
periods, although such effects cannot be reasonably estimated.
Prior Year Development
The adverse pre-tax effects during 1993, 1992 and 1991 on CIGNA's results
of operations from insured events of prior years (prior year development) were
$789 million, $656 million and $341 million, respectively.
Of the prior year loss development during 1993, 82% was attributable to
asbestos-related, environmental pollution and other long-term exposure claims,
which are discussed below. The remaining development is discussed on pages 20
and 21 of the MD&A section of CIGNA's 1993 Annual Report.
Asbestos-related, Environmental Pollution and Other Long-term Exposure Claims
CIGNA continues to receive claims related to asbestos, environmental
pollution and other long-term exposure claims asserting a right to recovery
under insurance policies issued by the Company.
19
<PAGE> 22
Liabilities for these claims cannot be estimated using standard actuarial
methods because developed case law and adequate claim history do not exist for
such claims. In addition, these claims differ from almost all others in that it
is generally not clear that an insured loss has occurred and which, if any, of
multiple policy years and insurers may be liable. These uncertainties prevent
identification of applicable policies and policy limits until after a claim is
reported to the Company and substantial time is spent (many years in some
cases), resolving contract issues and determining facts necessary to evaluate
the claim.
Estimating liabilities and recoveries for claims that will be asserted
under assumed and ceded reinsurance policies is also subject to uncertainties
similar to those affecting claims under direct policies. CIGNA expects
recoveries from ceded reinsurance to reduce its future losses, although the
amount of recoveries cannot be reasonably estimated.
Under current law, CIGNA expects these types of claims will continue to be
reported for the foreseeable future. The claims to be paid, if any, and timing
of any such payments depend on resolution of the uncertainties associated with
them, which are expected to extend over several decades.
For the reasons discussed above, and further elaborated on below, CIGNA
expects that its future results will continue to be adversely affected by losses
and legal expenses for these types of claims. Because of the significant
uncertainties involved, and the likelihood that they will not be resolved in the
near future, CIGNA is unable to reasonably estimate the additional losses and
expenses and therefore is unable to determine whether such amounts will be
material to its future results of operations, liquidity or financial condition.
Asbestos-related Claims
Since 1985, CIGNA has carried reserves related to certain insurance
policies issued for certain major asbestos manufacturers ("targets"), under
which CIGNA expects to pay the limits of liability. These reserves (which
include amounts for unreported claims and associated legal expenses) are equal
to the policy limits of liability, minus payments made to date, plus an estimate
of the associated future legal expenses.
More recent asbestos bodily injury litigation has been filed against
manufacturers and suppliers of diverse products that either contain asbestos or
used it in the manufacturing process, as well as against contractors and
building owners. There is inadequate history from which the Company can predict
the number or types of policyholders that will receive asbestos-related claims,
how many claims they will receive, the amounts of those future claims, the
insurance coverages that might be called upon for defense and indemnification or
the likelihood of those coverages having to respond to claims. Because the date
of event for which insurance coverage might be determined is unclear, numerous
policies with varying terms over many years may be involved.
In addition to bodily injury cases, damage suits have been brought seeking
reimbursement for the diminution in value of buildings containing asbestos
materials and for the expense of removing and replacing asbestos insulation
material and other building components made of asbestos. The Company and the
insurance industry generally dispute that coverage applies to these
asbestos-in-building claims.
Within the various state and federal court systems, there have been
conflicting decisions regarding the extent, if any, of the obligation of
insurers to provide coverage and the method of allocation of costs among
involved insurers. Additional uncertainties are created by efforts to create
novel dispute resolution procedures in response to the burden of asbestos
litigation on the courts, such as the proposed global settlement of future
asbestos bodily injury claims brought against certain asbestos producers, which
is being contested in the courts.
The majority of CIGNA's losses and legal expenses for asbestos-related
claims arise from its domestic property and casualty operations. As of December
31, 1993, 1992 and 1991, respectively, approximately 1,200, 950 and 900
policyholders had asbestos-related claims outstanding with the domestic
operations. The 1993 amount includes 140 policyholders for which data had not
previously been available. The number of policyholders with claims pending
increased during 1993, 1992 and 1991 reflecting policyholders filing claims for
the first time. During those years, there were no policyholders for which all
pending claims
20
<PAGE> 23
were either dismissed or settled. CIGNA continues to litigate certain
asbestos-related coverage issues, with 39 lawsuits involving 27 policyholders
pending as of December 31, 1993.
It is not possible to determine the Company's potential liability for
asbestos-related claims based on the number of policyholders with claims
outstanding. Additional information (which is not known for unreported claims)
would be needed for such determination, including the extent of coverage, the
policyholder's liability for claims tendered to it, the injuries allegedly
sustained by the policyholder's claimants, and the number of claims pending
against a policyholder. As discussed above, the lack of information on these and
other matters prevents the estimation of liabilities for unreported
asbestos-related claims.
CIGNA establishes case reserves for reported asbestos-related claims as
information permits and, during 1993, also established reserves for future legal
and associated expenses for such reported claims. However, except for claims
under the target manufacturers' policies discussed above, CIGNA does not
establish reserves for unreported claims or for legal and associated expenses
related to unreported claims because of the uncertainties described above.
Reserve changes for asbestos-related claims before ("Gross") and after
("Net") the effects of reinsurance for the periods indicated are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1993 1992 1991
-------------- -------------- --------------
GROSS NET GROSS NET GROSS NET
----- ---- ----- ---- ----- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Asbestos Bodily Injury Claims
Beginning reserves................................... $ 486 $166 $ 442 $168 $ 453 $155
Plus incurred claims and claim adjustment expenses... 186 111 125 61 61 16
Less payments for claims and claim adjustment
expenses........................................... (108) (61) (81) (63) (72) (3)
----- ---- ----- ---- ----- ----
Ending reserves...................................... $ 564 $216 $ 486 $166 $ 442 $168
----- ---- ----- ---- ----- ----
----- ---- ----- ---- ----- ----
Asbestos-in-Building Claims
Beginning reserves................................... $ 70 $ 47 $ 65 $ 40 $ 76 $ 31
Plus incurred claims and claim adjustment expenses... 117 60 17 8 11 29
Less payments for claims and claim adjustment
expenses........................................... (19) (10) (12) (1) (22) (20)
----- ---- ----- ---- ----- ----
Ending reserves...................................... $ 168 $ 97 $ 70 $ 47 $ 65 $ 40
----- ---- ----- ---- ----- ----
----- ---- ----- ---- ----- ----
</TABLE>
During 1993 CIGNA was able to segregate and separately report
asbestos-related reserves for certain of its excess and surplus and reinsurance
contracts that were previously included in prior year development for lines of
business such as casualty, commercial packages and reinsurance. The above table
reflects this change for all periods presented. Excess and surplus business is
generally subject to a significant amount of reinsurance; as a result, the
effect on net reserves of losses for this business was not significant. The
incurred claims and claim adjustment expenses for 1993 reflect the establishment
in the third quarter of reserves of $72 million, net of reinsurance ($106
million gross), for future legal and associated expenses for reported claims.
Environmental Pollution Claims
The principal federal statute that requires cleanup of environmental damage
is the Comprehensive Environmental Response, Compensation and Liability Act
("Superfund"), passed in 1980. It imposes liability on "Potentially Responsible
Parties" ("PRPs"), subjecting them to liability for clean-up costs regardless of
fault, time period and relative contribution of pollutants. Superfund is subject
to reauthorization by Congress in 1994; any changes in Superfund's system of
allocating responsibility or funding clean-up costs could affect the liabilities
of policyholders and insurers. The proposals being considered by Congress to
reform Superfund are in the early stages of development, therefore, CIGNA is not
able to determine what effect, if any, such enacted reform would have on its
future results.
21
<PAGE> 24
In addition to Superfund, other federal environmental statutes exist, and
state environmental statutes are, in some cases, stricter than the federal
statutes. In addition to clean-up costs, environmental pollution may give rise
to claims for bodily injury and property damage.
Those identified as potentially responsible for environmental pollution
typically assert that their liability is insured. As a result, CIGNA's
environmental pollution claims have escalated rapidly since 1985, and a
substantial and growing number of legal actions that involve insurers, including
CIGNA, have been brought to determine insurance coverage issues.
CIGNA and other insurers dispute coverage for the environmental liabilities
of policyholders. Fundamental legal questions that will ultimately determine
whether or not insurers have an obligation to provide coverage are being
vigorously litigated and there is no consistency among the court decisions
nationwide on these questions. Additional uncertainty arises because of the
varying types and terms of policies, which may or may not provide for the costs
of defense or contain pollution exclusions. Pollution exclusions may be absolute
or may allow coverage for certain sudden and accidental events.
The estimation of reserves for reported environmental pollution claims is
difficult and likely to change as additional information emerges. Even if
coverage issues on a particular claim are ultimately resolved in favor of the
policyholder, that result may not be useful in setting reserves on other claims
because of complex factual variations between sites, policyholders and policies.
For example, at any given Superfund site, the allocation of liability varies
greatly, depending on such factors as the amount and relative toxicity of the
material contributed, extent of impairment to the environment and ability to
pay. A PRP may have no liability, may share responsibility with others or may
bear the cost alone. According to the Environmental Protection Agency, the
average time period between issuance of initial notice of PRP status and
determination of the method and cost of a site clean-up now averages about ten
years. The issues have been resolved for relatively few waste sites.
The majority of CIGNA's losses and expenses for environmental pollution
claims arise from its domestic property and casualty operations. As of December
31, 1993, 1992 and 1991, respectively, the domestic operations had approximately
13,300, 9,200 and 7,000 environmental pollution files outstanding. During 1993,
1992 and 1991, new claim files opened were approximately 4,500 (including
approximately 1,300 files for which data had not previously been available),
2,500 and 2,100, respectively, and pending claim files dismissed, settled or
otherwise resolved were approximately 400, 300 and 200, respectively.
A file represents each policyholder involved at a site, regardless of the
number or type of claims asserted against the policyholder or the number or type
of insurance policies (primary or excess) under which coverage is asserted.
CIGNA disputes coverage for essentially all environmental pollution claims, and
is involved in 493 coverage lawsuits as of December 31, 1993, compared with 449
as of December 31, 1992. Accordingly, and because of the many unresolved legal
and factual issues described above, liabilities cannot be estimated from the
number of environmental pollution files outstanding.
CIGNA establishes case reserves for reported environmental pollution claims
as information permits and, during 1993, also established reserves for future
legal and associated expenses for such reported claims. However, CIGNA does not
establish reserves for unreported claims or for legal and associated expenses
related to unreported claims because of the uncertainties described above.
22
<PAGE> 25
Reserve changes for environmental pollution claims before ("Gross") and
after ("Net") the effects of reinsurance for the periods indicated are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1992 1991
--------------- -------------- --------------
GROSS NET GROSS NET GROSS NET
----- ----- ----- ---- ----- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
ENVIRONMENTAL POLLUTION CLAIMS
Beginning reserves................................. $ 252 $ 148 $ 192 $ 98 $ 181 $ 97
Plus incurred claims and claim adjustment
expenses......................................... 482 394 197 127 103 83
Less payments for claims and claim adjustment
expenses......................................... (141) (112) (137) (77) (92) (82)
----- ----- ----- ---- ----- ----
Ending reserves.................................... $ 593 $ 430 $ 252 $148 $ 192 $ 98
----- ----- ----- ---- ----- ----
----- ----- ----- ---- ----- ----
</TABLE>
During 1993, CIGNA was able to segregate and separately report
environmental pollution reserves for certain of its excess and surplus contracts
that were previously included in prior year development for lines of business
such as casualty and commercial packages. The above table reflects this change
for all periods presented. Excess and surplus contracts are generally subject to
a significant amount of reinsurance; as a result, the effect on net reserves of
losses for this business was not significant. The incurred claims and claim
adjustment expenses for 1993 reflect the establishment in the third quarter of
reserves of $268 million net of reinsurance ($335 million gross) for future
legal and associated expenses for reported claims.
Other Long-term Exposure Claims
Other long-term exposure claims typically assert injuries from a substance,
such as DES, lead or breast implants, which are manifested over an extended
period of time. These claims may involve multiple policies, policyholders and
insurers, with uncertainties similar to those affecting asbestos-related claims,
in resolving whether, and which, insurers may be liable. In addition, there are
questions as to which, if any, injuries or damages are caused by the particular
product or substance.
CIGNA's losses and legal expenses for other long-term exposure claims
primarily arise from its domestic property and casualty operations. As of
December 31, 1993 and 1992, respectively, approximately 1,000 and 700
policyholders had other long-term exposure claims outstanding with the domestic
operations. The 1993 amount includes approximately 250 policyholders for which
data had not previously been available. CIGNA continues to litigate other
long-term exposure coverage disputes, with 49 lawsuits involving 48
policyholders pending as of December 31, 1993.
CIGNA establishes case reserves for reported long-term exposure claims and,
during 1993, also established reserves for future legal and associated expenses
for such reported claims. However, CIGNA does not establish reserves for certain
classes of unreported claims or for legal and associated expenses related to
certain classes of unreported claims because of the uncertainties described
above.
The incurred claims and claim adjustment expenses, net of reinsurance, for
other long-term exposures were $76 million, $16 million and $21 million for
1993, 1992 and 1991, respectively. The incurred claims and claim adjustment
expenses in 1993 for other long-term exposure claims reflect the establishment
in the third quarter of reserves of $35 million, net of reinsurance, for future
legal and associated expenses for reported claims.
23
<PAGE> 26
Reserve Analysis
The following table presents a reconciliation of total beginning and ending
reserve balances of the Property and Casualty segment for unpaid claims and
claim adjustment expenses for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Gross Reserve for Unpaid Claims and Claim Adjustment
Expenses--January 1.................................................... $17,478 $16,750 $16,660
Less Reinsurance Recoverable......................................... 7,011 6,562 6,534
------- ------- -------
Net Reserve for Unpaid Claims and Claim Adjustment Expenses--January 1... 10,467 10,188 10,126
------- ------- -------
Plus incurred claims and claim adjustment expenses:
Provision for insured events of the current year..................... 3,464 4,448 4,587
Increase in provision for insured events of prior years.............. 789 656 341
------- ------- -------
Total incurred claims and claim adjustment expenses................ 4,253 5,104 4,928
------- ------- -------
Less payments for claims and claim adjustment expenses:
Attributable to insured events of the current year................... 1,153 1,371 1,454
Attributable to insured events of prior years........................ 3,017 3,454 3,412
------- ------- -------
Total payments for claims and claim adjustment expenses............ 4,170 4,825 4,866
------- ------- -------
Net Reserve for Unpaid Claims and Claim Adjustment
Expenses--December 31.................................................. 10,550 10,467 10,188
Plus Reinsurance Recoverable......................................... 7,104 7,011 6,562
------- ------- -------
Gross Reserve for Unpaid Claims and Claim Adjustment
Expenses--December 31.................................................. $17,654 $17,478 $16,750
------- ------- -------
------- ------- -------
</TABLE>
The table on page 25 presents the subsequent development of the estimated
year-end property and casualty reserve, net of reinsurance ("net reserve") for
the ten years prior to 1993. The first section of the table shows the estimated
net reserve that was recorded at the end of each of the indicated years for all
current and prior year unpaid claims and claim adjustment expenses. The second
section shows the cumulative percentages of such previously recorded net reserve
paid in succeeding years. The third section shows, as a percentage of such net
reserve, the re-estimates of the net reserve made in each succeeding year.
The indicated deficiency as shown in the table represents the aggregate
change in the reserve estimates from the original balance sheet dates through
1993. The amounts noted are cumulative; that is, an increase in a loss estimate
that related to a prior year occurrence generates a deficiency in each
intermediate year. For example, a deficiency recognized in 1993 relating to
losses incurred in 1987 would be included in the indicated deficiency amount for
the years 1987 through 1992. Yet, the deficiency would be reflected in operating
results in 1993 only. The effects on income in the past three years due to
changes in estimates of net reserve are shown as "Increase in provision for
insured events of prior years" in the above table.
Conditions and trends that have affected the reserve development reflected
in the table may continue to change, and care should be exercised in
extrapolating future reserve redundancies or deficiencies from such development.
24
<PAGE> 27
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
------ ------ ------ ------ ------ ------ ------ ------- ------- ------- -------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net reserve for unpaid claims and
claim adjustment expenses.......... $4,584 $5,715 $7,299 $8,027 $8,784 $9,366 $9,731 $10,126 $10,188 $10,467 $10,550
------ ------ ------ ------ ------ ------ ------ ------- ------- ------- -------
------ ------ ------ ------ ------ ------ ------ ------- ------- ------- -------
Cumulative percentage of net reserve
paid through:
One year later................... 39.5% 38.3% 30.5% 31.0% 30.3% 31.1% 34.3% 33.7% 33.9% 28.8%
Two years later.................. 62.6 60.0 51.2 50.2 49.6 52.7 54.2 53.8 53.4
Three years later................ 76.6 79.3 66.8 65.4 65.7 67.6 69.3 68.5
Four years later................. 91.5 92.7 79.5 78.9 77.0 78.9 80.7
Five years later................. 101.1 104.2 90.4 88.4 84.7 87.9
Six years later.................. 110.5 114.0 99.1 95.2 92.8
Seven years later................ 118.0 122.9 105.4 102.9
Eight years later................ 126.2 129.4 112.9
Nine years later................. 130.5 137.8
Ten years later.................. 139.7
Net reserve (percentage)
re-estimated as of:
One year later................... 105.1% 125.0% 101.7% 103.3% 102.7% 103.0% 103.1% 103.4% 106.4% 107.5%
Two years later.................. 128.3 127.3 108.8 106.2 105.0 105.9 106.9 107.4 115.5
Three years later................ 130.2 133.3 111.8 110.0 108.0 109.8 109.7 117.0
Four years later................. 134.7 136.5 116.2 114.9 111.4 112.4 119.7
Five years later................. 139.2 140.5 122.4 118.9 114.1 122.0
Six years later.................. 142.3 147.7 126.7 122.2 124.0
Seven years later................ 148.8 151.5 130.9 132.7
Eight years later................ 153.4 157.5 142.1
Nine years later................. 159.8 170.7
Ten years later.................. 172.7
Net Indicated deficiency: $3,331 $4,039 $3,073 $2,623 $2,109 $2,059 $1,913 $ 1,722 $ 1,578 $ 789
Gross reserve--December 31.......... $17,478 $17,654
Less: Reinsurance recoverable....... 7,011 7,104
------- -------
Net reserve--December 31............ $10,467 $10,550
------- -------
------- -------
Gross re-estimated reserve.......... $18,850
Less: Re-estimated reinsurance
recoverable........................ 7,594
-------
Net re-estimated reserve............ $11,256
-------
-------
Gross cumulative deficiency......... $ 1,372
-------
-------
</TABLE>
- ---------------
The liability for foreign subsidiaries was excluded for 1983 because claims and
claim adjustment expenses by accident year for foreign subsidiaries were not
available that year.
On a GAAP basis, which is before the effects of reinsurance, CIGNA's 1993
year-end reserves totaled $17.7 billion. For GAAP purposes, CIGNA's reserves are
generally carried at the full value of the estimated liabilities, except for
certain workers' compensation liabilities assumed in pre-1984 reinsurance
agreements. The discount for these liabilities, based on an assumed interest
rate of 9%, was approximately $22 million as of December 31, 1993, and
approximately $2 million was amortized in 1993. For state regulatory purposes,
reserves are reported in accordance with statutory accounting procedures
("SAP"), which is net of the effects of reinsurance, and, on that basis, totaled
$9.6 billion.
25
<PAGE> 28
The following table reconciles, as of year end, liabilities for unpaid
claims and claim adjustment expenses determined for state regulatory purposes in
accordance with SAP to those determined in accordance with GAAP:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Statutory reserve for unpaid claims and claim adjustment expenses,
net of reinsurance................................................ $ 9,590 $ 9,864 $ 9,791
Adjustments:
Statutory Reinsurance Recoverable................................. 6,584 6,807 6,448
Discounting of Gross Reserves(1).................................. 1,479 806 636
Salvage and Subrogation(2)........................................ -- -- (132)
Other............................................................. 1 1 7
-------- -------- --------
GAAP reserve for unpaid claims and claim adjustment expenses........ 17,654 17,478 16,750
Less GAAP Reinsurance Recoverable................................... 7,104 7,011 6,562
-------- -------- --------
GAAP reserve for unpaid claims and claim adjustment expenses,
net of reinsurance................................................ $ 10,550 $ 10,467 $ 10,188
-------- -------- --------
-------- -------- --------
</TABLE>
- ---------------
(1) Primarily for workers' compensation reserves. For SAP purposes workers'
compensation reserves are discounted at rates ranging from 3.5% to 6%.
During 1993, CIGNA expanded the use of discounting for certain statutory
loss reserves and modified the assumptions used to discount other reserves,
in accordance with state insurance regulations, which decreased statutory
reserves by $388 million.
(2) Prior to 1992, SAP did not generally allow for the recognition of estimated
recoverable salvage and subrogation. Beginning in 1992, both SAP and GAAP
included an adjustment for salvage and subrogation recoverables.
NAIC and Other Property and Casualty Regulatory Matters
The National Association of Insurance Commissioners ("NAIC") has adopted
risk-based capital rules effective for property and casualty companies as of
December 31, 1994. Additional information about the rules and their effect on
CIGNA's property and casualty subsidiaries is contained on page 33 below and on
page 15 of the MD&A section of CIGNA's 1993 Annual Report.
The NAIC calculates annually 12 financial ratios to assist state insurance
regulators in monitoring the financial condition of insurance companies.
Departure from the benchmark "usual range" on four or more of the ratios could
lead to inquiries from individual state insurance commissioners as to certain
aspects of a company's business. For 1993, CIGNA's consolidated domestic
property and casualty insurance subsidiaries fell outside the usual ranges for
four of the ratios, as discussed below. Management believes that this departure
from the usual ranges reflects the unfavorable insurance environment and will
not result in any regulatory actions that would have a material adverse effect
on the results of operations or financial condition of CIGNA.
The consolidated subsidiaries fell outside the usual ranges for the two
year overall operating ratio (118%), the one and two year reserve development to
surplus ratios (38% and 49%, respectively) and the liabilities to liquid assets
ratio (109%).
The two year operating ratio measures a company's overall profitability by
relating cumulative underwriting losses net of investment income for the current
and prior year to premium for that period. A ratio in excess of 100% falls
outside the usual range. Significant factors contributing to this result include
losses from catastrophes and asbestos and environmental pollution claims as well
as a highly competitive pricing environment. Underwriting losses and steps taken
to improve results are discussed on page 19 of the MD&A section of the Company's
1993 Annual Report.
The one and two year reserve development to surplus ratios relate a
company's loss reserve development for insured events of prior years for the
most recent calendar year to 1992 surplus (for the one
26
<PAGE> 29
year ratio) and for the two most recent calendar years to 1991 surplus (for the
two year ratio). A company falls outside the usual ranges if such development
exceeds 20% of such surplus. The reasons for the Company's adverse loss
development are discussed beginning on page 19 above and on pages 20 and 21 of
the MD&A section of the Company's 1993 Annual Report.
The liabilities to liquid assets ratio measures a company's ability to pay
its liabilities with cash, investment assets or receivables. A ratio in excess
of 105% falls outside the usual range. As stated above on page 13, CIGNA
provides coverages and services for customers who wish to increase their levels
of risk retention or to self-insure. The receivables associated with certain of
these products (with respect to which the Company typically obtains collateral)
are separately classified in the financial statements and are not included in
the NAIC definition of liquid assets. The inclusion of the liabilities
associated with such products without the related receivables results in the
Company falling outside the usual range.
As a result of property and casualty underwriting losses, CIGNA contributed
$150 million of capital in 1993 to enhance the capital base of the domestic
property and casualty operations. Also during 1993, CIGNA expanded the use of
discounting for certain statutory loss reserves and modified the assumptions
used to discount other reserves, in accordance with state insurance regulations,
which increased statutory surplus by approximately $290 million. Additional
capital contributions may be needed as a result of continued property and
casualty losses; however, such amounts are not reasonably estimable at this
time.
CIGNA's property and casualty insurance subsidiaries are members of
regulated advisory organizations that provide certain statistical, rate-making,
policy audit and similar services on a fee basis. In most states, these
subsidiaries may use rate filings developed by advisory organizations. They also
use filings developed by themselves, or combinations of both, thus enabling them
to pursue an independent course in certain areas while using advisory
organization services in others. The continued operation of advisory
organizations and their authority to set advisory rates is the subject of a
variety of proposed regulatory restraints and legal challenges.
G. Investments and Investment Income
CIGNA's investment operations primarily provide investment management and
related services in the United States and certain other countries for CIGNA's
corporate and insurance-related assets.
Assets under management at year-end 1993 totaled $67.4 billion, comprising
CIGNA corporate and insurance-related investment assets ("investment assets") of
$50.7 billion and advisory portfolios of $16.7 billion. Advisory portfolios
included $13.7 billion in Separate Accounts of CIGNA's life insurance
subsidiaries. For information about Separate Accounts, see "Employee Retirement
and Savings Benefits-- Principal Products and Markets" on page 7.
As of December 31, 1993, CIGNA implemented Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Accordingly, certain fixed maturities were
classified as available for sale and are now carried at fair value, rather than
amortized cost. The effect of implementing SFAS No. 115 was to increase
investment assets by $1.6 billion.
CIGNA invests in a broad range of asset classes, including domestic and
international fixed maturities and common stocks, mortgage loans, real estate,
and short-term investments. In 1993, CIGNA ceased active management of the bulk
of its domestic equity holdings in favor of an index approach primarily based on
the Standard & Poor's 500 Index.
The major portfolios under management consist of the combined assets of the
Employee Life and Health Benefits, Employee Retirement and Savings Benefits, and
Individual Financial Services segments (collectively, "Employee Benefits and
Individual Financial portfolios") and the assets of the Property and Casualty
segment. CIGNA's investment assets are generally managed to reflect the
underlying characteristics of related insurance and contractholder liabilities,
as well as regulatory and tax considerations pertaining to those liabilities.
CIGNA's insurance and contractholder liabilities as of December 31, 1993
comprised the following: property and casualty 37%; fully guaranteed 13%,
experience-rated 27%, interest-sensitive 10%, and other life and health 13%.
27
<PAGE> 30
Property and casualty claim demands are somewhat unpredictable in nature
and require liquidity from the underlying investment assets, which are
structured to emphasize current investment income to the extent consistent with
maintaining appropriate portfolio quality and diversity. The liquidity
requirements for shorter-term liabilities are met primarily through cash flows
and shorter-term investments (less than two years) and, to a lesser extent,
through publicly traded fixed maturities. For longer-term liabilities, liquidity
requirements are met primarily through private fixed maturity investments.
During 1993, equity holdings were sold from the Property and Casualty portfolios
and replaced with fixed maturity holdings with the objective of reducing future
volatility of investments supporting CIGNA's property and casualty reserves.
Fully guaranteed products primarily include GICs, settlement annuities and
single premium annuity products. Because these products generally do not permit
withdrawal by policyholders prior to maturity, the amount and timing of future
benefit cash flows can be reasonably estimated. Funds supporting these products
are invested in fixed income investments that generally match the aggregate
duration of the investment portfolio with that of the related benefit cash
flows. As of December 31, 1993, the duration of assets and liabilities for GICs,
single premium annuities and settlement annuities was 3 years, 8 years and 12
years, respectively.
Experience-rated products include defined benefit and defined contribution
pension products. The principal and liquidity requirements of experience-rated
liabilities are met by investments that emphasize current yield, primarily fixed
income investments.
Investment assets for interest-sensitive products, which include universal
life insurance, primarily include fixed income investments, which emphasize
investment yield while meeting the liquidity requirements of the related
liabilities.
Other life and health products consist of various group and individual life
and health products. The supporting investment assets are structured to
emphasize investment income, and the necessary liquidity is provided through
cash flow, short-term investments and common stocks.
Investment strategy and results are affected by the amount and timing of
cash available for investment, economic conditions and interest rates. For
example, cash flows have increased in the past two years due to higher principal
repayments, primarily from prepayments of mortgage-backed securities.
Reinvestment of this cash in high quality fixed maturities at prevailing
interest rates has reduced investment income. Increased competition for quality
investments could reduce the availability of such investments and adversely
affect future investment results.
CIGNA routinely monitors and evaluates the status of its investments in
light of current economic conditions, trends in capital markets and other
factors. Such factors include industry segment considerations for fixed maturity
investments, and geographic and property-type considerations for mortgage loan
investments.
CIGNA's fixed maturity investments as of December 31, 1993 constituted
approximately 54% of the Employee Benefits and Individual Financial portfolios
and approximately 87% of the Property and Casualty portfolios, respectively. As
of that date, approximately 33% of fixed maturity investments was attributable
to experience-rated contracts.
CIGNA reduces credit risk for the portfolios as a whole by investing
primarily in investment grade securities rated by rating agencies (for public
investments), by CIGNA (for private investments) or by the Securities Valuation
Office of the NAIC (for both public and private investments). For information
about below investment grade holdings and NAIC and agency ratings, see page 24
of the MD&A section of CIGNA's 1993 Annual Report.
Adverse economic conditions in particular industry sectors have impaired
certain borrowers' abilities to pay debt service on fixed maturities. This
resulted in additional write-downs, delinquencies and restructured bonds in
1993. Despite signs of overall economic growth, continuing adverse conditions in
various industry segments are expected to result in additional problem fixed
maturities and write-downs and valuation reserves.
28
<PAGE> 31
CIGNA's mortgage loan investments constituted approximately 26% of the
Employee Benefits and Individual Financial portfolios and approximately 4% of
the Property and Casualty portfolios as of December 31, 1993. As of that date,
approximately 59% of mortgage loan investments was attributable to
experience-rated contracts. Mortgage loan investments are subject to
underwriting criteria addressing loan-to-value ratio, debt service coverage,
cash flow, tenant quality, leasing, market, location and financial strength of
the borrower. Such investments consist primarily of first mortgage loans on
commercial properties and are diversified relative to property type, location,
borrower and loan size. The Company invests in fully completed and substantially
leased commercial properties. Virtually all of the Company's mortgage loans are
bullet or balloon loans, under which all or a substantial portion of the loan
principal is due at the end of the loan term.
Conditions in certain economic sectors and the real estate markets
generally, have impaired certain borrowers' abilities to pay debt service on
mortgage loans. As a result, CIGNA experienced additional delinquencies,
restructurings and, in particular, foreclosures in 1993, as well as an increase
in valuation reserves. Continuing adverse conditions, in particular in
California and the office building sector, are expected to result in additional
problem mortgage loans, foreclosures and valuation reserves.
In addition, in 1993 the Company refinanced approximately $900 million of
mortgage loans in good standing that related to borrowers unable to obtain
alternative financing and extended the maturities of certain mortgage loans.
CIGNA manages properties obtained through foreclosure of mortgage loans
("foreclosure properties") until such properties are sold. The Company's general
policy is to sell foreclosure properties after rehabilitating the properties,
re-leasing them, and managing them for two to four years, although CIGNA may
hold certain foreclosure properties for immediate sale if circumstances indicate
that to do so is in the best financial interests of the Company or
policyholders.
The amounts and timing of future write-downs and changes in valuation
reserves for bonds, mortgage loans and foreclosure properties cannot be
reasonably estimated. However, CIGNA currently does not expect a significant
decline in the aggregate carrying value of its assets or a material adverse
effect on its financial condition.
See pages 23 through 29 of the MD&A section of CIGNA's 1993 Annual Report
and Notes 1, 3 and 4 to CIGNA's 1993 Financial Statements for additional
information about CIGNA's investments.
29
<PAGE> 32
Employee Benefits and Individual Financial Investments
The following tables summarize the distribution of investments attributable
to CIGNA's Employee Benefits and Individual Financial portfolios and the related
net investment income from such investments. Approximately 53% of the
investments in the Employee Benefits and Individual Financial portfolios is
attributable to experience-rated contracts with policyholders.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------
INVESTMENTS 1993 1992 1991
- ------------------------------------------------------------------------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities
Bonds:
Finance.............................................................. $ 9,021 $ 7,245 $ 6,107
Manufacturing........................................................ 2,511 2,425 2,475
Consumer products.................................................... 2,274 2,478 2,593
States, municipalities and political subdivisions.................... 2,198 1,554 1,178
Energy............................................................... 1,867 1,731 1,510
Public utilities..................................................... 647 835 999
Transportation....................................................... 568 632 553
U.S. government and government agencies and authorities.............. 318 287 184
Foreign governments(1)............................................... 278 182 203
------- ------- -------
Total bonds..................................................... 19,682 17,369 15,802
Redeemable preferred stocks............................................ 26 24 27
------- ------- -------
Total fixed maturities.......................................... 19,708(2) 17,393 15,829
------- ------- -------
Equity securities
Common stocks:
Industrial and miscellaneous......................................... 1,110 886 833
Public utilities..................................................... 162 232 269
Banks, trust and insurance companies................................. 121 76 39
------- ------- -------
Total common stocks............................................. 1,393 1,194 1,141
Non-redeemable preferred stocks........................................ 84 54 31
------- ------- -------
Total equity securities......................................... 1,477 1,248 1,172
------- ------- -------
Mortgage loans
Commercial:
Office buildings..................................................... 3,652 4,245 4,780
Retail facilities.................................................... 3,483 3,486 3,161
Apartments........................................................... 923 905 896
Hotels............................................................... 711 875 965
Industrial........................................................... 379 380 434
Other................................................................ 109 114 120
------- ------- -------
Total commercial................................................ 9,257 10,005 10,356
Agricultural........................................................... 118 171 245
------- ------- -------
Total mortgages................................................. 9,375 10,176 10,601
------- ------- -------
Policy loans............................................................. 3,623 2,062 1,627
Real estate.............................................................. 1,539 1,173 718
Other long-term investments.............................................. 108 99 93
Short-term investments................................................... 401 497 528
------- ------- -------
Total investments............................................... $36,231 $32,648 $30,568
------- ------- -------
------- ------- -------
</TABLE>
- ---------------
See Note 1 of Notes to Financial Statements on page 34 of CIGNA's 1993 Annual
Report for a discussion of the method of valuation of investments. The above
amounts do not include Separate Account assets.
(1) Comprises fixed maturities of sovereign foreign governments.
(2) Amount reflects an increase of $732 million related to the adoption of SFAS
No. 115. See Note 1 of Notes to Financial Statements on page 33 of CIGNA's
1993 Annual Report.
30
<PAGE> 33
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
NET INVESTMENT INCOME 1993 1992 1991
- ------------------------------------------------------------------------- ------- ------- -------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities......................................................... $1,610 $1,594 $1,460
Equity securities........................................................ 56 42 40
Mortgage loans........................................................... 948 998 1,047
Real estate.............................................................. 244 162 102
Policy loans............................................................. 253 164 126
Other investments........................................................ 69 70 92
------- ------- -------
Total........................................................... 3,180 3,030 2,867
Less investment expenses................................................. 248 176 120
------- ------- -------
Net investment income, pre-tax........................................... $2,932 $2,854 $2,747
------- ------- -------
------- ------- -------
NAIC earned interest rate(1)............................................. 8.80 % 9.14 % 9.43 %
------- ------- -------
------- ------- -------
</TABLE>
- ---------------
(1) In accordance with rules prescribed by the NAIC, the earned interest rate
for any given year is equal to (a) net investment income multiplied by two,
divided by (b) the sum, at the beginning and end of the year (excluding the
effects of SFAS No. 115), of cash, invested assets and investment income due
and accrued, less borrowed money, less net investment income.
Property and Casualty Investments
The following tables summarize the distribution of investments attributable
to CIGNA's Property and Casualty segment and the related net investment income
from such investments.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------
INVESTMENTS 1993 1992 1991
- ------------------------------------------------------------------------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities
Bonds:
States, municipalities and political subdivisions.................... $ 2,545 $ 2,088 $ 2,065
Foreign governments(1)............................................... 1,472 218 355
Finance.............................................................. 1,404 1,455 1,380
U.S. government and government agencies and authorities.............. 1,083 599 656
Energy............................................................... 810 163 151
Public utilities..................................................... 635 200 116
Consumer products.................................................... 548 559 543
Manufacturing........................................................ 487 458 439
Transportation....................................................... 76 198 192
Other................................................................ 924 411 333
------- ------- -------
Total bonds........................................................ 9,984 6,349 6,230
Redeemable preferred stocks............................................ 24 23 41
------- ------- -------
Total fixed maturities............................................. 10,008(2) 6,372 6,271
------- ------- -------
Equity securities
Common stocks:
Industrial and miscellaneous......................................... 293 877 858
Banks, trust and insurance companies................................. 57 45 20
Public utilities..................................................... 9 125 58
------- ------- -------
Total common stocks................................................ 359 1,047 936
Non-redeemable preferred stocks........................................ 7 11 8
------- ------- -------
Total equity securities............................................ 366 1,058 944
------- ------- -------
Other long-term investments, principally mortgages....................... 643 722 799
Short-term investments(3)................................................ 461 2,473 2,271
------- ------- -------
Total investments.................................................. $11,478 $10,625 $10,285
------- ------- -------
------- ------- -------
</TABLE>
- ------------
See Note 1 of Notes to Financial Statements on page 34 of CIGNA's 1993 Annual
Report for a discussion of the method of valuation of investments. The above
table does not reflect purchase accounting adjustments relating to the 1982
business combination of Connecticut General Corporation ("CGC") and INA
Corporation ("INA"), which are made in consolidation. In addition, the above
amounts do not include Separate Account assets.
(1) Comprises fixed maturities of sovereign foreign governments.
(2) Amount reflects an increase of $548 million related to the adoption of SFAS
No. 115. See Note 1 of Notes to Financial Statements on page 33 of CIGNA's
1993 Annual Report. Fixed maturities carried at fair value prior to adoption
of SFAS No. 115 approximated $2.3 billion as of December 31, 1993 and are
reflected in the appropriate bond categories presented above.
(3) Includes fixed maturities that are carried at market value of approximately
$2.1 billion and $1.9 billion, respectively, as of December 31, 1992 and
1991.
31
<PAGE> 34
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
NET INVESTMENT INCOME(1) 1993 1992 1991
- ------------------------------------------------------------------------- ----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Interest:
Taxable.............................................................. $ 643 $ 712 $ 740
Tax-exempt........................................................... 101 105 108
----- ----- -----
Total........................................................... 744 817 848
Dividends from stocks.................................................... 25 30 31
Other.................................................................... 34 42 56
----- ----- -----
Total investment income.................................................. 803 889 935
Less investment expenses................................................. 50 47 37
----- ----- -----
Net investment income, pre-tax........................................... $ 753 $ 842 $ 898
----- ----- -----
----- ----- -----
</TABLE>
- ---------------
(1) The above table does not reflect purchase accounting adjustments relating to
the 1982 business combination of CGC and INA, which are made in
consolidation.
Portfolio Management and Advisory Services
CIGNA's investment operations primarily focus on providing investment
services to CIGNA and its insurance subsidiaries. In addition, the investment
operations provide fee-based investment management and advisory services to
advisory clients, including large group pension sponsors, institutions and
international investors. CIGNA acquires or originates, directly or through
intermediaries, various investments including private placements, public
securities, mortgage loans, real estate and leveraged capital funds.
Other Investments and Operations
Assets for CIGNA's Other Operations include fixed maturities, mortgage
loans and investments maturing in less than two years. These assets support the
settlement annuity and non-insurance businesses, and also supported, until
January 1994 when they were sold, the California personal automobile and
homeowners insurance businesses that CIGNA retained from the 1989 sale of the
Horace Mann insurance companies. Net investment income for these investments was
$217 million for 1993, $218 million for 1992 and $215 million for 1991.
In addition, CIGNA has non-strategic equity investments in operating
businesses, including oil and gas, drilling rig and real estate operations.
H. Regulation
CIGNA's insurance subsidiaries are licensed to do business in, and are
subject to regulation and supervision by, the states of the United States, the
District of Columbia, certain U.S. territories and various foreign
jurisdictions. Although the extent of regulation varies, most jurisdictions have
laws and regulations governing rates, solvency, standards of business conduct,
and various insurance and investment products. Licensing of insurers and their
agents and the approval of policy forms are usually required. The form and
content of statutory financial statements and the type and concentration of
investments are also regulated. Each insurance subsidiary is required to file
annual financial reports with supervisory agencies in most of the jurisdictions
in which it does business, and its operations and accounts are subject to
examination by such agencies at regular intervals.
Most states and the District of Columbia require licensed insurance
companies to support guaranty associations, which are organized to pay claims on
behalf of insolvent insurance companies. These associations levy assessments on
member insurers in a particular state to pay such claims on the basis of their
proportionate shares of the lines of business of the insolvent insurer. Maximum
assessments permitted by law in any one year generally range from 1% to 2% of
annual premiums written by each member in a particular state with respect to the
categories of business involved, and in some cases may be offset against premium
taxes payable to the state. The assessments against CIGNA's subsidiaries were
$28 million,
32
<PAGE> 35
$23 million and $32 million for 1993, 1992 and 1991, respectively, before giving
effect to premium tax offsets. The amounts of future assessments are not
expected to have a material adverse effect on CIGNA's financial condition.
The increase in the number of insurance companies that are impaired or
insolvent has prompted state and federal initiatives to enhance solvency
regulation. For example, the NAIC has developed model solvency-related laws that
it is encouraging states to adopt. In addition, effective for life insurance
companies in 1993 and property and casualty companies in 1994, risk-based
capital rules have been adopted that recommend a specified level of capital
depending on the types and quality of investments held, the types of business
written and the types of liabilities maintained. Depending on the ratio of the
insurer's surplus to its risk-based capital, the insurer could be subject to
various regulatory actions ranging from increased scrutiny to conservatorship.
See page 15 of the MD&A section of CIGNA's 1993 Annual Report for additional
information.
Also, the NAIC is addressing risk-based capital guidelines for HMOs and a
proposal that would limit the types and amounts of investment assets that an
insurance company can hold.
In the past, federal oversight of insurer solvency has also been proposed.
Among proposals that have been discussed are optional federal chartering, which
would preempt most state insurance regulations; minimum federal solvency
standards, which would be supervised by the states; federal licensing of all
reinsurers; and establishment of a national guaranty fund.
Recent state and federal regulatory scrutiny of life insurers' sales and
advertising tactics, including the adequacy of disclosure regarding products and
their future performance, may result in increased regulations in this area.
In December 1993, the U.S. Supreme Court issued the John Hancock Mutual
Life Insurance Company v. Harris Trust decision, which held that certain funds
held under a general account group annuity contract were subject to ERISA
fiduciary standards. The Department of Labor is addressing compliance issues
raised by the decision and, depending on the outcome, CIGNA may make future
changes to its group annuity contracts or the operation of its general account.
CIGNA's insurance subsidiaries are subject to state laws regulating
insurers that are subsidiaries of insurance holding companies. Under such laws,
which are generally becoming more stringent, certain dividends, distributions
and other transactions between an insurance subsidiary and the holding company
or its other subsidiaries may require notification to, or be subject to the
approval of, one or more state insurance commissioners.
Proposals to reform the United States health care system could change the
way health care is financed and delivered. Such proposals are discussed on page
6.
CIGNA's HMOs and mental health and substance abuse clinics are subject to
regulation and supervision by various government agencies in the states in which
they do business. The extent of regulation varies, but most jurisdictions
regulate licensing, solvency, contracts and rates. Regulation of these entities
may also include standards for quality assurance, minimum levels of benefits
that must be offered and requirements for availability and continuity of care. A
few states require HMOs to participate in guaranty funds, and several state
legislatures have recently considered insolvency and guaranty fund legislation,
a trend that is expected to continue.
Regulatory concerns with insurance risk selection have increased
significantly in recent years. For example, there is continuous legislative,
regulatory and judicial activity regarding the use of gender in determining
insurance benefits and rates. Also, some states have imposed restrictions on the
use of underwriting criteria related to AIDS.
Property and casualty insurers are required to participate in assigned risk
plans, joint underwriting associations and other residual market mechanisms to
write coverages on risks not acceptable under normal underwriting standards. In
addition, states have responded to concerns about the availability and
affordability of commercial casualty insurance by proposing or adopting
legislation, regulations or positions to, among
33
<PAGE> 36
other things, limit rate increases, require rate reductions or refunds, restrict
nonrenewal and cancellation with respect to commercial lines coverages or
require the refunding of "excess" profits, and by expanding regulatory
examination of the appropriateness of rates, non-renewals and cancellations.
The extent of insurance regulation varies significantly among the countries
in which CIGNA conducts its international operations. As a foreign insurer,
CIGNA is, in many countries, faced with greater restrictions than domestic
competitors. Trade barriers include discriminatory licensing procedures,
compulsory cessions of reinsurance, required localization of records and funds,
higher premium and income taxes, and requirements for local participation in an
insurer's ownership. Where appropriate, CIGNA has incorporated insurance
subsidiaries locally to improve its position.
Depending upon their nature, CIGNA's investment management activities and
products with United States contacts are subject to the federal securities laws,
ERISA and other federal and state laws governing investment management
activities and products. Investments made by United States insurance companies
are subject to state insurance laws. Investment management activities and
products outside the United States, and investments made by non-United States
insurance companies outside the United States, are subject to local regulation.
Often, the investments of individual insurance companies are subject to
regulation by multiple jurisdictions.
Federal initiatives can have an impact on the insurance business in a
variety of ways. In addition to proposals discussed above related to Superfund,
health care reform and federal oversight of insurer solvency, current and
proposed federal measures that may significantly affect the insurance business
include: (a) pension and other employee benefit regulation; (b) Social Security
legislation; (c) financial services regulation; (d) amendment to the antitrust
exemption provided for the business of insurance by the McCarran-Ferguson Act;
and (e) tax legislation.
The economic and competitive effects of the legislative and regulatory
proposals discussed above would depend upon the final form such legislation or
regulation might take.
I. Miscellaneous
Portions of CIGNA's insurance business are seasonal in nature. Reported
claims under group health and certain property and casualty products are
generally higher in the first quarter. Sales, particularly of individual life
products, are generally lowest in the first quarter and highest in the fourth
quarter.
CIGNA and its principal subsidiaries are not dependent on business from one
or a few customers. No customer accounted for 10% or more of CIGNA's
consolidated revenues in 1993. CIGNA and its principal subsidiaries are not
dependent on business from one or a few brokers or agents, except as noted on
page 12 in connection with sales of certain corporate-owned life insurance. In
addition, CIGNA's insurance businesses are generally not committed to accept a
fixed portion of the business submitted by independent brokers and agents, and
generally all such business is subject to its approval and acceptance.
CIGNA had approximately 50,600, 52,300 and 56,000 employees as of December
31, 1993, 1992 and 1991, respectively.
Item 2. PROPERTIES
CIGNA's headquarters are located in approximately 90,240 total square feet
of leased office space at One Liberty Place, Philadelphia, Pennsylvania. CIGNA
Property & Casualty, CIGNA Reinsurance -- Property & Casualty, CIGNA Group
Insurance -- Life - Accident - Disability, and CIGNA International are located
in a leased building of approximately 1.25 million total square feet at Two
Liberty Place, Philadelphia. CIGNA HealthCare, CIGNA Individual Insurance, CIGNA
Reinsurance -- Life - Accident - Health and CIGNA Investment Management are
located in a complex of buildings owned by CIGNA, aggregating approximately 1.15
million total square feet of office space, located at 900-950 Cottage Grove
Road, Bloomfield, Connecticut. CIGNA's Retirement & Investment Services
operations are located in approximately 230,000 total square feet of leased
office space at Metro Center One, Hartford, Connecticut. In addition, CIGNA owns
or leases office buildings, or parts thereof, throughout the United States and
in other
34
<PAGE> 37
countries. For additional information concerning leases and property, see Notes
1(H) and 15 to CIGNA's 1993 Consolidated Financial Statements, which are
incorporated herein by reference from pages 35 and 46, respectively, of CIGNA's
1993 Annual Report. This paragraph does not include information on investment
properties.
CIGNA's information processing resources include large mainframe computers
in major data centers, a multitude of personal computers connected through local
area networks and a nationwide backbone network that provides desktop computing
and office automation to CIGNA employees. CIGNA's policies regarding the
safeguarding of critical corporate data are disseminated to all employees. The
policies require data security through the use of appropriate identification and
password practices and data backup through appropriate offsite storage
techniques. Protection of CIGNA's major data centers, which house large amounts
of critical corporate data, involves access controls, fire detection and
suppression systems, and other hazard elimination processes. In addition, CIGNA
maintains a formal disaster contingency plan, which includes recovery services
in the event of a disaster in a CIGNA data center. Critical files are stored
offsite, to be available for recovery in the event of a disaster.
Item 3. LEGAL PROCEEDINGS
CIGNA is continuously involved in numerous lawsuits arising, for the most
part, in the ordinary course of its business either as a liability insurer
defending third-party claims brought against its insureds or as an insurer
defending coverage claims brought against it by its policyholders or other
insurers.
During 1988, a number of state attorneys general and private plaintiffs
filed lawsuits against a number of insurance companies and others, including
CIGNA, alleging violations of federal and state antitrust laws. One of the
lawsuits, filed in Texas, was settled in March 1991 for an insignificant amount.
All of the remaining lawsuits were dismissed by the trial court in 1989. The
United States Court of Appeals reversed the trial court and the United States
Supreme Court reversed in part and modified in part the ruling of the Court of
Appeals and remanded the cases to the Court of Appeals for further proceedings
in accordance with its opinion. The Supreme Court ruled that the insurance
companies did not forfeit their McCarran-Ferguson protection when they acted
with reinsurers to produce acceptable policy terms and defined the boycott
exception to the McCarran-Ferguson exemption in a manner favorable to the
insurance industry. The cases are now in the trial court for further
proceedings, having been remanded by the Court of Appeals.
While the outcome of litigation involving CIGNA cannot be determined, such
litigation (other than that related to asbestos, environmental pollution and
other long-term exposure claims, which is discussed below), net of reserves and
giving effect to reinsurance, is not expected to have a material effect on
CIGNA.
CIGNA is involved in lawsuits regarding policy coverage and judicial
interpretation of legal liability for asbestos-related, environmental pollution
and other long-term exposure claims. As discussed beginning on page 19,
reserving for these claims is subject to significant uncertainties, such as lack
of developed case law or adequate claim history. Future results of the Company
are expected to continue to be affected adversely by losses and expenses for
asbestos-related, environmental pollution and other long-term exposure claims.
Because of the significant uncertainties involved and the likelihood that these
uncertainties will not be resolved in the near future, CIGNA is unable to
reasonably estimate the additional losses and expenses and therefore is unable
to determine whether such amounts will be material to its future results of
operations, liquidity or financial condition.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
35
<PAGE> 38
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information under the caption "Quarterly Financial Data--Stock and
Dividend Data" on page 51 and under the caption "Stock Listing" on the inside
back cover of CIGNA's 1993 Annual Report is incorporated by reference, as is the
information from Note 7 to CIGNA's Consolidated Financial Statements on page 41
and the number of shareholders of record as of December 31, 1993 under the
caption "Highlights" on page 1 of CIGNA's 1993 Annual Report.
Item 6. SELECTED FINANCIAL DATA
The five-year financial information under the caption "Highlights" on page
1 of CIGNA's 1993 Annual Report is incorporated by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information on pages 14 through 29 of CIGNA's 1993 Annual Report is
incorporated by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CIGNA's Consolidated Financial Statements on pages 30 through 49 and the
report of its independent accountants on page 50 of CIGNA's 1993 Annual Report
are incorporated by reference, as is the unaudited information set forth under
the caption "Quarterly Financial Data--Consolidated Results" on page 51.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A. Directors of the Registrant
The information under the captions "Nominees for Election" and "Incumbent
Directors to Continue in Office" on pages 5 through 7, and the information in
the final paragraph under the caption "Certain Transactions" on page 9 of
CIGNA's proxy statement dated March 21, 1994 are incorporated by reference.
B. Executive Officers of the Registrant
Reference is made below to CG Life and ICNA, which are indirect
subsidiaries of CIGNA. All officers are elected to serve for a one-year term or
until their successors are elected. Principal occupations and employment during
the past five years are listed.
LAWRENCE P. ENGLISH, 53, President of CIGNA HealthCare since March 1992;
President of CIGNA's Individual Financial Services Division from April 1986
until March 1992; and President of CG Life from January 1991 until February
1992.
H. EDWARD HANWAY, 42, President of CIGNA International beginning March 7, 1994;
President of CIGNA International -- Property & Casualty from February 1989 until
March 7, 1994; Senior Vice President of ICNA since February 1989; and Vice
President of CIGNA with responsibility for Operational Planning and Business
Control from December 1986 until February 1989.
36
<PAGE> 39
GERALD A. ISOM, 55, President of CIGNA Property and Casualty beginning March
1993. Group Vice President of Transamerica Corporation from 1990 until March
1993; and Chief Executive Officer and President of Transamerica Insurance Group
from January 1985 until March 1993. Transamerica Insurance Group is a major
provider of property and casualty insurance products.
JOHN K. LEONARD, 45, President of CIGNA Group Insurance -
Life-Accident-Disability since March 1992; and Senior Vice President of CIGNA
from March 1989 until March 1992 (Vice President from December 1986 until March
1989) with responsibility for Corporate Marketing and Strategy.
DONALD M. LEVINSON, 48, Executive Vice President of CIGNA since March 1988, with
responsibility for Human Resources and Services.
BYRON D. OLIVER, 51, President of CIGNA Retirement & Investment Services since
February 1988.
ARTHUR C. REEDS, III, 49, President of CIGNA Investment Management since March
1992; and Managing Director and Head of Portfolio Management, CIGNA's Investment
Division, from May 1986 until March 1992.
JAMES G. STEWART, 51, Executive Vice President and Chief Financial Officer of
CIGNA since 1983.
WILSON H. TAYLOR, 50, Chairman of CIGNA since November 1989; and Chief Executive
Officer of CIGNA since November 1988 and President of CIGNA since May 1988.
GEORGE R. TRUMBULL, 49, President of CIGNA Individual Insurance since March
1992; Executive Vice President of CIGNA from January 1988 until April 1992;
President of CG Life since February 1992; and President of CIGNA's Investment
Division from July 1988 until March 1992.
THOMAS J. WAGNER, 54, Executive Vice President and General Counsel of CIGNA
since January 1992; Corporate Secretary of CIGNA from January 1988 until April
1992; and Senior Vice President of CIGNA from January 1988 until January 1992.
C. Compliance with Section 16(a) of the Securities Exchange Act
The information under the caption "Compliance with Section 16(a) of the
Securities Exchange Act" on page 18 of CIGNA's proxy statement dated March 21,
1994 is incorporated by reference.
Item 11. EXECUTIVE COMPENSATION
The information under the captions "Executive Compensation" on pages 11
through 14 and "Compensation of Directors" on pages 8 and 9 of CIGNA's proxy
statement dated March 21, 1994 is incorporated by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the captions "Ownership of CIGNA Corporation Common
Stock by Directors and Executive Officers" on pages 2 and 3 and "Ownership of
CIGNA Corporation Common Stock by Certain Beneficial Owners" on page 4 of
CIGNA's proxy statement dated March 21, 1994, relating to security ownership of
certain beneficial owners and management, is incorporated by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Certain Transactions" on page 9 of
CIGNA's proxy statement dated March 21, 1994 is incorporated by reference.
37
<PAGE> 40
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. (1) The following financial statements have been incorporated by
reference from the pages indicated below of CIGNA's 1993 Annual
Report:
Consolidated Statements of Income and Retained Earnings for the
years ended December 31, 1993, 1992 and 1991--page 30.
Consolidated Balance Sheets as of December 31, 1993 and 1992--page
31.
Consolidated Statements of Cash Flows for the years ended December
31, 1993, 1992 and 1991--page 32.
Notes to Financial Statements--pages 33 through 49.
Report of Independent Accountants, Price Waterhouse--page 50.
(2) The financial statement schedules are listed in the Index to
Financial Statement Schedules on page FS-1.
(3) The exhibits are listed in the Index to Exhibits beginning on page
E-1.
B. During the last quarter of the fiscal year ended December 31, 1993, the
registrant filed (1) a Report on Form 8-K dated December 21, 1993 regarding
legal proceedings; (2) a Report on Form 8-K dated December 14, 1993 restating
the registrant's 1992 Form 10-K financial information to reflect the effects of
implementing SFAS 113; (3) a Report on Form 8-K dated November 19, 1993
regarding a revised rating by Standard & Poor's; and (4) a Report on Form 8-K
dated November 1, 1993 containing a copy of a press release reporting its third
quarter 1993 results.
38
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed by its
undersigned duly authorized officer, on its behalf and in the capacity
indicated.
Date: March 25, 1994
<TABLE>
<S> <C>
CIGNA Corporation
By:/s/ James G. Stewart
James G. Stewart
Executive Vice President and
Chief Financial Officer
(PRINCIPAL FINANCIAL OFFICER)
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 25, 1994.
<TABLE>
<S> <C>
PRINCIPAL EXECUTIVE OFFICER: DIRECTORS:*
Robert P. Bauman
Evelyn Berezin
Wilson H. Taylor* Robert H. Campbell
Chairman, Chief Executive Officer Alfred C. DeCrane, Jr.
and a Director James F. English, Jr.
Frank S. Jones
Robert D. Kilpatrick
Gerald D. Laubach
Marilyn W. Lewis
Paul F. Oreffice
Charles R. Shoemate
PRINCIPAL ACCOUNTING OFFICER: Louis W. Sullivan, M.D.
Hicks B. Waldron
Ezra K. Zilkha
/s/ Gary A. Swords
Gary A. Swords
Vice President and Chief Accounting Officer
*By:/s/ Thomas J. Wagner
Thomas J. Wagner
Attorney-in-Fact
</TABLE>
39
<PAGE> 42
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 43
CIGNA CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
Report of Independent Accountants on Financial Statement
Schedules......................................................... FS-2
SCHEDULES
I Summary of Investments--Other Than Investments in Related
Parties as of December 31, 1993.......................... FS-3
III Condensed Financial Information of CIGNA Corporation
(Registrant)............................................. FS-4
V Supplementary Insurance Information........................ FS-8
VI Reinsurance................................................ FS-10
VIII Valuation and Qualifying Accounts and Reserves............. FS-11
IX Short-term borrowings...................................... FS-12
X Supplemental Information Concerning Property-Casualty
Insurance Operations..................................... FS-13
</TABLE>
Schedules other than those listed above are omitted because they are not
required or are not applicable, or the required information is shown in the
financial statements or notes thereto, which are incorporated by reference from
CIGNA's 1993 Annual Report.
FS-1
<PAGE> 44
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of CIGNA Corporation
Our audits of the consolidated financial statements referred to in our
report dated February 14, 1994 appearing on page 50 of the 1993 Annual Report to
Shareholders of CIGNA Corporation (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedules listed in the index
on page FS-1 of this Form 10-K. In our opinion, these Financial Statement
Schedules present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
The Company implemented certain new accounting pronouncements as discussed
in Note 1 to the consolidated financial statements.
/S/ PRICE WATERHOUSE
Philadelphia, Pennsylvania
February 14, 1994
FS-2
<PAGE> 45
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE I
SUMMARY OF INVESTMENTS-- OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1993
(IN MILLIONS)
<TABLE>
<CAPTION>
AMOUNT AT WHICH
SHOWN IN THE
FAIR CONSOLIDATED
TYPE OF INVESTMENT COST VALUE BALANCE SHEET
- --------------------------------------------------------- ------- ------- ---------------
<S> <C> <C> <C>
Fixed maturities
Bonds:
United States government and government agencies and
authorities....................................... $ 1,480 $ 1,688 $ 1,688
States, municipalities and political subdivisions... 4,296 4,787 4,772
Foreign governments................................. 1,665 1,767 1,766
Public utilities.................................... 1,378 1,478 1,451
Convertibles and bonds with warrants attached....... 31 35 33
All other corporate bonds........................... 21,100 23,381 21,994
Redeemable preferred stocks............................ 43 51 51
------- ------- ---------------
Total fixed maturities............................ 29,993 33,187 31,755(1)
------- ------- ---------------
Equity securities
Common stocks:
Industrial, miscellaneous and all other............. 1,200 1,406 1,406
Banks, trust and insurance companies................ 168 178 178
Public utilities.................................... 160 171 171
Non-redeemable preferred stocks........................ 98 94 94
------- ------- ---------------
Total equity securities........................... 1,626 1,849 1,849
------- ------- ---------------
Total fixed maturities and equity securities...... 31,619 $35,036 33,604
-------
-------
Mortgage loans on real estate............................ 10,021 10,021
Policy loans............................................. 3,663 3,663
Real estate investments (including $929 million of real
estate acquired in satisfaction of debt)............... 1,780 1,780
Other long-term investments.............................. 303 303
Short-term investments................................... 1,357 1,357
------- ---------------
Total investments................................. $48,743 $50,728
------- ---------------
------- ---------------
</TABLE>
- ---------------
(1) Amount reflects an increase of approximately $1.6 billion related to the
adoption of SFAS No. 115. See Note 1 of Notes to Financial Statements on
page 33 of CIGNA's 1993 Annual Report.
FS-3
<PAGE> 46
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION
(REGISTRANT)
STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER
31,
-----------------------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Intercompany income...................................... $ 3 $ 2 $ 3
Other revenue............................................ -- 4 --
----- ----- -----
Total revenues......................................... 3 6 3
----- ----- -----
Operating expenses:
Interest............................................... 105 90 88
Intercompany interest.................................. 14 18 23
Other.................................................. 1 3 5
----- ----- -----
Total operating expenses............................ 120 111 116
----- ----- -----
Loss before income taxes................................. (117) (105) (113)
Income tax benefit....................................... (33) (17) (15)
----- ----- -----
Loss of parent company................................... (84) (88) (98)
Equity in income of subsidiaries before extraordinary
item and cumulative effect of accounting changes....... 318 425 551
----- ----- -----
Income before extraordinary item and cumulative effect of
accounting changes..................................... 234 337 453
Loss from early extinguishment of subsidiary debt, net of
taxes.................................................. -- -- (4)
Cumulative effect of accounting changes for
postemployment and postretirement benefits other than
pensions, net of taxes................................. -- (530) --
Cumulative effect of accounting change for income
taxes.................................................. -- 504 --
----- ----- -----
Net income............................................... $ 234 $ 311 $ 449
----- ----- -----
----- ----- -----
</TABLE>
See Notes to Condensed Financial Statements on FS-7.
FS-4
<PAGE> 47
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION
(REGISTRANT)
BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1993 1992
------ ------
<S> <C> <C>
Assets:
Cash and cash equivalents........................................... $ 1 $ 7
Investments in subsidiaries......................................... 8,964 7,581
Goodwill............................................................ 124 207
Other assets........................................................ 115 88
------ ------
Total............................................................ $9,204 $7,883
------ ------
------ ------
Liabilities:
Intercompany........................................................ $ 486 $ 449
Short-term debt..................................................... 348 389
Long-term debt...................................................... 1,100 816
Other liabilities................................................... 695 485
------ ------
Total liabilities................................................ 2,629 2,139
------ ------
Shareholders' Equity:
Common stock (shares issued, 83 and 82)............................. 83 82
Additional paid-in capital.......................................... 2,222 2,206
Net unrealized appreciation -- fixed maturities..................... 961 12
Net unrealized appreciation -- equity securities.................... 211 325
Net translation of foreign currencies............................... (74) (46)
Retained earnings................................................... 3,717 3,702
Less treasury stock, at cost........................................ (545) (537)
------ ------
Total shareholders' equity....................................... 6,575 5,744
------ ------
Total............................................................ $9,204 $7,883
------ ------
------ ------
</TABLE>
See Notes to Condensed Financial Statements on FS-7.
FS-5
<PAGE> 48
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION
(REGISTRANT)
STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Income from continuing operations.................................. $ 234 $ 337 $ 453
Adjustments to reconcile income from continuing operations to net
cash provided by (used in) operating activities:
Equity in income of subsidiaries.............................. (318) (425) (551)
Dividends received from subsidiaries.......................... 308 322 293
Accounts payable, accrued expenses, other liabilities and
income taxes................................................. 210 38 19
Other, net.................................................... (22) 10 7
----- ----- -----
Net cash provided by operating activities................... 412 282 221
----- ----- -----
Cash Flows from Investing Activities:
Capital contributions to subsidiaries.............................. (480) (79) (145)
Proceeds from sale of subsidiaries................................. -- 4 88
Other, net......................................................... 1 -- (6)
----- ----- -----
Net cash used in investing activities....................... (479) (75) (63)
----- ----- -----
Cash Flows from Financing Activities:
Change in intercompany debt........................................ 37 (61) 159
Net change in commercial paper..................................... (48) 92 (281)
Issuance of long-term debt......................................... 327 111 219
Repayment of debt.................................................. (36) (124) (38)
Dividends paid..................................................... (219) (218) (217)
----- ----- -----
Net cash provided by (used in) financing activities......... 61 (200) (158)
----- ----- -----
Net (decrease) increase in cash and cash equivalents............... (6) 7 --
Cash and cash equivalents, beginning of year....................... 7 -- --
----- ----- -----
Cash and cash equivalents, end of year............................. $ 1 $ 7 $ --
----- ----- -----
----- ----- -----
</TABLE>
See Notes to Condensed Financial Statements on FS-7.
FS-6
<PAGE> 49
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE III
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 in the Annual Report.
Note 1-- As of December 31, 1993, CIGNA implemented Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The effect of implementing
SFAS No. 115 resulted in an increase in net assets and shareholders'
equity of approximately $900 million resulting from the classification
of certain fixed maturities previously classified as held to maturity
(carried at amortized cost) to available for sale (carried at fair
value).
In the fourth quarter of 1992, CIGNA implemented SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions"; No. 109, "Accounting for Income Taxes"; and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." These accounting
changes were implemented as of January 1, 1992 through cumulative
effect adjustments. Prior year financial statements were not restated.
The cumulative effect of implementing these accounting standards as of
January 1, 1992 resulted in a non-cash after-tax charge to net income
of $26 million. In addition, the implementation of these accounting
standards decreased 1992 net income by $5 million.
Note 2-- Long-term debt, net of current maturities, consists of CIGNA's 7.4%
Notes, due 2003; 7.65% Notes, due 2023; 8% Notes, due 1996; 8.2%
Convertible Subordinated Debentures, due 2010; 8 1/4% Notes, due 2007;
8.3% Notes due 2023; 8 3/4% Notes, due 2001; and Medium-term Notes
with interest rates ranging from 5 3/4% to 10%, and original maturity
dates from approximately two to ten years.
Maturities of long-term debt for each of the next five years are as
follows: 1994--$43 million; 1995--$2 million; 1996--$157 million;
1997--$39 million; 1998--$82 million.
In 1993, CIGNA issued $100 million of unsecured 7.4% Notes due in
2003; $100 million of unsecured 7.65% Notes due in 2023; $100 million
of unsecured 8.3% Notes due in 2023 and $27 million of medium-term
notes. In 1992, CIGNA issued $100 million of unsecured 8 1/4% Notes
due in 2007 and $11 million of medium-term notes.
As of December 31, 1993, CIGNA had approximately $950 million
remaining under effective shelf registration statements filed with the
Securities and Exchange Commission that may be issued as debt and
equity securities, depending upon market conditions and CIGNA's
capital requirements. In January 1994, CIGNA issued $100 million of
unsecured 6 3/8% Notes due in 2006 under one of the shelf registration
statements.
Interest paid on short-and long-term debt amounted to $95 million, $88
million and $84 million, for 1993, 1992 and 1991, respectively.
Note 3-- CIGNA Corporation files a consolidated U.S. federal income tax return
with its domestic subsidiaries. Net income taxes paid in connection
with the consolidated return were $75 million, $287 million and
$122 million during 1993, 1992 and 1991, respectively.
FS-7
<PAGE> 50
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE V
SUPPLEMENTARY INSURANCE INFORMATION
(IN MILLIONS)
<TABLE>
<CAPTION>
DEFERRED FUTURE POLICY UNPAID
POLICY BENEFITS AND CLAIMS
ACQUISITION CONTRACTHOLDER AND CLAIM
SEGMENT COSTS DEPOSIT FUNDS EXPENSES
- -------------------------------------------------- ----------- -------------- ---------
<S> <C> <C> <C>
Year Ended December 31, 1993:
Property and Casualty:
Domestic..................................... $ 269 $ -- $13,107
International................................ 167 1,242 2,270
Other, primarily Reinsurance................. 10 129 2,370
----------- -------------- ---------
Total Property and Casualty................ 446 1,371 17,747
Employee Life and Health Benefits............... 28 3,833 2,168
Employee Retirement and Savings Benefits........ 62 20,404 --
Individual Financial Services................... 549 7,699 200
All Other....................................... -- 1,956 29
----------- -------------- ---------
Total...................................... $ 1,085 $ 35,263 $20,144
----------- -------------- ---------
----------- -------------- ---------
Year Ended December 31, 1992:
Property and Casualty:
Domestic..................................... $ 283 $ -- $12,559
International................................ 178 809 2,309
Other, primarily Reinsurance................. 21 120 2,684
----------- -------------- ---------
Total Property and Casualty................ 482 929 17,552
Employee Life and Health Benefits............... 27 3,583 1,668
Employee Retirement and Savings Benefits........ 53 19,936 --
Individual Financial Services................... 499 5,607 157
All Other....................................... -- 1,923 35
----------- -------------- ---------
Total...................................... $ 1,061 $ 31,978 $19,412
----------- -------------- ---------
----------- -------------- ---------
Year Ended December 31, 1991:
Property and Casualty:
Domestic..................................... $ 339 $ -- $12,329
International................................ 174 463 2,573
Other, primarily Reinsurance................. 21 85 1,910
----------- -------------- ---------
Total Property and Casualty................ 534 548 16,812
Employee Life and Health Benefits............... 20 3,446 1,699
Employee Retirement and Savings Benefits........ 47 19,561 --
Individual Financial Services................... 455 4,696 161
All Other....................................... -- 1,881 52
----------- -------------- ---------
Total...................................... $ 1,056 $ 30,132 $18,724
----------- -------------- ---------
----------- -------------- ---------
</TABLE>
- ------------
(1) Amounts presented are shown net of the effects of reinsurance.
(2) The allocation of net investment income is based upon the investment year
method, the identification of certain portfolios with specific segments, or
a combination of both.
FS-8
<PAGE> 51
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE V
SUPPLEMENTARY INSURANCE INFORMATION
(IN MILLIONS)
<TABLE>
<CAPTION>
BENEFITS,
PREMIUMS NET LOSSES AND
UNEARNED AND INVESTMENT SETTLEMENT
SEGMENT PREMIUMS FEES(1) INCOME(2) EXPENSES(1)
- -------------------------------------------------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1993:
Property and Casualty:
Domestic..................................... $1,403 $ 2,528 $ 486 $ 3,017
International................................ 965 2,071 186 1,446
Other, primarily Reinsurance................. 112 537 81 570
-------- -------- ----------- -----------
Total Property and Casualty................ 2,480 5,136 753 5,033
Employee Life and Health Benefits............... 188 7,438 503 5,543
Employee Retirement and Savings Benefits........ -- 296 1,846 1,721
Individual Financial Services................... 35 814 583 921
All Other....................................... 8 28 217 201
-------- -------- ----------- -----------
Total...................................... $2,711 $13,712 $ 3,902 $13,419
-------- -------- ----------- -----------
-------- -------- ----------- -----------
Year Ended December 31, 1992:
Property and Casualty:
Domestic..................................... $1,562 $ 3,128 $ 556 $ 3,188
International................................ 747 2,031 185 1,474
Other, primarily Reinsurance................. 161 601 101 920
-------- -------- ----------- -----------
Total Property and Casualty................ 2,470 5,760 842 5,582
Employee Life and Health Benefits............... 64 7,174 504 5,553
Employee Retirement and Savings Benefits........ -- 248 1,893 1,738
Individual Financial Services................... 51 710 457 775
All Other....................................... 9 32 218 209
-------- -------- ----------- -----------
Total...................................... $2,594 $13,924 $ 3,914 $13,857
-------- -------- ----------- -----------
-------- -------- ----------- -----------
Year Ended December 31, 1991:
Property and Casualty:
Domestic..................................... $1,898 $ 3,533 $ 593 $ 3,309
International................................ 722 1,965 195 1,450
Other, primarily Reinsurance................. 180 616 110 528
-------- -------- ----------- -----------
Total Property and Casualty................ 2,800 6,114 898 5,287
Employee Life and Health Benefits............... 63 7,137 488 5,724
Employee Retirement and Savings Benefits........ -- 300 1,879 1,783
Individual Financial Services................... 38 699 380 699
All Other....................................... 9 45 215 219
-------- -------- ----------- -----------
Total...................................... $2,910 $14,295 $ 3,860 $13,712
-------- -------- ----------- -----------
-------- -------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
POLICY OTHER
ACQUISITION OPERATING PREMIUMS
SEGMENT EXPENSES EXPENSES WRITTEN
- -------------------------------------------------- ----------- --------- --------
<S> <C> <C> <C>
Year Ended December 31, 1993:
Property and Casualty:
Domestic..................................... $ 524 $ 619 $2,388
International................................ 465 448 1,334
Other, primarily Reinsurance................. 124 77 507
----------- --------- --------
Total Property and Casualty................ 1,113 1,144 4,229
Employee Life and Health Benefits............... 13 1,985 --
Employee Retirement and Savings Benefits........ 14 153 --
Individual Financial Services................... 68 294 --
All Other....................................... 2 32 28
----------- --------- --------
Total...................................... $ 1,210 $ 3,608 $4,257
----------- --------- --------
----------- --------- --------
Year Ended December 31, 1992:
Property and Casualty:
Domestic..................................... $ 567 $ 517 $2,858
International................................ 491 391 1,377
Other, primarily Reinsurance................. 131 (75) 582
----------- --------- --------
Total Property and Casualty................ 1,189 833 4,817
Employee Life and Health Benefits............... 15 1,938 --
Employee Retirement and Savings Benefits........ 12 142 --
Individual Financial Services................... 61 306 --
All Other....................................... 3 47 32
----------- --------- --------
Total...................................... $ 1,280 $ 3,266 $4,849
----------- --------- --------
----------- --------- --------
Year Ended December 31, 1991:
Property and Casualty:
Domestic..................................... $ 538 $ 540 $3,384
International................................ 488 339 1,456
Other, primarily Reinsurance................. 146 74 622
----------- --------- --------
Total Property and Casualty................ 1,172 953 5,462
Employee Life and Health Benefits............... 18 1,759 --
Employee Retirement and Savings Benefits........ 10 144 --
Individual Financial Services................... 65 259 --
All Other....................................... 3 71 34
----------- --------- --------
Total...................................... $ 1,268 $ 3,186 $5,496
----------- --------- --------
----------- --------- --------
</TABLE>
- ------------
(1) Amounts presented are shown net of the effects of reinsurance.
(2) The allocation of net investment income is based upon the investment year
method, the identification of certain portfolios with specific segments, or
a combination of both.
FS-9
<PAGE> 52
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE VI
REINSURANCE
(IN MILLIONS)
<TABLE>
<CAPTION>
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
GROSS OTHER FROM OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
-------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Life insurance in force............... $395,042 $26,268 $234,892 $603,666 38.9%
-------- --------- ---------- -------- -----
-------- --------- ---------- -------- -----
Premiums and fees:
Life insurance and annuities....... $ 2,378 $ 167 $ 893 $ 3,104 28.8%
Accident and health insurance...... 5,970 228 835 6,577 12.7
Property and casualty insurance.... 4,780 1,801 1,052 4,031 26.1
-------- --------- ---------- --------
Total......................... $ 13,128 $ 2,196 $ 2,780 $ 13,712 20.3%
-------- --------- ---------- -------- -----
-------- --------- ---------- -------- -----
Year Ended December 31, 1992:
Life insurance in force............... $310,592 $25,933 $263,726 $548,385 48.1%
-------- --------- ---------- -------- -----
-------- --------- ---------- -------- -----
Premiums and fees:
Life insurance and annuities....... $ 1,697 $ 81 $ 926 $ 2,542 36.4%
Accident and health insurance...... 5,920 236 901 6,585 13.7
Property and casualty insurance.... 5,878 2,258 1,177 4,797 24.5
-------- --------- ---------- --------
Total......................... $ 13,495 $ 2,575 $ 3,004 $ 13,924 21.6%
-------- --------- ---------- -------- -----
-------- --------- ---------- -------- -----
Year Ended December 31, 1991:
Life insurance in force............... $251,183 $20,035 $257,573 $488,721 52.7%
-------- --------- ---------- -------- -----
-------- --------- ---------- -------- -----
Premiums and fees:
Life insurance and annuities....... $ 1,604 $ 134 $ 1,014 $ 2,484 40.8%
Accident and health insurance...... 6,233 250 552 6,535 8.5
Property and casualty insurance.... 6,109 2,315 1,482 5,276 28.1
-------- --------- ---------- --------
Total......................... $ 13,946 $ 2,699 $ 3,048 $ 14,295 21.3%
-------- --------- ---------- -------- -----
-------- --------- ---------- -------- -----
</TABLE>
FS-10
<PAGE> 53
CIGNA CORPORATION
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN MILLIONS)
<TABLE>
<CAPTION>
CHARGED CHARGED
(CREDITED) (CREDITED)
BALANCE AT TO TO OTHER OTHER BALANCE
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS AT END
DESCRIPTION OF PERIOD EXPENSES --DESCRIBE(1) --DESCRIBE(2) OF PERIOD
- -------------------------------------- ---------- --------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
1993:
INVESTMENT ASSET VALUATION RESERVES:
Fixed maturities.................... $ 29 $ (10) $ (8) $ -- $ 11
Mortgage loans...................... 184 62 48 (78) 216
Real estate......................... 79 8 21 (10) 98
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Premiums, accounts and notes
receivable........................ 90 49 -- (19) 120
Reinsurance recoverables............ 381 28 -- (4) 405
DEFERRED TAX ASSET VALUATION
ALLOWANCE........................... 82 (29) -- -- 53
1992:
INVESTMENT ASSET VALUATION RESERVES:
Fixed maturities.................... $ 28 $ 1 $ -- $ -- $ 29
Mortgage loans...................... 170 32 51 (69) 184
Real estate......................... 45 8 29 (3) 79
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Premiums, accounts and notes
receivable........................ 104 17 -- (31) 90
Reinsurance recoverables............ 311 89 -- (19) 381
DEFERRED TAX ASSET VALUATION
ALLOWANCE(3)........................ 38 44 -- -- 82
1991:
INVESTMENT ASSET VALUATION RESERVES:
Fixed maturities.................... $ -- $ 15 $ 13 $ -- $ 28
Mortgage loans...................... 85 46 97 (58) 170
Real estate......................... 20 18 7 -- 45
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Premiums, accounts and notes
receivable........................ 86 50 -- (32) 104
Reinsurance recoverables............ 311 28 -- (28) 311
</TABLE>
- ---------------
(1) Change in valuation reserves attributable to policyholder contracts.
(2) Reflects transfer of reserves to other investment asset categories as well
as charge-offs upon sales, repayments and other.
(3) The Company adopted SFAS No. 109 effective January 1, 1992.
FS-11
<PAGE> 54
CIGNA CORPORATION
SCHEDULE IX
SHORT-TERM BORROWINGS
(IN MILLIONS)
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
AMOUNT AMOUNT AVERAGE
WEIGHTED OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AGGREGATE BALANCE AT AVERAGE DURING DURING DURING THE
SHORT-TERM BORROWINGS END OF PERIOD INTEREST RATE THE PERIOD THE PERIOD(1) PERIOD(2)
- ------------------------ ------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1993:
Commercial paper........ $ 304 3.3% $ 419 $ 340 3.1%
Medium-term notes....... 44 9.1% 57 46 8.3%
Other................... 3 8.0% 50 33 12.0%
1992:
Commercial paper........ $ 352 3.4% $ 459 $ 350 3.6%
Medium-term notes....... 37 8.7% 98 75 8.8%
Other................... 86 11.4% 93 22 11.2%
1991:
Commercial paper........ $ 260 4.6% $ 489 $ 350 5.9%
Medium-term notes....... 124 8.3% 142 97 7.7%
Other................... 1 10.0% 17 6 10.0%
</TABLE>
- ---------------
(1) Method of computation -- the sum of the daily amount outstanding for each
day divided by the number of days in the year.
(2) Method of computation -- the sum of the weighted average rate for each month
times the sum of the daily amount outstanding during the month, divided by
the sum of the daily amount outstanding during the year.
FS-12
<PAGE> 55
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE X
SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY-CASUALTY INSURANCE OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------------------------------------------------------------------
RESERVES FOR
DEFERRED UNPAID CLAIMS DISCOUNT,
AFFILIATION POLICY AND CLAIM IF ANY,
WITH ACQUISITION ADJUSTMENT DEDUCTED IN UNEARNED
REGISTRANT COSTS EXPENSES COLUMN C(1) PREMIUMS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1993:
Consolidated property-casualty
entities............................. $ 420 $17,654 $22 $1,980
Year Ended December 31, 1992:
Consolidated property-casualty
entities............................. $ 442 $17,478 $20 $2,139
Year Ended December 31, 1991:
Consolidated property-casualty
entities............................. $ 493 $16,750 $21 $2,535
</TABLE>
- ---------------
(1) Discounts were computed using an annual interest rate of 9%.
(2) Amounts presented are shown net of the effects of reinsurance.
FS-13
<PAGE> 56
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE X
SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY-CASUALTY INSURANCE OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
COLUMN A COLUMN F COLUMN G COLUMN H
- ----------------------------------------------------------------------------------------------
CLAIMS AND CLAIM
ADJUSTMENT EXPENSES
AFFILIATION NET INCURRED RELATED TO:
WITH EARNED INVESTMENT CURRENT PRIOR
REGISTRANT PREMIUMS(2) INCOME YEAR(2) YEAR(2)
- ----------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
Year Ended December 31, 1993:
Consolidated property-casualty
entities............................. $ 4,358 $667 $3,464 $789
Year Ended December 31, 1992:
Consolidated property-casualty
entities............................. $ 5,132 $780 $4,448 $656
Year Ended December 31, 1991:
Consolidated property-casualty
entities............................. $ 5,619 $845 $4,587 $341
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
COLUMN A COLUMN I COLUMN J COLUMN K
- ----------------------------------------------------------------------------------------
AMORTIZATION
OF DEFERRED PAID CLAIMS
AFFILIATION POLICY AND CLAIM
WITH ACQUI- ADJUSTMENT PREMIUMS
REGISTRANT SITION COSTS EXPENSES(2) WRITTEN
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year Ended December 31, 1993:
Consolidated property-casualty
entities............................. $1,020 $ 4,170 $4,229
Year Ended December 31, 1992:
Consolidated property-casualty
entities............................. $1,103 $ 4,825 $4,817
Year Ended December 31, 1991:
Consolidated property-casualty
entities............................. $1,080 $ 4,866 $5,462
</TABLE>
- ---------------
(1) Discounts were computed using an annual interest rate of 9%.
(2) Amounts presented are shown net of the effects of reinsurance.
FS-14
<PAGE> 57
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
- ------ --------------------------------------- ---------------------------------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation Filed herewith.*
of the registrant as last amended
October 2, 1990
3.2 By-Laws of the registrant as last Filed as Exhibit 4.2 to the
amended and restated December 9, 1991 registrant's Post-Effective Amendment
No. 1 dated December 19, 1991 to Form
S-8 Registration Statement No. 33-44371
and incorporated herein by reference.
4.1 Description of Preferred Stock Purchase Filed as Item 1 and Exhibit 1 to the
Rights, including the Rights Agreement registrant's Form 8-A Registration
dated as of July 23, 1987 between CIGNA Statement dated July 28, 1987, such
Corporation and Morgan Shareholder Exhibit 1 amended by the registrant's
Services Trust Company Amendment No. 1 on Form 8 dated August
11, 1987, and incorporated herein by
reference.
4.2 Amended description of Preferred Stock Filed as Item 1 and Exhibit 2 to the
Purchase Rights, including the First registrant's Amendment No. 2 on Form 8
Amendment to Rights Agreement dated as dated March 27, 1989 and incorporated
of March 22, 1989 between CIGNA herein by reference.
Corporation and Morgan Shareholder
Services Trust Company
Exhibits 10.1 through 10.17 are filed as exhibits pursuant to Item 14(c) of Form 10-K.
10.1 CIGNA Corporation Stock Plan effective Filed herewith.*
as of May 1, 1991
10.2 Amendment No. 1 dated as of July 28, Filed herewith.*
1993 to the CIGNA Corporation Stock
Plan
10.3 Amendment No. 2 dated as of February Filed herewith.
24, 1994 to the CIGNA Corporation Stock
Plan
10.4 CIGNA Corporation Executive Stock Filed herewith.*
Incentive Plan, as Amended and Restated
as of March 23, 1988
10.5 Amendment No. 1 dated as of September Filed herewith.*
28, 1988 to the CIGNA Corporation
Executive Stock Incentive Plan
10.6 Amendment No. 2 dated as of March 27, Filed herewith.*
1991 to the CIGNA Corporation Executive
Stock Incentive Plan
</TABLE>
- ---------------
* Refiled in electronic format.
E-1
<PAGE> 58
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
- ------ --------------------------------------- ---------------------------------------
<C> <S> <C>
10.7 Description of the CIGNA Corporation Filed herewith.*
Key Management Annual Incentive Bonus
Plan
10.8 CIGNA Corporation Strategic Performance Filed herewith.*
Plan, as amended and restated March 25,
1992
10.9 Description of CIGNA Corporation Filed herewith.*
Financial Services Program
10.10 Deferred Compensation Plan of CIGNA Filed herewith.*
Corporation and Participating
Subsidiaries, as amended and restated
as of January 1, 1990
10.11 Deferred Compensation Plan for Filed herewith.*
Directors of CIGNA Corporation, as
amended and restated as of May 1, 1991
10.12 Retirement and Consulting Plan for Filed herewith.*
Directors of CIGNA Corporation, as
amended and restated as of May 29, 1991
10.13 CIGNA Corporation Supplemental Filed herewith.*
Executive Retirement Plan Agreement
dated as of March 23, 1989 between R.
D. Kilpatrick and the registrant
10.14 Agreement dated February 9, 1993 Filed herewith.
between Gerald A. Isom and the
registrant
10.15 Restricted Stock Plan for Non-Employee Filed herewith.*
Directors for CIGNA Corporation
effective as of September 30, 1989
10.16 Description of First Amendment to the Filed herewith.*
Restricted Stock Plan for Non-Employee
Directors of CIGNA Corporation
10.17 Description of Stock Compensation Plan Filed herewith.
for Non-Employee Directors of CIGNA
Corporation, as amended
</TABLE>
- ---------------
* Refiled in electronic format.
E-2
<PAGE> 59
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
- ------ --------------------------------------- ---------------------------------------
<C> <S> <C>
11 Computation of Primary and Fully Filed herewith.
Diluted Earnings Per Share
12 Computation of Ratios of Earnings to Filed herewith.
Fixed Charges and to Combined Fixed
Charges and Preferred Stock Dividends
13 Portions of registrant's 1993 Annual Filed herewith.
Report to Shareholders
21 Subsidiaries of the Registrant Filed herewith.
23 Consent of Independent Accountants Filed herewith.
24.1 Powers of Attorney Filed herewith.
24.2 Certified Resolutions Filed herewith.
28.1 Reconciliation of Schedule P to Total Filed herewith.
Statutory Reserves
28.2 (P) Schedule P to the Annual Statement Filed herewith in paper format under
for the Year 1993 of ICNA and its cover of Form SE.
Affiliates
</TABLE>
The registrant will furnish to the Commission upon request a copy of any of
the registrant's agreements with respect to its long-term debt.
Shareholders may obtain copies of exhibits by writing to CIGNA Corporation,
Shareholder Services Department, Two Liberty Place, 1601 Chestnut Street, P.O.
Box 7716, Philadelphia, Pennsylvania 19192-2378.
- ---------------
* Refiled in electronic format.
E-3
<PAGE> 1
RESTATED CERTIFICATE OF INCORPORATION
OF
CIGNA CORPORATION
*****
This Restated Certificate of Incorporation of CIGNA Corporation was duly
approved by the Board of Directors of the Corporation and only restates and
integrates but does not further amend the provisions of the Corporation's
Certificate of Incorporation as theretofore amended or supplemented; and there
is no discrepancy between these amended and supplemented provisions and the
provisions of the Restated Certificate of Incorporation set forth below except
as permitted by Section 245 of the General Corporation Law. The Corporation
was incorporated under the name North American General Corporation. The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on November 3, 1981.
First: The name of the Corporation is CIGNA Corporation.
Second: The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street in the City of Wilmington, County of New
Castle, Delaware 19801. The name of its registered agent at such address is
The Corporation Trust Company.
Third: The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
Fourth: The total number of shares of all classes of capital stock which
the Corporation shall have the authority to issue is 225,000,000 shares divided
into two classes as follows: 200,000,000 shares of Common Stock (the "Common
Stock") of the par value of $1 per share and 25,000,000 shares of Preferred
Stock (the "Preferred Stock") of the par value of $1 per share.
a. PREFERRED STOCK
The Board of Directors is expressly authorized to provide for the
issue of all or any shares of the Preferred Stock, in one or more series, and
to fix for each such series such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating,
optional or other special rights and such qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions adopted by the Board
<PAGE> 2
of Directors providing for the issue of such series and as may be permitted by
the General Corporation Law of the State of Delaware, including, without
limitation, the authority to provide that any such series may be (i) subject to
redemption at such time or times and at such price or prices; (ii) entitled to
receive dividends (which may be cumulative or non-cumulative) at such rates, on
such conditions, and at such times, and payable in preference to, or in such
relation to, the dividends payable on any other class or classes or any other
series; (iii) entitled to such rights upon the dissolution of, or upon any
distribution of the assets of, the Corporation; or (iv) convertible into, or
exchangeable for, shares of any other class or classes of stock, or of any
other series of the same or any other class or classes of stock, of the
Corporation at such price or prices or at such rates of exchange and with such
adjustments; all as may be stated in such resolution or resolutions.
1. Junior Participating Preferred Stock, Series D.
Section 1. Designation and Amount. The shares of such series which shall
be designated as "Junior Participating Preferred Stock, Series D," $1.00 par
value, and the number of shares constituting such series shall be 2,000,000.
Such number of shares may be increased or decreased by resolution of the Board
of Directors; provided, that no decrease shall reduce the number of shares of
Junior Preferred Stock, Series D to a number less than that of the shares then
outstanding plus the number of shares issuable upon exercise of outstanding
rights, options or warrants or upon conversion of outstanding securities issued
by the Corporation.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Junior Participating Preferred Stock, Series D, with respect to dividends, the
holders of shares of Junior Participating Preferred Stock, Series D, in
preference to the holders of shares of Common Stock, par value $1.00 per share
(the "Common Stock"), of the Corporation and any other junior stock, shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
the 10th day of January, April, July, and October in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share
or fraction of a share of Junior Participating Preferred Stock, Series D, in an
amount per share (rounded to the nearest cent) equal to the greater of (a)
$10.00, or (b) subject to the provision for adjustment hereinafter set forth,
100 times the aggregate per share amount of all cash dividends, and 100 times
the aggregate per share amount (payable in kind) of all non-cash
- 2 -
<PAGE> 3
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock, since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Junior Participating Preferred Stock, Series D. In the
event the Corporation shall at any time after August 5, 1987 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Junior Participating Preferred
Stock, Series D were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on the
Junior Participating Preferred Stock, Series D, as provided in paragraph (A)
above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share
on the Junior Participating Preferred Stock, Series D, shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Junior Participating Preferred Stock, Series D, from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Junior
Participating Preferred Stock, Series D, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Junior Participating Preferred Stock, Series D,
entitled to receive a quarterly dividend and before such Quarterly Dividend
Payment Date in either of which events such dividends shall begin to accrue and
be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Junior
Participating Preferred Stock, Series D, in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall
- 3 -
<PAGE> 4
be allocated pro rata on a share-by-share basis among all such shares at the
time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Junior Participating Preferred Stock,
Series D, entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the date
fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Junior Participating
Preferred Stock, Series D shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Junior Participating Preferred Stock, Series D, shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Junior Participating Preferred Stock, Series D, were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares
of Junior Participating Preferred Stock, Series D, and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Junior Participating Preferred
Stock, Series D, shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Junior
Participating Preferred Stock, Series D, then outstanding shall have been
declared and paid or set apart for payment. During each default period, all
holders of Preferred Stock (including holders of the Junior Participating
Preferred Stock, Series D) with dividends in arrears in an amount equal to six
(6) quarterly dividends thereon, voting as a class, irrespective of series,
shall have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Junior Participating Preferred Stock, Series D,
- 4 -
<PAGE> 5
may be exercised initially at a special meeting called pursuant to subparagraph
(iii) of this Section 3(C) or at any annual meeting of stockholders, and
thereafter at annual meetings of stockholders, provided that neither such
voting right nor the right of the holders of any other series of Preferred
Stock, if any, to increase, in certain cases, the authorized number of
Directors shall be exercised unless the holders of ten percent (10%) in number
of shares of Preferred Stock outstanding shall be present in person or by
proxy. The absence of a quorum of the holders of Common Stock shall not affect
the exercise by the holders of Preferred Stock of such voting right. At any
meeting at which the holders of Preferred Stock shall exercise such voting
right initially during an existing default period, they shall have the right,
voting as a class, to elect Directors to fill such vacancies, if any, in the
Board of Directors as may then exist up to two (2) Directors or, if such right
is exercised at an annual meeting, to elect two (2) Directors. If the number
which may be so elected at any special meeting does not amount to the required
number, the holders of the Preferred Stock shall have the right to make such
increase in the number of Directors as shall be necessary to permit the
election by them of the required number. After the holders of the Preferred
Stock shall have exercised their right to elect Directors in any default period
and during the continuance of such period, the number of Directors shall not be
increased or decreased except by vote of the holders of Preferred Stock as
herein provided or pursuant to the rights of any equity securities ranking
senior to or pari passu with the Junior Participating Preferred Stock, Series
D.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling
of a special meeting of the holders of Preferred Stock, which meeting shall
thereupon be called by the Chairman, President, a Vice-President or the
Corporate Secretary of the Corporation. Notice of such meeting and of any
annual meeting at which holders of Preferred Stock are entitled to vote
pursuant to this paragraph (C)(iii) shall be given to each holder of record of
Preferred Stock by mailing a copy of such notice to him at his last address as
the same appears on the books of the Corporation. Such meeting shall be called
for a time not earlier than 10 days and not later than 60 days after such order
or request or in default of the calling of such meeting within 60 days after
such order or request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than ten percent
(10%) of the total number of shares of Preferred Stock outstanding.
Notwithstanding the provisions of this paragraph (C)(iii), no such special
meeting shall be called during the period within 60 days immediately preceding
the date fixed for the next annual meeting of the stockholders.
- 5 -
<PAGE> 6
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of Preferred
Stock shall have exercised their right to elect two (2) Directors voting as a
class, after the exercise of which right (x) the Directors so elected by the
holders of Preferred Stock shall continue in office until their successors
shall have been elected by such holders or until the expiration of the default
period, and (y) any vacancy in the Board of Directors may (except as provided
in paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of stock
which elected the Director whose office shall have become vacant. References
in this paragraph (C) to Directors elected by the holders of a particular class
of stock shall include Directors elected by such Directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of
the holders of Preferred Stock as a class to elect Directors shall cease, (y)
the term of any Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as may be
provided for in, or pursuant to, the Restated Certificate of Incorporation or
By-Laws irrespective of any increase made pursuant to the provisions of
paragraph (C)(ii) of this Section 3 (such number being subject, however to
change thereafter in any manner provided by law or in the Restated Certificate
of Incorporation or By-Laws). Any vacancies in the Board of Directors effected
by the provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining Directors, even though less than a
quorum.
(D) Except as set forth herein, holders of Junior Participating Preferred
Stock, Series D, shall have no special voting rights and their consent shall
not be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Junior Participating Preferred Stock, Series D, as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Junior Participating
Preferred Stock, Series D, outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking
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<PAGE> 7
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Junior Participating Preferred Stock, Series D;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Junior Participating
Preferred Stock, Series D, except dividends paid ratably on the Junior
Participating Preferred Stock, Series D, and all such parity stock on
which dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Junior Participating
Preferred Stock, Series D, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation ranking junior (either
as to dividends or upon dissolution, liquidation or winding up) to the
Junior Participating Preferred Stock, Series D; or
(iv) purchase or otherwise acquire for consideration any shares of
Junior Participating Preferred Stock, Series D, or any shares of stock
ranking on a parity with the Junior Participating Preferred Stock, Series
D, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Junior Participating
Preferred Stock, Series D, purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof.
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<PAGE> 8
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Participating Preferred Stock, Series
D, unless, prior thereto, the holders of shares of Junior Participating
Preferred Stock, Series D, shall have received $20,000 per share plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, (the "Series D Liquidation Preference").
Following the payment of the full amount of the Series D Liquidation
Preference, no additional distributions shall be made to the holders of shares
of Junior Participating Preferred Stock, Series D, unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the Series
D Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in
subparagraph C below to reflect such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock) (such number in clause
(ii), the "Adjustment Number"). Following the payment of the full amount of
the Series D Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Junior Participating Preferred Stock, Series D, and
Common Stock, respectively, holders of Junior Participating Preferred stock,
Series D, and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event there are not sufficient assets available to permit
payment in full of the Series D Liquidation Preference and the liquidation
preferences of all other series of Preferred Stock, if any, which rank on a
parity with the Junior Participating Preferred Stock, Series D, then such
remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event
there are not sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be distributed ratably to
the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide
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<PAGE> 9
the outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the Adjustment Number
in effect immediately prior to such event shall be adjusted by multiplying such
Adjustment Number by a fraction the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Junior Participating Preferred Stock, Series D, shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Junior Participating Preferred Stock, Series D,
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that are outstanding immediately prior to such event.
Section 8. Redemption. The shares of Junior Participating Preferred
Stock, Series D, shall not be redeemable.
Section 9. Ranking. The Junior Participating Preferred Stock, Series D,
shall rank junior to all other series of the Corporation's Preferred Stock as
to the payment of dividends and the distribution of assets, unless the terms of
any such series shall provide otherwise.
Section 10. Amendment. The Restated Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences for special rights of the Junior
Participating Preferred Stock, Series D, so as to affect them adversely without
the affirmative vote of the holders of a majority or more of the outstanding
shares of Junior Participating Preferred Stock, Series D, voting separately as
a class.
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<PAGE> 10
Section 11. Fractional Shares. Junior Participating Preferred Stock,
Series D, may be issued in fractions of a share which shall entitle the holder,
in proportion to such holders's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Junior Participating Preferred Stock, Series D.
b. COMMON STOCK
1. Voting Rights. Except as provided by law or this Certificate of
Incorporation, each holder of Common Stock shall have one vote in respect of
each share of stock held by him of record on the books of the Corporation for
the election of directors and on all matters submitted to a vote of
stockholders of the Corporation.
2. Dividends. Subject to the preferential rights of the Preferred
Stock, the holders of shares of Common Stock shall be entitled to receive, when
and if declared by the Board of Directors, out of the assets of the Corporation
which are by law available therefor, dividends payable either in cash, in
property, or in shares of capital stock.
3. Dissolution, Liquidation or Winding Up. In the event of any
dissolution, liquidation or winding up of the affairs of the Corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of shares of Preferred Stock, holders of Common Stock shall be
entitled to receive all of the remaining assets of the Corporation of whatever
kind available for distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively. The Board of
Directors may distribute in kind to the holders of Common Stock such remaining
assets of the Corporation or may sell, transfer or otherwise dispose of all or
any part of such remaining assets to any other corporation, trust or other
entity and receive payment therefor in cash, stock or obligations of such other
corporation, trust or entity, or any combination thereof, and may sell all or
any part of the consideration so received and distribute any balance thereof in
kind to holders of Common Stock. Neither the merger or consolidation of the
Corporation into or with any other corporation, nor the merger of any other
corporation into it, nor any purchase or redemption of shares of stock of the
Corporation of any class, shall be deemed to be a dissolution, liquidation or
winding up of the Corporation for the purpose of this paragraph.
Fifth: The By-Laws of the Corporation may be adopted, amended or repealed
(a) by action of the holders of at least eighty percent (80%) of the voting
power of all outstanding Voting Stock (as defined in Article Tenth) of the
Corporation entitled to vote generally at any annual or special meeting of
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<PAGE> 11
stockholders or (b) by action of the Board of Directors at a regular or special
meeting thereof. Any By-Laws made by the Board of Directors may be amended or
repealed by action of the stockholders by the vote required by (a) above at any
annual or special meeting of stockholders.
Sixth: Elections of directors need not be by written ballot unless the
By-Laws of the Corporation shall otherwise provide.
Seventh: Notwithstanding any provision of the General Corporation Law of
the State of Delaware, no action may be taken by stockholders without a
meeting, without prior notice and without a vote, unless a consent in writing
setting forth the action so taken shall be signed by the holders of all the
outstanding stock who would be entitled to vote thereon.
Eighth: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all of the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
Ninth: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
Tenth: 1. Higher Vote for Certain Business Combinations. In addition to
any affirmative vote of holders of a class or series of capital stock of the
Corporation required by law or this Certificate, a Business Combination (as
hereinafter
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<PAGE> 12
defined) with or upon a proposal by a Related Person (as hereinafter defined)
shall require the affirmative vote of the holders of at least eighty percent
(80%) of the voting power of all outstanding Voting Stock (as hereinafter
defined) of the Corporation, voting together as a single class. Such
affirmative votes shall be required notwithstanding the fact that no vote may
be required, or that a lesser percentage may be specified, by law or the Board.
2. When Higher Vote Is Not Required. The provisions of
this Article shall not be applicable to a particular Business Combination, and
such Business Combination shall require only such affirmative vote as is
required by law and any other provision of this Certificate or the By-Laws of
the Corporation, if all of the conditions specified in any one of the following
Paragraphs (A), (B) or (C) are met:
(A) Approval by Directors. The Business Combination
has been approved by a vote of a majority of all the Continuing Directors (as
hereinafter defined); or
(B) Combination with Subsidiary. The Business
Combination is solely between the Corporation and a subsidiary of the
Corporation and such Business Combination does not have the direct or indirect
effect set forth in Paragraph 3(B)(v) of this Article Tenth; or
(C) Price and Procedural Conditions. The proposed
Business Combination will be consummated within three years after the date the
Related Person became a Related Person (the "Determination Date") and all of
the following conditions have been met:
(i) The aggregate amount of (x) cash and (y)
fair market value (as of the date of the consummation of the Business
Combination) of consideration other than cash, to be received per share of
Common or Preferred Stock of the Corporation in such Business Combination by
holders thereof shall be at least equal to the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Related Person for any shares of such class or series of
stock acquired by it; provided, that if either (a) the highest preferential
amount per share of a series of Preferred Stock to which the holders thereof
would be entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation (regardless of
whether the Business Combination to be consummated constitutes such an event)
or (b) the highest reported sales price per share for any shares of such series
of Preferred Stock on any national securities exchange on which such series is
traded and if not traded on any such exchange, the highest reported closing bid
quotation per share with respect to shares of such series on the National
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<PAGE> 13
Association of Securities Dealers, Inc. Automated Quotation System or on any
system then in use, at any time after the Related Person became a holder of any
shares of Common Stock, is greater than such aggregate amount, holders of such
series of Preferred Stock shall receive an amount for each such share at least
equal to the greater of (a) or (b).
(ii) The consideration to be received by holders
of a particular class or series of outstanding Common or Preferred Stock shall
be in cash or in the same form as the Related Person has previously paid for
shares of such class or series of stock. If the Related Person has paid for
shares of any class or series of stock with varying forms of consideration, the
form of consideration given for such class or series of stock in the Business
Combination shall be either cash or the form used to acquire the largest number
of shares of such class or series of stock previously acquired by it.
(iii) No Extraordinary Event (as hereinafter
defined) occurs after the Determination Date and prior to the consummation of
the Business Combination.
(iv) A proxy or information statement describing
the proposed Business Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) is mailed to public stockholders of the Corporation at least 30
days prior to the consummation of such Business Combination (whether or not
such proxy or information statement is required pursuant to such Act or
subsequent provisions).
3. Certain Definitions. For purposes of this Article
Tenth:
(A) A "person" shall mean any individual, firm,
corporation or other entity, or a group of "persons" acting or agreeing to act
together in the manner set forth in Rule 13d-5 under the Securities Exchange
Act of 1934, as in effect on April 24, 1985.
(B) The term "Business Combination" shall mean any of
the following transactions, when entered into by the Corporation or a
subsidiary of the Corporation with, or upon a proposal by, a Related Person:
(i) the merger or consolidation of the
Corporation or any subsidiary of the Corporation; or
(ii) the sale, lease, exchange, mortgage,
pledge, transfer or other disposition (in one or a series of transactions) of
any assets of the Corporation or any subsidiary of the Corporation having an
aggregate fair market value of $100 million or more; or
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<PAGE> 14
(iii) the issuance or transfer by the
Corporation or any subsidiary of the Corporation (in one or a series of
transactions) of securities of the Corporation or any subsidiary having an
aggregate fair market value of $50 million or more; or
(iv) the adoption of a plan or proposal for the
liquidation or dissolution of the Corporation; or
(v) the reclassification of securities
(including a reverse stock split), recapitalization, consolidation or any other
transaction (whether or not involving a Related Person) which has the direct or
indirect effect of increasing the voting power, whether or not then
exercisable, of a Related Person in any class or series of capital stock of the
Corporation or any subsidiary of the Corporation; or
(vi) any agreement, contract or other
arrangement providing directly or indirectly for any of the foregoing.
(C) The term "Related Person" shall mean any person
(other than the Corporation, a subsidiary of the Corporation or any profit
sharing, employee stock ownership or other employee benefit plan of the
Corporation or of a subsidiary of the Corporation or any trustee of or
fiduciary with respect to any such plan acting in such capacity) that is the
direct or indirect beneficial owner (as defined in Rule 13d-3 and Rule 13d-5
under the Securities Exchange Act of 1934, as in effect on April 24, 1985) of
more than ten percent (10%) of the outstanding Voting Stock of the Corporation,
and any Affiliate or Associate of any such person.
(D) The term "Continuing Director" shall mean any
member of the Board of Directors who is not affiliated with a Related Person
and who was a member of the Board of Directors immediately prior to the time
that the Related Person became a Related Person, and any successor to a
Continuing Director who is not affiliated with the Related Person and is
recommended to succeed a Continuing Director by a majority of Continuing
Directors who are then members of the Board of Directors.
(E) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 under the Securities
Exchange Act of 1934, as in effect on April 24, 1985.
(F) The term "Extraordinary Event" shall mean, as to
any Business Combination and Related Person, any of the following events that
is not approved by a majority of all Continuing Directors:
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<PAGE> 15
(i) any failure to declare and pay at the
regular date therefor any full quarterly dividend (whether or not cumulative)
on outstanding Preferred Stock; or
(ii) any reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock); or
(iii) any failure to increase the annual rate of
dividends paid on the Common Stock as necessary to reflect any reclassification
(including any reverse stock split), recapitalization, reorganization or any
similar transaction that has the effect of reducing the number of outstanding
shares of the Common Stock; or
(iv) the receipt by the Related Person, after
the Determination Date, of a direct or indirect benefit (except proportionately
as a stockholder) from any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages provided by the
Corporation or any subsidiary of the Corporation, whether in anticipation of or
in connection with the Business Combination or otherwise.
(G) A majority of all Continuing Directors shall have
the power to make all determinations with respect to this Article Tenth,
including, without limitation, the transactions that are Business Combinations,
the persons who are Related Persons, the time at which a Related Person became
a Related Person, and the fair market value of any assets, securities or other
property, and any such determinations of such directors shall be conclusive and
binding.
(H) The term "Voting Stock" shall mean all
outstanding shares of the Common or Preferred Stock of the Corporation entitled
to vote generally and each reference to a proportion of Voting Stock shall
refer to shares having such proportion of the number of shares entitled to be
cast.
4. No Effect on Fiduciary Obligations of Related Persons.
Nothing contained in this Article Tenth shall be construed to relieve any
Related Person from any fiduciary obligation imposed by law.
5. Amendment, Repeal, etc. The affirmative vote of the
holders of at least eighty percent (80%) of the voting power of all outstanding
Voting Stock of the Corporation, voting together as a single class, shall be
required in order to amend, repeal or adopt any provision inconsistent with
this Article Tenth.
Eleventh: To the fullest extent permitted by the General
Corporation Law of the State of Delaware as the same exists or
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<PAGE> 16
may hereafter be amended, no director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Any repeal or modification of the preceding sentence shall
not adversely affect any right or protection of a director existing at the time
of such repeal or modification.
IN WITNESS WHEREOF, the Corporation has caused this instrument
to be signed in its name by its Chairman of the Board and Chief Executive
Officer and attested to by its Corporate Secretary this 26th day of September,
1990.
s/ Wilson H. Taylor
--------------------------------
Wilson H. Taylor
Chairman of the Board and
Chief Executive Officer
Attest:
s/Thomas J. Wagner
- -------------------------------
Thomas J. Wagner
Corporate Secretary
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<PAGE> 1
CIGNA CORPORATION
STOCK PLAN
(Effective as of May 1, 1991)
ARTICLE 1
STATEMENT OF PURPOSE
The CIGNA Corporation Stock Plan (the "Plan") is intended to reward and
provide incentives for key employees of CIGNA Corporation and its Subsidiaries
by providing them with an opportunity to acquire an equity interest in CIGNA
Corporation, thereby increasing their personal interest in its continued
success and progress. It also is intended to aid the Company in attracting key
personnel of exceptional ability.
ARTICLE 2
DEFINITIONS
2.1 Defined Terms. For all purposes of this Plan, except as otherwise
expressly provided or defined herein or unless the context otherwise requires,
the terms defined in this Article shall have the following meanings:
"Board of Directors" means either the board of directors of CIGNA
Corporation or any duly authorized committee of that board.
"Change of Control" means:
(i) a corporation, person or group acting in concert as described in
Section 14(d)(2) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), holds or acquires beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act of a number of
preferred or common shares of CIGNA Corporation having voting power which
is either (i) more than 50% of the voting power of the shares which voted
in the election of directors of CIGNA Corporation at the shareholders'
meeting immediately preceding such determination, or (ii) more than 25%
of the voting power of CIGNA Corporation's outstanding common shares; or
(ii) as a result of a merger or consolidation to which CIGNA
Corporation is a party, either (i) CIGNA Corporation is not the surviving
corporation or (ii) Directors of CIGNA Corporation immediately prior to
the merger or consolidation constitute less than a majority of the Board
of Directors of the surviving corporation; or
(iii) a change occurs in the composition of the Board at any time
during any consecutive 24-month period such that the "Continuity
Directors" cease for any reason to constitute a majority of the Board.
For purposes of the preceding sentence "Continuity Directors" shall mean
those members of the Board who either: (i) were directors at the
beginning of such consecutive 24-month period; or (ii) were elected by
or on nomination or recommendation of, at least a majority (consisting of
at least nine directors) of the Board.
"Committee" means the People Resources Committee of the Board of
Directors or any successor committee with responsibility for compensation. The
number of Committee members and their qualifications shall at all times be
sufficient to meet the requirements of Securities and Exchange Commission Rule
16b-3 as in effect from time to time.
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<PAGE> 2
"Common Stock" means the common stock, par value $1 per share, of CIGNA
Corporation.
"Company" means CIGNA Corporation, a Delaware corporation, and/or its
Subsidiaries.
"Deferred Compensation Account" means a separate account established
pursuant to a Deferred Compensation Plan.
"Deferred Compensation Plan" means and refers to a deferred compensation
plan of the Company which has been designated by the Committee as a "Deferred
Compensation Plan" for purposes of this Plan.
"Disability" means permanent and total disability as defined in Section
22(e)(3) of the Internal Revenue Code.
"Early Retirement" means a Termination of Employment, after appropriate
notice to the Company, (i) on or after age 55 and before age 65 with
eligibility for immediate annuity benefits under a qualified pension or
retirement plan of the Company, or (ii) upon such terms and conditions
approved by the Committee or officers of the Company designated by the Board
of Directors or the Committee.
"Eligible Employee" means a salaried officer or other key employee of the
Company who (i) occupies a position with the Company that has been designated
by the Committee as an eligible position for participation in this Plan or
(ii) has been specifically authorized or designated by the Committee to
participate in this Plan.
"Fair Market Value" means the mean between the highest and lowest quoted
selling prices as reported on the Composite Tape (or other successor means of
publishing stock prices) on the date as of which any determination of such
value is or is required to be made, or, if the Composite Tape or such
successor publication is not published on such date, on the next preceding
date of publication. In the absence of such sales, Fair Market Value shall be
determined by the Committee, which shall take into account all relevant facts
and circumstances.
"Incentive Stock Option" means a stock option granted in accordance with
Section 422A of the Internal Revenue Code.
"Participant" means an Eligible Employee to whom any one or more of the
awards authorized in this Plan shall have been granted.
"Payment Date" means the date that payment of an award pursuant to a
Qualifying Incentive Plan, or of a benefit pursuant to a Qualifying
Supplemental Benefit Plan, is made or would have been made but for deferral
pursuant to Section 3.7(b).
"Qualifying Incentive Plan" means any bonus plan or other incentive
compensation plan of the Company, including but not limited to the Company's
Performance Recognition Award Program, pursuant to which awards payable in
cash are or are authorized to be made to employees of the Company.
"Qualifying Supplemental Benefit Plan" means any plan of the Company
pursuant to which benefits which would have been paid under a tax qualified
retirement plan but for legal limitations are payable in cash to eligible
employees of the Company.
"Retirement" means a Termination of Employment, after appropriate notice
to the Company, (i) on or after age 65 with eligibility for immediate annuity
benefits under a qualified pension or
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<PAGE> 3
retirement plan of the Company, or (ii) upon such terms and conditions
approved by the Committee, or officers of the Company designated by the Board
of Directors or the Committee.
"Subsidiary" means any corporation of which more than 50% of the total
combined voting power of all classes of stock entitled to vote, or other
equity interest, is directly or indirectly owned by CIGNA Corporation; or a
partnership, joint venture or other unincorporated entity of which more than a
50% interest in the capital, equity or profits is directly or indirectly owned
by CIGNA Corporation.
"Termination for Cause" means a Termination of Employment initiated by
the Company on account of the conviction of Participant of a felony involving
fraud or dishonesty directed against the Company.
"Termination of Employment" means the termination of the Participant's
active employment relationship with the Company, unless otherwise expressly
provided by the Committee, or the occurrence of a transaction by which the
Participant's employing Company ceases to be a Subsidiary.
"Termination Upon a Change of Control" means a Termination of Employment
upon or within two years after a Change of Control (i) initiated by the
Company or a successor corporation other than pursuant to Termination for
Cause or (ii) initiated by the Participant and pursuant to the Participant's
certification that the Change of Control has rendered him unable to perform
the duties and responsibilities of the position he held immediately prior to
the Change of Control by adverse changes in his authority, compensation,
office location, duties, responsibilities, or title.
2.2 General. Certain terms are defined in other Articles of this Plan.
The terms defined in this Article and elsewhere in this Plan shall include the
feminine as well as the masculine gender and the plural as well as the
singular, as the context in which they are used requires.
ARTICLE 3
AUTHORIZED STOCK INCENTIVE AWARDS
3.1 Authorized Awards. The awards authorized are as follows:
(a) stock options,
(b) stock appreciation rights,
(c) restricted stock grants,
(d) dividend equivalent rights, and
(e) Common Stock in lieu of cash payable under a Qualifying
Incentive Plan or Qualifying Supplemental Benefit Plan.
3.2 General Powers of the Committee. Subject to the provisions of this
Plan, the Committee is authorized and empowered in its sole discretion to
select Participants and to grant to them any one or more of the awards
authorized above in such amounts and combinations and upon such terms and
conditions as it shall determine.
3.3 Stock Options. The Committee shall have the authority to grant
Eligible Employees options to purchase Common Stock upon such terms and
conditions as it shall establish, including restrictions on the right to
exercise options, subject in all events to the following limitations and
provisions of general application:
(a) The option price per share of any option shall not be less than
the Fair Market Value on the date of grant. The option price may be paid
in cash or, if the Committee so provides, in
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<PAGE> 4
Common Stock (including Common Stock subject to a Restricted Period
pursuant to Section 3.5(a)). Common Stock used to pay the option price
shall be valued using the Fair Market Value on the date of exercise. To
the extent the option price is paid in shares of restricted stock, an
equal number of the shares of Common Stock purchased upon exercise of the
option shall be subject to identical restrictions which shall continue in
effect for the remaining part of the Restricted Period applicable to the
restricted stock used to pay the option price.
(b) No option shall be for a term of more than 10 years from the
date of grant.
(c) No option may be exercised during a leave of absence except to
the extent exercisable immediately prior to commencement of the leave of
absence, unless otherwise expressly provided by the Committee.
(d) In the event of Termination of Employment (including termination
during an approved leave of absence) of a Participant holding an
outstanding option for any reason other than death, Disability or Upon a
Change of Control (in case of an Incentive Stock Option) or for any
reason other than death, Disability, Retirement or Upon a Change of
Control (in case of any option other than an Incentive Stock Option), the
term of the option shall expire on the earlier of the date of Termination
of Employment or the expiration date set forth in the option.
(e) In the event of Termination of Employment due to death or
Disability (including death or Disability during an approved leave of
absence) of a Participant holding an outstanding Incentive Stock Option,
the option shall be fully exercisable immediately and the term of the
option shall expire on the earlier of 12 months from the date of
Termination of Employment or the expiration date set forth in the option.
(f) In the event of Termination of Employment due to death,
Disability or Retirement (including death, Disability or Retirement
during an approved leave of absence) of a Participant holding an
outstanding option other than an Incentive Stock Option, the option shall
remain fully exercisable until the expiration date set forth in the
option.
(g) In the event of Termination of Employment Upon a Change of
Control of a Participant holding an outstanding option, the term of the
option shall expire on the earlier of 3 months from the date of
Termination of Employment or the expiration date set forth in the option.
(h) Notwithstanding the provisions of Section 3.3(d), in the event
of a Termination of Employment due to Early Retirement (including Early
Retirement during an approved leave of absence) of a Participant holding
an outstanding option, the Committee or its designee may extend the
exercise period of the option up to 3 months from the date of Termination
of Employment (but not beyond the expiration date set forth in the
option) in the case of an Incentive Stock Option or up to the expiration
date set forth in the option in the case of an option other than an
Incentive Stock Option.
3.4 Stock Appreciation Rights. The Committee shall have the authority to
grant stock appreciation rights to Eligible Employees who are granted options
under this Plan upon such terms and conditions as it shall establish, subject
in all events to the following limitations and provisions of general
application:
(a) Each right shall relate to a specific option granted under this
Plan and shall be granted to the optionee either concurrently with the
grant of such option or at such later time as determined by the
Commitee.
(b) The right shall entitle an optionee to receive a number of
shares of Common Stock, without payment to the Company, determined by
dividing-
(1) the total number of shares which the optionee is eligible
to purchase as of the exercise date under the related option
multiplied by the amount by which the Fair Market
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<PAGE> 5
Value of a share of Common Stock on the exercise date of the right
exceeds the Fair Market Value of a share of Common Stock on the
date, as determined by the Commitee, that the right or related
option was granted to the optionee; by
(2) the Fair Market Value of a share of Common Stock on the
exercise date.
(c) In lieu of issuing shares on an exercise of a right, the
Committee may elect to pay the cash equivalent of the Fair Market Value
on the date of exercise of any or all the shares which would otherwise be
issuable pursuant to such exercise.
(d) Shares under an option to which a right is related shall be used
not more than once to calculate a number of shares or cash to be received
pursuant to an exercise of such right.
(e) The number of shares which may be purchased pursuant to an
exercise of the related option will be reduced to the extent such shares
are used in calculating the number of shares or cash to be received
pursuant to an exercise of a related right.
(f) In the event of Termination of Employment of a Participant
holding an outstanding right, the right shall be exercisable only to the
extent and upon the conditions that its related option is exercisable.
3.5 Restricted Stock Grants. The Committee shall have the authority to
award Common Stock to Eligible Employees by grant (a "Grant") upon such terms
and conditions as it shall establish, subject in all events to the following
limitations, restrictions and provisions of general application:
(a) Except as expressly provided below, the Common Stock awarded by
a Grant shall not be sold, transferred, assigned, pledged or otherwise
disposed of by the Participant during the period or periods established
by the Committee (each such period, a "Restricted Period"). Common Stock
subject to a Restricted Period may be used to exercise options pursuant
to Section 3.3(a). The Committee may establish different Restricted
Periods applicable to such number of the shares of Common Stock
evidenced by a single Grant as it deems appropriate.
(b) The Common Stock awarded by a Grant shall be issued by the
Company as of the date of the Grant. During the Restricted Period, the
Participant shall be entitled to vote the shares. Dividends paid on
shares of Common Stock subject to a Restricted Period shall be retained
by the Company during the Restricted Period and shall be paid to the
Participant, with interest computed in a manner determined by the
Committee, when the Restricted Period ends or otherwise lapses, but shall
not be paid to the Participant if the related shares of Common Stock are
forfeited by the Participant pursuant to Section 3.5(c). Shares issued as
a consequence of stock dividends, splits or reclassifications shall be
issued subject to the same limitations, restrictions and provisions
applicable to the Common Stock with respect to which they are to be
issued.
(c) In the event of Termination of Employment of a Participant
during a Restricted Period, except Termination Upon a Change of Control
or termination by reason of death, Disability or Retirement, ownership of
the Common Stock subject to any Restricted Period at the date of
Termination of Employment and all rights therein shall be forfeited to
the Company, unless otherwise expressly provided by the Committee.
(d) In the event of Termination Upon a Change of Control or
Termination of Employment by reason of death, Disability or Retirement of
a Participant during a Restricted Period, the Restricted Period
applicable to any outstanding Grant at the date of Termination of
Employment shall lapse immediately.
(e) The effect of approved leaves of absence on the running of
applicable Restricted Periods shall be determined by the Committee,
provided, however, that no Restricted Period shall lapse during an
approved leave of absence unless expressly provided by the Committee.
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<PAGE> 6
3.6 Dividend Equivalent Rights. The Committee shall have the authority to
grant dividend equivalent rights to Eligible Employees upon such terms and
conditions as it shall establish, subject in all events to the following
limitations and provisions of general application:
(a) Each right may relate to a specific option granted under this
Plan and may be granted to the optionee either concurrently with the
grant of such option or at such later time as determined by the
Committee, or each right may be granted independent of any option.
(b) The right shall entitle a holder to receive, for a period of
time to be determined by the Committee, a payment equal to the quarterly
dividend declared and paid by the Company on one share of Common Stock.
If the right relates to a specific option, the period shall not extend
beyond the earliest of the date the option is exercised, the date any
stock appreciation right related to the option is exercised, or the
expiration date set forth in the option.
(c) The Committee shall determine at time of grant whether payment
pursuant to a right shall be immediate or deferred and whether it shall
be in the form of cash or Common Stock, or a combination of cash and
Common Stock. If immediate, the Company shall make payments pursuant to
each right within 90 days after the Company has paid the quarterly
dividend to holders of Common Stock. If deferred, the payments shall
accumulate (with interest computed in a manner to be determined by the
Committee) until a date or event specified by the Committee and then
shall be made within 90 days after the occurrence of the specified date
or event, unless the right is forfeited under the terms of the Plan.
(d) In the event of Termination of Employment (including termination
during an approved leave of absence) of a Participant for any reason, any
dividend equivalent right held by such Participant at Termination of
Employment shall be forfeited, unless otherwise expressly provided by the
Committee.
3.7 Common Stock in Lieu of Cash. The Committee shall have the authority
to award an Eligible Employee Common Stock (a "Stock Payment") in lieu of all
or a portion (determined by the Committee) of an award otherwise payable in
cash pursuant to a Qualifying Incentive Plan or Qualifying Supplemental
Benefit Plan (collectively referred to as a "Qualifying Plan"). The number of
shares of Common Stock comprising the Stock Payment shall have an aggregate
Fair Market Value, determined as of the Payment Date, equal to the amount of
cash in lieu of which the Stock Payment is made. All Stock Payments shall be
subject to the following limitations and provisions of general application:
(a) Stock Payments shall not be made to any Participant whose
employment terminates for any reason before the Payment Date or to the
heirs of an Eligible Employee who dies before the Payment Date. In any
such event, the entire award, in lieu of a portion of which a Stock
Payment was to be made, shall be paid to such Participant or his personal
representative, as the case may be, in cash.
(b) The right to receive all or a portion of Stock Payments may be
deferred by a Participant under a Deferred Compensation Plan, subject to
the following provisions: (i) the aggregate Fair Market Value of the
Stock Payment so deferred shall be hypothetically invested (within the
meaning of the Deferred Compensation Plan) in the number of shares of
Common Stock (as adjusted to reflect stock dividends, splits and
reclassifications) comprising the Stock Payment, (ii) an amount equal to
cash dividends which otherwise would have been paid on the Stock Payment
if it were not so hypothetically invested, also will be deemed to have
been paid and hypothetically invested pursuant to the Deferred
Compensation Plan, and (iii) a certificate evidencing the number of
shares of Common Stock (as so adjusted) comprising the Stock Payment shall
not be issued or delivered to the Participant until payment of his
Deferred Compensation Account is made pursuant to the Deferred
Compensation Plan.
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<PAGE> 7
ARTICLE 4
SHARES AUTHORIZED UNDER THE PLAN
4.1 Maximum Number Authorized. The number of shares of Common Stock
authorized to be issued pursuant to stock options, rights, Grants or Stock
Payments awarded under this Plan is 3,500,000.
4.2 Maximum Number Per Participant. No more than 10% of the maximum
number of shares of Common Stock authorized pursuant to this Plan shall be
acquired by any one Participant by way of option (including Common Stock
subject to option), right, Grant or Stock Payment under this Plan.
4.3 Unexercised Options, Grant Forfeitures and Options Exercised with
Common Stock. All Common Stock (i) under options granted under this Plan which
expire or are cancelled or surrendered or (ii) which is forfeited pursuant to
Section 3.5, shall be available for further awards under this Plan upon such
expiration, cancelation, surrender and forfeiture. In addition, any Common
Stock granted or purchased under this Plan which is used by a Participant as
full or partial payment to the Company of the purchase price of Common Stock
acquired upon exercise of a stock option granted under this Plan shall be
available for further awards under this Plan upon such payment.
4.4 No Fractional Shares. No fractional shares of Common Stock shall be
issued pursuant to this Plan.
4.5 Source of Shares. Common Stock may be issued from authorized but
unissued shares or out of shares held in CIGNA Corporation's treasury, or
both.
ARTICLE 5
ANTIDILUTION PROVISIONS
Except as otherwise expressly provided herein, the following provisions
shall apply to all Common Stock authorized for issuance, and options, granted
or awarded under this Plan:
5.1 Stock Dividends, Splits, Etc. In the event of a stock dividend, stock
split, or other subdivision or combination of the Common Stock, the number of
shares of Common Stock authorized under this Plan will be adjusted
proportionately. Similarly, in any such event there will be a proportionate
adjustment in the number of shares of Common Stock subject to unexercised
stock options (but without adjustment to the aggregate option price) and in
the number of shares of Common Stock then subject to Restricted Periods under
a Grant.
5.2 Merger, Exchange or Reorganization. In the event that the outstanding
shares of Common Stock are changed or converted into, exchanged or exchangeable
for, a different number or kind of shares or other securities of CIGNA
Corporation or of another corporation, by reason of a reorganization, merger,
consolidation, reclassification or combination, appropriate adjustment shall be
made by the Committee in the number of shares and kind of Common Stock for
which options, rights, Grants and Stock Payments may be or may have been
awarded under this Plan, to the end that the proportionate interests of
Participants shall be maintained as before the occurrence of such event,
provided, however, that in the event of any contemplated transaction which may
constitute a Change of Control of CIGNA Corporation, the Committee, with the
approval of a majority of the members of the Board of Directors who are not
then Participants, may modify any and all outstanding options, rights, Grants
and Stock Payments (except those deferred pursuant to
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<PAGE> 8
Section 3.7(b)), so as to accelerate, as a consequence of or in connection
with such transaction, the vesting of a Participant's right to exercise any
such options or stock appreciation right or the unqualified ownership of
Common Stock subject to a Grant or the accelerated payment of any deferred
dividend equivalent rights.
ARTICLE 6
ADMINISTRATION OF PLAN
6.1 General Administration. The Plan is to be administered by the
Committee, subject to such requirements for review and approval by the Board
of Directors as the Board of Directors may establish.
6.2 Administrative Rules. The Committee shall have the power and
authority to adopt, amend and rescind administrative guidelines, rules and
regulations pertaining to this Plan and to interpret and rule on any
questions respecting any provision of this Plan.
6.3 Committee Members Not Eligible. No member of the Committee shall be
eligible to participate in this Plan.
6.4 Decisions Binding. Decisions of the Committee concerning this Plan
shall be binding on CIGNA Corporation and its Subsidiaries and their
respective boards of directors, and on all Eligible Employees and
Participants.
ARTICLE 7
AMENDMENTS
All amendments to this Plan shall be in writing and shall be effective
when approved by the Board of Directors, provided, however, that an amendment
shall not be effective without the prior approval of the shareholders of CIGNA
Corporation if such approval is necessary under Internal Revenue Service or
Securities and Exchange Commission regulations, or the rules of the New York
Stock Exchange or any applicable law. The Board of Directors may make any
changes required to conform this Plan and option agreements with applicable
provisions of the Internal Revenue Code or regulations thereunder pertaining
to Incentive Stock Options. Unless otherwise expressly provided by an
amendment or the Board of Directors, no amendment to this Plan shall apply to
grants of options, rights or Restricted Stock made before the effective date
of the amendment.
ARTICLE 8
OTHER PROVISIONS
8.1 Effective Date. This Plan is effective on May 1, 1991 (the "Effective
Date").
8.2 Duration of the Plan. The Plan shall remain in effect until all
options and rights granted under this Plan have been satisfied by the issuance
of Common Stock, or terminated under the terms of this Plan, provided that
options, rights, Grants and Stock Payments under this Plan must be awarded on
or after the Effective Date.
8.3 Early Termination. Notwithstanding the provisions of Section 8.2, the
Board of Directors may terminate this Plan at any time; but no such action by
the Board of Directors shall adversely affect the rights of Participants which
exist under this Plan immediately before its termination.
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<PAGE> 9
8.4 General Restriction. No Common Stock issued pursuant to this Plan
shall be sold or distributed by a Participant until all appropriate listing,
registration and qualification requirements and consents and approvals have
been obtained, free of any condition unacceptable to the Board of Directors.
8.5 Awards Not Assignable. No right to receive Common Stock, including
options or similar rights (such as stock appreciation rights), pursuant to
this Plan shall be assignable or transferable by a Participant except by will
or by the laws of descent and distribution, and any option or similar right
shall be exercisable during a Participant's lifetime only by the Participant
or by the Participant's guardian or legal representative.
8.6 Withholding Taxes. Whenever Common Stock is to be issued or delivered
in satisfaction of options or other awards granted hereunder, the Company
shall have the right to require the Participant to remit an amount sufficient
to satisfy federal, state and local withholding taxes prior to delivery of any
certificate for such shares. The Committee may require, or permit, the
Participant to remit such amount in whole or in part in Common Stock. If the
Committee permits a Participant to elect to remit such amount in Common Stock,
any such election shall be irrevocable, be made on or prior to the date the
withholding obligation arises and be subject to the disapproval of the
Committee. The Committee may establish such additional conditions as it deems
appropriate. If the Participant remits such amount in Common Stock, the number
of shares of Common Stock delivered to or on behalf of a Participant shall be
reduced by the number of shares so remitted. Common Stock so remitted shall be
valued using the Fair Market Value of Common Stock as of the date the
withholding obligation arises.
8.7 Safekeeping of Certificates. The certificate evidencing Common Stock
awarded by a restricted stock grant or purchased upon exercise of an option
shall be retained for safekeeping by the Company, or by a custodian appointed
by the Company, except the Committee may in its discretion cause the
certificate to be delivered to the Participant after a restricted stock grant
or a purchase upon exercise of an option. The Company will deliver any such
retained certificates that are not subject to a Restricted Period to the
Participant within a reasonable period after a Participant requests delivery
of such certificates.
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<PAGE> 1
AMENDMENT NO. 1
to the
CIGNA CORPORATION STOCK PLAN
WHEREAS, the Board of Directors has retained the right to amend the
CIGNA Corporation Stock Plan (the "Plan") pursuant to Article 7 thereof; and
WHEREAS, the Board of Directors, by resolution dated July 28, 1993,
approved certain amendments to the Plan in order to comply with requirements
imposed on Plan transactions by the Securities and Exchange Commission;
NOW THEREFORE, Section 4.3 of the Plan is hereby amended in its
entirety, effective as of its Effective Date (as defined therein), as follows:
4.3 Unexercised Options, Grant Forfeitures and
Options Exercised with Common Stock. To the extent permitted
in maintaining compliance with regulations adopted by the
Securities and Exchange Commission (including SEC Rule 16b-3
and successor provisions), (a) all Common Stock (i) under
options granted under this Plan which expire or are canceled
or surrendered or (ii) which is forfeited pursuant to Section
3.5, shall be available for further awards under this Plan
upon such expiration, cancellation, surrender and forfeiture;
provided, however, that in the case of a stock appreciation
right paid in cash pursuant to Section 3.4(c), there shall
immediately cease to be available for further awards under
this Plan that number of shares of Common Stock having a fair
market value (calculated on the date the right is exercised)
equal to such cash payment; and (b) any Common Stock granted
or purchased under this Plan which is used by a Participant as
full or partial payment to the Company for the purchase of
Common Stock acquired upon exercise of a stock option granted
under this Plan shall be available for further awards under
this Plan upon such payment.
<PAGE> 1
AMENDMENT NO. 2
to the
CIGNA CORPORATION STOCK PLAN
WHEREAS, the Board of Directors has retained the right to
amend the CIGNA Corporation Stock Plan (the "Plan") pursuant to
Article 7 thereof; and
WHEREAS, the Board of Directors, by resolution dated February
23, 1994, approved certain amendments to the Plan in order to permit
current payment of dividends on shares of restricted stock and to
eliminate the automatic lapse of restrictions on restricted stock at
retirement;
NOW THEREFORE, the Plan is hereby amended, effective as of
February 23, 1994, as follows:
1. Section 3.5(b) of Article 3 is amended in its entirety to read as
follows:
(b) The Common Stock awarded by a Grant shall be issued by the
Company as of the date of the Grant. During the Restricted
Period, the Participant shall be entitled to vote the shares.
Shares issued as a consequence of stock dividends, splits or
reclassifications shall be issued subject to the same
limitations, restrictions and provisions applicable to the
Common Stock with respect to which they are issued.
2. Section 3.5(c) of Article 3 is amended in its entirety to read as
follows:
(c) In the event of Termination of Employment of a Participant
during a Restricted Period, except Termination Upon a Change
of Control or termination by reason of death or Disability,
ownership of the Common Stock subject to any Restricted Period
at the date of Termination of Employment and all rights
therein shall be forfeited to the Company, unless otherwise
expressly provided by the Committee. In the event of
Termination of Employment by reason of Retirement of a
Participant during a Restricted Period, the Committee or its
designee in the sole discretion of either may provide, before
the Participant's Retirement,
<PAGE> 2
that the Restricted Period applicable to any outstanding Grant
at the date of Retirement shall lapse immediately upon the
Participant's Retirement.
3. Section 3.5(d) of Article 3 is amended in its entirety to read as
follows:
(d) In the event of Termination Upon a Change of Control or
Termination of Employment by reason of death or Disability of
a Participant during a Restricted Period, the Restricted
Period applicable to any outstanding Grant at the date of
Termination of Employment shall lapse immediately.
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<PAGE> 1
CIGNA CORPORATION
Executive Stock Incentive Plan
(Amended and Restated Effective as of March 23, 1988)
ARTICLE 1
STATEMENT OF PURPOSE
The CIGNA Corporation Executive Stock Incentive Plan (the
"Plan") is intended to reward and provide incentives for key
employees of CIGNA Corporation and its Subsidiaries by providing
them with an opportunity to acquire an equity interest in CIGNA
Corporation, thereby increasing their personal interest in its
continued success and progress. It also is intended to aid the
Company in attracting key personnel of exceptional ability,
ARTICLE 2
DEFINITIONS
2.1 Defined Terms. For all purposes of this Plan, except
as otherwise expressly provided or defined herein, or unless the
context otherwise requires, the terms defined in this Article
shall have the meanings assigned to them as follows:
"Board of Directors" means either the board of directors of
CIGNA Corporation or any duty authorized committee of that board.
"Change of Control" means:
(i) a corporation, person or group acting in concert as
described in Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"),
holds or acquires beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange
Act of a number of preferred or common shares of CIGNA
Corporation having voting power which is either (i)
more than 50% of the voting power of the shares which
voted in the election of directors of CIGNA
Corporation at the shareholders' meeting immediately
preceding such determination, or (ii) more than 25% of
the voting power of CIGNA Corporation's outstanding
common shares; or
(ii) as a result of a merger or consolidation to which
CIGNA Corporation is a party, either (i) CIGNA
Corporation is not the surviving corporation or (ii)
Directors of CIGNA Corporation immediately prior to
the merger or consolidation constitute less than a
majority of the Board of Directors of the surviving
corporation; or
<PAGE> 2
(iii) a change occurs in the composition of the Board at any
time during any consecutive 24-month period such that
the "Continuity Directors" cease for any reason to
constitute a majority of the Board. For purposes of
the preceding sentence "Continuity Directors" shall
mean those members of the Board who either: (i) were
directors at the beginning of such consecutive
24-month period; or (ii) were elected by, or on
nomination or recommendation of, at least a majority
(consisting of at least nine directors) of the Board.
"Committee" means the People Resources Committee of the
Board of Directors of any successor committee with
responsibility for compensation.
"Common Stock" means the common stock, par value $1 per
share, of CIGNA Corporation.
"Company" means CIGNA Corporation, a Delaware corporation,
and/or its Subsidiaries.
"Deferred Compensation Account" means a separate account
established pursuant to a Deferred Compensation Plan.
"Deferred Compensation Plan" means and refers to a deferred
compensation plan of the Company which has been designated by
the Committee as a "Deferred Compensation Plan" for purposes of
this Plan.
"Disability" means permanent and total disability as defined
in Section 22(e)(3) of the Internal Revenue Code.
"Early Retirement" means Termination of Employment, after
appropriate notice to the Company, (i) on or after age 55 and
before age 65 with eligibility for immediate annuity benefits
under a qualified pension or retirement plan of the Company, or
(ii) upon such terms and conditions approved by the Committee,
or officers of the Company designated by the Board of Directors
or the Committee.
"Eligible Employee" means a salaried officer or other key
employee of the Company who (i) occupies a position with the
Company that has been designated by the Committee as an eligible
position for participation in this Plan or (ii) has been
specifically authorized or designated by the Committee to
participate in this Plan.
"Fair Market Value" means the mean between the highest and
lowest quoted selling prices as reported on the Composite Tape
(or other successor means of publishing stock prices) on the
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<PAGE> 3
date as of which any determination of such value is or is
required to be made or if the Composite Tape, or such successor
publication, is not published on such date, the next preceding
date on which it was published. In the absence of such sales,
Fair Market Value shall be determined by the Committee, which
shall take into account all relevant facts and circumstances.
"Incentive Stock Option" means a stock option granted in
accordance with Section 422A of the Internal Revenue Code.
"Participant" means an Eligible Employee to whom any one or
more of the awards authorized in this Plan shall have been
granted.
"Qualifying Incentive Plan" means any bonus plan or other
incentive compensation plan of the Company pursuant to which
awards payable in cash are or are authorized to be made to
employees of the Company.
"Restatement Date" means the date this Plan was amended and
restated -- March 23, 1988.
"Retirement" means Termination of Employment, after
appropriate notice to the Company, (i) on or after age 65 with
eligibility for immediate annuity benefits under a qualified
pension or retirement plan of the Company, or (ii) upon such
terms and conditions approved by the Committee, or officers of
the Company designated by the Board of Directors or the
Committee.
"Subsidiary" means any corporation of which more than 50% of
the total combined voting power of all classes of stock entitled
to vote, or other equity interest, is directly or indirectly
owned by CIGNA Corporation; or a partnership, joint venture or
other unincorporated entity of which more than a 50% interest in
the capital, equity or profits is directly or indirectly owned
by CIGNA Corporation.
"Termination for Cause" means a Termination of Employment by
the Company on account of the conviction by the Participant of a
felony involving fraud or dishonesty directed against the
Company.
"Termination of Employment" means the termination of the
Participant's active employment relationship with the Company,
unless otherwise expressly provided by the Committee, or the
occurrence of a transaction by which the Participant's employing
Company ceases to be a Subsidiary.
"Termination Upon a Change of Control" means a Termination
of Employment upon or within two years after a Change of Control
(i) initiated by the Company, or a successor corporation other
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<PAGE> 4
than pursuant to Termination for Cause or (ii) initiated by the
Participant and pursuant to the Participant's certification that
the Change of Control has rendered him unable to perform the
duties and responsibilities of the position he held immediately
prior to the Change of Control by adverse changes in his
authority, compensation, office location, duties,
responsibilities, or title.
2.2 General. Certain terms are defined in other Articles
of this Plan. The terms defined in this Article and elsewhere
in this Plan shall include the feminine as well as the masculine
gender and the plural as well as the singular, as the context in
which they are used requires.
ARTICLE 3
AUTHORIZED STOCK INCENTIVE AWARDS
3.1 Authorized Awards. The awards authorized are as
follows:
(a) stock options,
(b) stock appreciation rights,
(c) restricted stock grants, and
(d) Common Stock in lieu of cash payable under a
Qualifying Incentive Plan.
3.2 General Powers of the Committee. Subject to the
provisions of this Plan, the Committee is authorized and
empowered in its sole discretion to select Participants and to
grant to them any one or more of the awards authorized above in
such amounts and combinations and upon such terms and conditions
as it shall determine.
3.3 Stock Options. The Committee shall have the authority
to grant Eligible Employees options to purchase Common Stock
upon such terms and conditions as it shall establish, subject in
all events to the following limitations and provisions of
general application:
(a) The option price per share shall not be less than
the Fair Market Value at the date of grant. The option
price may be paid in cash or, if the Committee so provides,
in Common Stock (including Common Stock subject to a
Restricted Period pursuant to Section 3.5(a)). Common Stock
used to pay the option price shall be valued using the Fair
Market Value on the date of exercise. To the extent the
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<PAGE> 5
option price is paid in shares of restricted stock, an equal
number of the shares of Common Stock purchased upon exercise
of the option shall be subject to identical restrictions
which shall continue in effect for the remaining part of the
Restricted Period applicable to the restricted stock used to
pay the option price.
(b) No option shall be for a term of more than 10
years from the date of grant.
(c) No option may be exercised during a leave of
absence except to the extent exercisable immediately prior
to commencement of the leave of absence unless otherwise
expressly provided by the Committee.
(d) In the event of Termination of Employment
(including termination during an approved leave of absence)
of a Participant holding an outstanding option (including
options outstanding on April 22, 1987) for any reason other
than death, Disability, Early Retirement, or Retirement, the
term of the option shall expire on the earlier of 3 months
from the date of Termination of Employment or the expiration
date set forth in the option.
(e) In the event of Termination of Employment due to
death, Disability, Early Retirement, or Retirement
(including death, Disability, Early Retirement, or
Retirement during an approved leave of absence) of a
Participant holding an outstanding option (including options
outstanding on April 22, 1987), the option shall be fully
exercisable until the earlier of 3 years from the date of
Termination of Employment due to death, Disability, Early
Retirement, or Retirement, or the expiration date set forth
in the option.
3.4 Stock Appreciation Rights. The Committee shall have
the authority to grant stock appreciation rights to Eligible
Employees who are granted options under this Plan upon such
terms and conditions as it shall establish, subject in all
events to the following limitations and provisions of general
application:
(a) Each right shall relate to a specific option
granted under this Plan and shall be granted to the optionee
either concurrently with the grant of such option or at such
later time as determined by the Committee.
(b) The right shall entitle an optionee to receive a
number of shares of Common Stock, without payment to the
Company, determined by dividing -
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<PAGE> 6
(1) the total number of shares which the optionee
is eligible to purchase as of the exercise date under
the related option multiplied by the amount by which
the Fair Market Value of a share of Common Stock on the
exercise date of the right exceeds the Fair Market
Value of a share of Common Stock on the date, as
determined by the Committee, that the right or related
option was granted to the optionee; by
(2) the Fair Market Value of a share of Common
Stock on the exercise date.
(c) In lieu of issuing shares on an exercise of a
right, the Committee may elect to pay the cash equivalent of
the Fair Market Value on the date of exercise of any or all
the shares which would otherwise be issuable pursuant to
such exercise.
(d) Shares under an option to which a right is related
shall be used not more than once to calculate a number of
shares of cash to be received pursuant to an exercise of
such right.
(e) The number of shares which may be purchased
pursuant to an exercise of the related option will be
reduced to the extent such shares are used in calculating
the number of shares or cash to be received pursuant to an
exercise of a related right;
(f) In the event of Termination of Employment of a
Participant holding an outstanding right, the right shall be
exercisable only to the extent and upon the conditions that
its related option is exercisable.
3.5 Restricted Stock Grants. The Committee shall have the
authority to award Common Stock to Eligible Employees by grant
(a "Grant") upon such terms and conditions as it shall
establish, subject in all events to the following limitations,
restrictions and provisions of general application:
(a) Except as expressly provided below, the Common
Stock awarded by a Grant shall not be sold, transferred,
assigned, pledged or otherwise disposed of by the
Participant during the period or periods established by the
Committee (each such period, a "Restricted Period"). Common
Stock subject to a Restricted Period may be used to exercise
options pursuant to Section 3.3(a). The Committee may
establish different Restricted Periods applicable to such
number of the shares of Common Stock evidenced by a single
Grant as it deems appropriate. At the time of Grant no
Restricted Period shall be less than 1 year or more than 10
years from the date of the Grant.
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<PAGE> 7
(b) The Common Stock awarded by a Grant shall be
issued as of the date of the Grant. During the Restricted
Period, the Participant shall be entitled to vote the
shares. Shares issued as a consequence of stock dividends,
splits or reclassifications shall be issued subject to the
same limitations, restrictions and provisions applicable to
the Common Stock with respect to which they are to be issued.
(c) In the event of Termination of Employment of a
Participant during a Restricted Period, except Termination
Upon a Change of Control or termination by reason of death,
Disability, or Retirement, ownership of the Common Stock
subject to any Restricted Period at the date of Termination
of Employment and all rights therein shall be forfeited to
the Company, unless otherwise expressly provided by the
Committee.
(d) In the event of Termination Upon a Change of
Control or Termination of Employment by reason of death,
Disability or Retirement of a Participant during a
Restricted Period, the Restricted Period applicable to any
outstanding Grant at the date of Termination of Employment
shall lapse immediately.
(e) The effect of approved leaves of absence on the
running of applicable Restricted Periods shall be determined
by the Committee, provided, however, that no Restricted
Period shall lapse during an approved leave of absence
unless expressly provided by the Committee.
3.6 Common Stock in Lieu of Cash. The Committee shall have
the authority to award an Eligible Employee Common Stock (a
"Stock Payment") in lieu of all or a portion (determined by the
Committee) of an award otherwise payable in cash pursuant to a
Qualifying Incentive Plan. The number of shares of Common Stock
comprising the Stock Payment shall have an aggregate Fair Market
Value, determined as of the date payment of the award pursuant
to the Qualifying Incentive Plan is made or, but for deferral
pursuant to paragraph (b) below, would have been made (the
"Payment Date"), equal to the amount of cash in lieu of which
the Stock Payment is made. All Stock Payments shall be subject
to the following limitations and provisions of general
application:
(a) Stock Payments shall not be made to any
Participant whose employment terminates for any reason
before the Payment Date or to the heirs of an Eligible
Employee who dies before the Payment Date. In any such
event, the entire award, in lieu of a portion of which a
Stock Payment was to be made, shall be paid to such
Participant or his personal representative, as the case may
be, in cash.
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<PAGE> 8
(b) The right to receive all or a portion of Stock
Payments may be deferred by a Participant under a Deferred
Compensation Plan, subject to the following provisions: (i)
the aggregate Fair Market Value of the Stock Payment so
deferred shall be hypothetically invested (within the
meaning of the Deferred Compensation Plan) in the number of
shares of Common Stock (as adjusted to reflect stock
dividends, splits and reclassifications) comprising the
Stock Payment, (ii) an amount equal to cash dividends which
otherwise would have been paid on the Stock Payment if it
were not so hypothetically invested, also will be deemed to
have been paid and hypothetically invested pursuant to the
Deferred Compensation Plan, and (iii) a certificate
evidencing the number of shares of Common Stock (as so
adjusted) comprising the Stock Payment shall not be issued
or delivered to the Participant until payment of his
Deferred Compensation Account is made pursuant to the
Deferred Compensation Plan.
ARTICLE 4
SHARES AUTHORIZED UNDER THE PLAN
4.1 Maximum Number Authorized. The number of shares of
Common Stock authorized to be issued pursuant to stock options,
rights, Grants or Stock Payments awarded under this Plan is
2,500,000.
4.2 Maximum Number Per Participant. No more than 10% of
the maximum number of shares of Common Stock authorized pursuant
to this Plan shall be acquired by any one Participant by way of
option (including Common Stock subject to option), right, Grant
or Stock Payment under this Plan.
4.3 Unexercised Options and Grant Forfeitures. All Common
Stock (i) under options granted under this Plan which expire, or
(ii) which is forfeited pursuant to Section 3.5, shall be
available for further awards upon such expiration and forfeiture.
4.4 No Fractional Shares. No fractional shares of Common
Stock shall be issued pursuant to this Plan.
4.5 Source of Shares. Common Stock may be issued from
authorized but unissued shares or out of shares held in CIGNA
Corporation's treasury, or both.
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<PAGE> 9
ARTICLE 5
ANTIDILUTION PROVISIONS
Except as otherwise expressly provided herein, the following
provisions shall apply to all Common Stock authorized for
issuance, and options, granted or awarded under this Plan:
5.1 Stock Dividends, Splits, Etc. In the event of a stock
dividend, stock split, or other subdivision or combination of
the Common Stock, the number of shares of Common Stock
authorized under this Plan will be adjusted proportionately.
Similarly, in any such event there will be a proportionate
adjustment in the number of shares of Common Stock subject to
unexercised stock options (but without adjustment to the
aggregate option price) and in the number of shares of Common
Stock then subject to Restricted Periods under a Grant.
5.2 Merger, Exchange or Reorganization. In the event that
the outstanding shares of Common Stock are changed or converted
into, exchanged or exchangeable for, a different number of kind
of shares or other securities of CIGNA Corporation or of another
corporation, by reason of a reorganization, merger,
consolidation, reclassification or combination, appropriate
adjustment shall be made by the Committee in the number of
shares and kind of Common Stock for which options, rights,
Grants and Stock Payments may be or may have been awarded under
this Plan, to the end that the proportionate interests of
Participants shall be maintained as before the occurrence of
such event, provided, however, that in the event of any
contemplated transaction which may constitute a Change of
Control of CIGNA Corporation, the Committee, with the approval
of a majority of the members of the Board of Directors who are
not then Participants, may modify any and all outstanding
options, rights, Grants and Stock Payments (except those
deferred pursuant to Section 3.6(b)), so as to accelerate, as a
consequence of or in connection with such transaction, the
vesting of a Participant's right to exercise any such option or
right or the unqualified ownership of Common Stock subject to a
Grant.
ARTICLE 6
ADMINISTRATION OF PLAN
6.1 General Administration. The Plan is to be administered
by the Committee, subject to such requirements for review and
approval by the Board of Directors as the Board of Directors may
establish.
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<PAGE> 10
6.2 Administrative Rules. The Committee shall have the
power and authority to adopt, amend and rescind administrative
guidelines, rules and regulations pertaining to this Plan and to
interpret and rule on any questions respecting any provision of
this Plan.
6.3 Committee Members Not Eligible. No member of the
Committee shall be eligible to participate in this Plan.
6.4 Decisions Binding. Decisions of the Committee
concerning this Plan shall be binding on CIGNA Corporation and
its Subsidiaries and their respective boards of directors, and
on all Eligible Employees and Participants.
ARTICLE 7
AMENDMENTS
All amendments to this Plan shall be in writing and shall be
effective when approved by the Board of Directors, provided,
however, that no amendment increasing the number of shares of
Common Stock authorized or available under this Plan, providing
for the grant of stock options at an option price of less than
Fair Market Value, or continuing this Plan in effect beyond the
time established in Section 8.2 shall be effective without the
prior approval of the shareholders of CIGNA Corporation. The
Board of Directors may make any changes required to conform this
Plan and option agreements with applicable provisions of the
Internal Revenue Code or regulations thereunder pertaining to
Incentive Stock Options. Unless otherwise expressly provided by
an amendment or the Board of Directors, no amendment to this
Plan shall apply to grants of options, rights or Restricted
Stock made before the effective date of the amendment.
ARTICLE 8
OTHER PROVISIONS
8.1 Effective Date. This Plan is effective on April 1,
1982 (the "Effective Date").
8.2 Duration of the Plan. The Plan shall remain in effect
until all options and rights granted under this Plan have been
satisfied by the issuance of Common Stock, or terminated under
the terms of this Plan, provided that options, rights, Grants
and Stock Payments under this Plan must be awarded within 10
years from the Effective Date.
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<PAGE> 11
8.3 Early Termination. Notwithstanding the provisions of
Section 8.2, the Board of Directors may terminate this Plan at
any time; but no such action by the Board of Directors shall
adversely affect the rights of Participants under this Plan.
8.4 General Restriction. No Common Stock issued pursuant
to this Plan shall be sold or distributed by a Participant until
all appropriate listing, registration and qualification
requirements and consents and approvals have been obtained, free
of any condition unacceptable to the Board of Directors.
8.5 Awards Not Assignable. No right to receive Common
Stock pursuant to this Plan shall be assignable or transferable
by a Participant except (unless otherwise expressly provided
herein) by will or by the laws of descent and distribution.
8.6 Withholding Taxes. Whenever Common Stock is to be
issued or delivered in satisfaction of options or other awards
granted hereunder, the Company shall have the right to require
the Participant to remit an amount sufficient to satisfy
federal, state and local withholding taxes prior to delivery of
any certificate for such shares. The Committee may require, or
permit, the Participant to remit such amount in whole or in part
in Common Stock. If the Committee permits a Participant to
elect to remit such amount in Common Stock, any such election
shall be irrevocable, be made on or prior to the date the
withholding obligation arises and be subject to the disapproval
of the Committee. The Committee may establish such additional
conditions as it deems appropriate. If the Participant remits
such amount in Common Stock, the number of shares of Common
Stock delivered to or on behalf of a Participant shall be
reduced by the number of shares so remitted. Common Stock so
remitted shall be valued using the Fair Market Value of Common
Stock as of the date the withholding obligation arises.
8.7 Safekeeping of Certificates. The certificate
evidencing Common Stock awarded by a restricted stock grant or
purchased upon exercise of an option shall be retained for
safekeeping by CIGNA Corporation, or by a custodian appointed by
CIGNA Corporation, except the Committee may in its discretion
cause the certificate to be delivered to the Participant after a
restricted stock grant or a purchase upon exercise of an
option. CIGNA Corporation will deliver any such retained
certificates that are not subject to a Restricted Period to the
Participant within a reasonable period after a Participant
requests delivery of such certificates.
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<PAGE> 1
AMENDMENT NO. 1 TO THE
CIGNA CORPORATION EXECUTIVE STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE MARCH 23, 1988)
WHEREAS, the Board of Directors has retained the right to amend the
CIGNA Corporation Executive Stock Incentive Plan (the "Plan") pursuant to
Article 7 thereof, and,
WHEREAS, by resolution dated September 28, 1988, the Board of
Directors of CIGNA Corporation authorized changes in the Plan to extend the
period during which retirees may exercise stock options and authorized an
Officer of the Corporation to effectuate such changes,
NOW, THEREFORE, the Plan is amended effective as of September 28, 1988
as follows:
Subsection 3.3(e) of Article 3 shall be amended in its entirety to read as
follows:
(e) In the event of Termination of Employment due to death, Disability,
Early Retirement, or Retirement (including death, Disability, Early
Retirement, or Retirement during an approved leave of absence) of a
Participant holding an outstanding option, the option shall be fully
exercisable until the earlier of 5 years from the date of Termination
of Employment due to death, Disability, Early Retirement, or
Retirement, or the expiration date set forth in the option.
<PAGE> 1
AMENDMENT NO. 2 TO THE
CIGNA CORPORATION EXECUTIVE STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE MARCH 23, 1988)
WHEREAS, the Board of Directors
has retained the right to amend the CIGNA
Corporation Executive Stock Incentive Plan
(the "Plan") pursuant to Article 7 thereof;
and,
WHEREAS, by resolution dated March 27,
1991, the Board of Directors of CIGNA
Corporation authorized changes in the Plan
to extend the period during which retirees
and certain other optionholders may exercise
stock options and authorized an Officer of
the Corporation to effectuate such changes;
NOW, THEREFORE, the Plan is
amended effective as of March 27, 1991 as
follows:
1. Subsection 3.3(e) of Article 3 shall be
amended in its entirety to read as follows:
(e) In the event of Termination of
Employment due to death, Disability,
Early Retirement or Retirement
(including death, Disability, Early
Retirement or Retirement during an
approved leave of absence) of a
Participant holding an outstanding
option, the option shall be fully
exercisable only until the earlier of 5
years from the date of Participant's
Termination of Employment or the
expiration date set forth in the option
unless the Chief Executive Officer of
the Corporation extends the exercise
period of the option up to the
expiration date set forth in the option.
2. This amendment shall also apply to
grants of options made under the Plan before
the effective date of the amendment,
provided that, with respect to grants of
Incentive Stock Options, such grants were
modified, before the effective date of this
amendment, to become nonqualified stock
options, and further provided that, with
respect to any options, they have not been
exercised, cancelled or surrendered, and
<PAGE> 2
have not expired, before the effective date
of this amendment. This amendment shall
apply only to the exercise period of options
and shall have no effect upon, or in any
manner extend the exercise period of, any
stock appreciation rights which may have
been granted in tandem with, or which may
have subsequently been attached to, any
options described in the preceding sentence.
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<PAGE> 1
Description dated March 30, 1990 of CIGNA Corporation
Key Management Annual Incentive
Bonus Plan
The CIGNA Key Management Annual Incentive Bonus Plan is
designed to motivate and reward the attainment of annual
corporate performance objectives and performance relative to
key competitors. The maximum bonus pool for any one year is
based on the evaluation by the Board of Directors of corporate
results versus corporate financial performance goals and
business plans previously approved by the Board. Cash awards
to individual participants depend on the extent to which those
objectives have been achieved, how corporate results compare to
competitor performance and upon the People Resource Committee's
assessment of the individual's personal contributions to their
achievement.
<PAGE> 1
CIGNA CORPORATION STRATEGIC PERFORMANCE PLAN
(As Amended and Restated March 25, 1992)
STATEMENT OF PURPOSE
The CIGNA Corporation Strategic Performance Plan has been
adopted by the CIGNA Corporation Board of Directors to serve the
following purposes:
(a) To supplement and balance CIGNA's salary, incentive
bonus and stock program awards in support of CIGNA Corporation's
long-term strategic plans;
(b) To motivate and reward the maximization of CIGNA
Corporation's long-term financial results;
(c) To encourage decisions and actions by senior level CIGNA
executives that are consistent with the long-range interests of
CIGNA Corporation's shareholders; and
(d) To assist CIGNA in recruiting outstanding candidates for
officer and key employee positions and in retaining those of
proven ability and contribution.
ARTICLE I. DEFINITIONS
The following are defined terms wherever they appear in the
Plan.
1.1 Allocation: The assignment of SPP Units to an Eligible
Employee for a Performance Period.
1.2 Award: Compensation due a Participant, or Participant's
estate, under the provisions of the Plan on account of an
Allocation.
1.3 Board: The Board of Directors of CIGNA Corporation.
1.4 CEO: The Chief Executive Officer of CIGNA Corporation.
1.5 Change of Control: The occurrence of one of the
following:
(a) a corporation, person or group acting in concert as
described in Section 14(d)(2) of the Securities Exchange Act of
1934, as amended ("Exchange Act"), holds or acquires beneficial
ownership within the meaning of Rule 13d-3 promulgated under the
Exchange Act of a number of preferred or common shares of CIGNA
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<PAGE> 2
Corporation having voting power which is either (i) more than 50%
of the voting power of the shares which voted in the election of
directors of CIGNA Corporation at the shareholders' meeting
immediately preceding such determination, or (ii) more than 25%
of the voting power of CIGNA Corporation's outstanding common
shares; or
(b) as a result of a merger or consolidation to which
CIGNA Corporation is a party, either CIGNA Corporation is not the
surviving corporation or Directors of CIGNA Corporation
immediately prior to the merger or consolidation constitute less
than a majority of the Board of Directors of the surviving
corporation; or
(c) a change occurs in the composition of the Board at
any time during any consecutive 24-month period such that the
"Continuity Directors" cease for any reason to constitute a
majority of the Board. For purposes of the preceding sentence
"Continuity Directors" shall mean those members of the Board who
either: (i) were directors at the beginning of such consecutive
24-month period; or (ii) were elected by, or on nomination or
recommendation of, at least a majority (consisting of at least
nine directors) of the Board.
1.6 CIGNA: CIGNA Corporation and/or its Subsidiaries.
1.7 Committee: The People Resources Committee of the Board
or a successor committee.
1.8 Disability: Permanent and total disability as defined
in Section 22(e)(3) of the Internal Revenue Code.
1.9 Eligible Employee: An Employee who meets the
eligibility requirements of Section 2.1 of the Plan.
1.10 Employee: A salaried employee of CIGNA.
1.11 Participant: An Eligible Employee to whom an
Allocation has been made.
1.12 Peer Group: A group of companies, selected by the
Committee, whose average financial performance is compared to
that of CIGNA to value SPP Units.
1.13 Performance Period: A period of time specified by the
Committee as a period with respect to which Allocations may be
made and Awards may be paid.
1.14 Plan: The CIGNA Corporation Strategic Performance Plan
as it may be amended from time to time.
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<PAGE> 3
1.15 Retirement: Termination of employment with CIGNA, after
appropriate notice to CIGNA, (a) on or after age 65 or (b) under
such terms and conditions as may be approved by the Committee or
its designee.
1.16 SPP Points: The number of points assigned to a
particular year of a Performance Period pursuant to Section 3.2
of the Plan.
1.17 SPP Unit: The smallest amount of incentive opportunity
available for Allocation to a Participant for a specified
Performance Period, with a target value of $75.00 per unit.
1.18 Stock Plan: The CIGNA Corporation Executive Stock
Incentive Plan and/or the CIGNA Corporation Stock Plan and/or any
successor plan to either of those plans.
1.19 Subsidiary: Any corporation or unincorporated entity of
which more than 50% of the voting power in the election of
directors, or 50% of any ownership interest, is at the time
directly or indirectly owned, held or controlled by CIGNA
Corporation.
1.20 Termination for Cause: A termination of employment by
CIGNA on account of the conviction of an employee of a felony
involving fraud or dishonesty directed against CIGNA.
1.21 Termination Upon a Change of Control: A termination of
employment upon or within two years after a Change of Control (i)
initiated by CIGNA or a successor other than a Termination for
Cause or (ii) initiated by an Employee after determining in his
reasonable judgment that there has been a reduction in his
authority, duties, responsibilities or title, any reduction in
his compensation, or any change caused by CIGNA in his office
location of more than 35 miles from its location on the date of
the Change of Control.
ARTICLE II. PARTICIPATION
2.1 Eligibility. The individuals who are eligible to
participate in the Plan are those Employees of CIGNA who either:
(a) Occupy officer and key Employee positions which
have been designated by the Committee as eligible positions; or
(b) Have been specifically authorized by the Committee
to participate in the Plan.
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<PAGE> 4
2.2 Allocation
(a) The CEO or his designee shall make recommendations
to the Committee regarding (i) the positions and Employees to be
selected as eligible to participate in the Plan and (ii)
Allocations of SPP Units to Eligible Employees, provided that no
person can make a recommendation regarding his own eligibility,
participation or Allocation.
(b) Before or during the Performance Period the
Committee shall in its sole discretion make Allocations to those
Eligible Employees selected for participation for a Performance
Period.
(c) In accordance with guidelines approved by the
Committee or actions subject to ratification by the Committee
prior to any resulting Award payment, the CEO or his designee may
adjust the Allocation of SPP Units for Participants whose
responsibilities change significantly during a Performance
Period.
(d) In accordance with guidelines approved by the
Committee or actions subject to ratification by the Committee
prior to any resulting Award payment, the CEO or his designee may
make an Allocation of SPP Units to a person who becomes an
Eligible Employee during a Performance Period.
ARTICLE III. VALUATION OF SPP UNITS
3.1 Financial Measures. The Committee shall determine, at
the time Allocations are made for a particular Performance
Period, the financial measurements which shall be used to compare
CIGNA's financial results to the average financial results of a
Peer Group. The composition of the Peer Group shall be
determined by the Committee.
3.2 SPP Points. Using an annual scoring formula or method
approved by the Committee at the time Allocations are made and
the financial results performance comparison of CIGNA to the Peer
Group, a number of SPP Points will be assigned to each year of a
Performance Period. Based upon the Committee's assessment of
factors which affected financial results, the Committee may
adjust the number of SPP Points for each or any year in the
Performance Period up or down, but such adjustment shall not
exceed 10 points. The SPP Points for each year of a Performance
Period will be added to compute the number of SPP Points to be
used in valuing SPP Units for the entire Performance Period.
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<PAGE> 5
3.3 Value of SPP Units. The number of SPP Points computed
for the Performance Period will determine, in accordance with a
Performance Period payout formula approved by the Committee when
Allocations are made, the preliminary dollar value of an SPP Unit
for the Performance Period. The preliminary value may be
adjusted up or down by the Committee based upon the Committee's
evaluation of CIGNA's strategic accomplishments over the
Performance Period. The maximum amount of the adjustment per SPP
Unit shall not exceed $25.00. The final value of each SPP Unit
may not exceed $200.00.
ARTICLE IV. PAYMENT OF AWARDS
4.1 Time of Payment. As soon as practicable after the close
of a Performance Period, the SPP Units shall be valued and Award
payments made to those Participants who are eligible to receive
an Award.
4.2 Amount of Awards. A Participant's Award with respect to
a Performance Period shall equal the value of one SPP Unit, as
determined in accordance with Article III, times the number of
SPP Units in the Allocation made to the Participant.
4.3 Eligibility for Awards.
(a) Except for payments described in paragraphs (b) and
(c) of this Section 4.3, and except in the event of a Termination
Upon a Change of Control, a Participant shall be eligible to
receive an Award for a Performance Period only if the Participant
has been employed by CIGNA continuously from the date of
Participant's Allocation through the date of payment of the
Award.
(b) For the purposes of this Section 4.3, a leave of
absence of less than three months' duration with the approval of
CIGNA is not considered to be a break in continuous employment.
In the case of a leave of absence of three months or longer:
(i) The Committee, based on the recommendation of
the CEO, shall determine whether or not the leave of absence
constitutes a break in continuous employment for purposes of
payment of the Award; and
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<PAGE> 6
(ii) If a Participant is on a leave of absence on
the date that the Award payment is to be made, the Committee may
require that the Participant return to active employment with
CIGNA at the end of the leave of absence as a condition of
receiving an Award payment, and any determination as to
eligibility and Award payment may be deferred for a reasonable
period after such return.
(c) If the employment of a Participant is terminated by
reason of Retirement, death or Disability after receipt of an
Allocation but before the related Award payment is made, the
Committee or its designee shall determine whether an Award shall
be paid to or on behalf of such Participant, and whether the
Award, if paid, shall be paid in full or prorated based on
factors determined in the sole discretion of the Committee, or
its designee. Any Award payment shall be made to the Participant
or the Participant's estate.
(d) In the event of a Termination Upon a Change of
Control of a Participant after the Participant receives an
Allocation but before the related Award payment is made, an Award
payment shall be made to the Participant within 30 days following
the Termination Upon a Change of Control. The amount of the
Award payment shall be an amount equal to $100.00 multiplied by
the number of SPP Units in the most recent Allocation (including
any upward adjustments in number of SPP Units made since the date
of the Allocation) for a single Performance Period received by
the Participant immediately prior to the Change of Control. In
case of multiple Allocations made on the same date, the number of
SPP Units in the Allocation for the latest-ending Performance
Period shall be applicable for purposes of this sub-section
4.3(d).
4.4. Form of Award Payment.
(a) Awards shall be paid in cash, except that the
Committee may require that all or a portion of the Award be paid
in shares of CIGNA Common Stock as provided by the Stock Plan.
This Plan is a Qualifying Incentive Plan under the provisions of
the Stock Plan.
(b) If the Committee requires payment of an Award to be
made wholly or partially in shares of CIGNA Common Stock as
provided in paragraph (a) above, the payment shall be made in
whole shares, the number of which shall have an aggregate market
value which most closely approximates, but does not exceed the
dollar amount of the Award. For purposes of this paragraph (b),
the value of a whole share of Common Stock shall be determined
under the provisions of the Stock Plan.
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<PAGE> 7
(c) A Participant's Award payment may be deferred in
accordance with the provisions of the Deferred Compensation Plan
of CIGNA Corporation and Participating Subsidiaries or a similar
or successor plan.
ARTICLE V. ADMINISTRATION
5.1 Committee Responsibilities and Authority
(a) The Plan shall be administered by the Committee,
subject to such requirements for review or approval by the Board
as the Board may establish. The Board may act in place of and on
behalf of the Committee. The Committee shall have full power and
authority to adopt, amend and rescind administrative guidelines,
rules and regulations pertaining to the Plan and to interpret the
Plan and rule on any questions respecting any of its provisions,
terms and conditions.
(b) All decisions of the Committee are binding on CIGNA
Corporation and its Subsidiaries and the directors, officers and
employees of each.
5.2 Amendment and Termination. The Board, Committee, or
authorized designee of the Committee, may amend, modify or
terminate the Plan at any time, except that the Participant's
rights with respect to outstanding Allocations may not be
abridged by any amendment, modification or termination without
their individual consent and the rights of Participants or other
Eligible Employees under paragraph 4.3(d) of the Plan may not be
abridged by any amendment, modification or termination, after a
Change of Control, without their individual consent.
ARTICLE VI. GENERAL PROVISIONS
6.1 Participant's Rights Unsecured. The right of any
Participant to receive future payments under the provisions of
the Plan shall be an unsecured claim against the general assets
of CIGNA.
6.2 Assignability. An Allocation shall not be transferable
or assignable by a Participant, except by will or by the laws of
descent and distribution. Any other attempted assignment or
alienation of an Allocation shall be void and of no force or
effect.
- 7 -
<PAGE> 8
6.3 Future Participation Not Guaranteed. Participation in
the Plan with respect to a Performance Period is not in and of
itself to be construed as evidence of a right to participate in
any subsequent Performance Period. For each successive
Performance Period, participation of an Eligible Employee shall
be evidenced only by the designation of the Eligible Employee by
the Committee as the recipient of an Allocation.
6.4 Termination of Employment. CIGNA Corporation and each
Subsidiary retain the right to terminate the employment of any
employee at any time for any reason or no reason, and an
Allocation to an Eligible Employee is not, and shall not be
construed in any manner to be, a waiver of such right.
6.5 Successors. Any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of CIGNA Corporation,
shall assume the liabilities of CIGNA Corporation under this Plan
and perform any duties and responsibilities in the same manner
and to the same extent that CIGNA Corporation would be required
to perform if no such succession had taken place.
6.6 Construction. The masculine gender, where appearing in
this Plan, shall also include the feminine gender. The singular
shall include the plural, where appropriate.
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<PAGE> 1
Description of CIGNA Corporation
Financial Services Program
The CIGNA Financial Services Program ("Program") is
designed to maximize the value of CIGNA'S compensation and
benefits program by providing support to key employees in their
financial and estate planning. Under the Program, key
employees are provided an allowance, related to the employee's
job grade, that may be applied to the cost of financial
planning provided by a CIGNA subsidiary and used for
reimbursement of expenses for tax return preparation and legal
services related to estate or financial planning. The
allowance for the chief executive officer and employees who
report to him covers the full amount of such costs and expenses.
<PAGE> 1
DEFERRED COMPENSATION PLAN OF CIGNA CORPORATION
AND PARTICIPATING SUBSIDIARIES
(Amended and Restated as of January 1, 1990)
ARTICLE I. DEFINITIONS
The following are defined terms wherever they appear in the Plan.
1.1 "Administrator" shall mean the person, or committee, appointed
by the Chief Executive Officer of CIGNA Corporation, and charged with
responsibility for administration of the Plan.
1.2 "Board Committee" shall mean the People Resources Committee of
the Board of Directors, or any successor Committee.
1.3 "Board of Directors" shall mean the Board of Directors of CIGNA
Corporation.
1.4 "Change of Control" shall mean that:
(a) a corporation, person or group acting in concert as
described in Section 14(d)(2) of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), holds or acquires beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act a number of preferred
or common shares of CIGNA Corporation having voting power which is either (1)
more than 50 percent of the voting power of the shares which voted in the
election of directors of CIGNA Corporation at the shareholders' meeting
immediately preceding such determination, or (2) more than 25 percent of the
voting power of common shares outstanding of CIGNA Corporation, or
(b) as a result of a merger or consolidation to which CIGNA
Corporation is a party, either (1) CIGNA Corporation is not the surviving
corporation, or (2) Directors of CIGNA Corporation immediately prior to the
merger or consolidation constitute less than a majority of the Board of
Directors of the surviving corporation, or
(c) a change occurs in the composition of the Board at any time
during any consecutive 24-month period such that the "Continuity Directors"
cease for any reason to constitute a majority of the Board. For purposes of
the preceding sentence, "Continuity Directors" shall mean those members of the
Board who either: (1) were directors at the beginning of such consecutive
24-month period; or (2) were elected by, or upon nomination or recommendation
of, at least a majority (consisting of at least nine directors) of the Board.
<PAGE> 2
1.5 "CIGNA Common Stock", or "Common Stock" or "Stock" shall mean
the common stock of CIGNA Corporation, par value of one dollar ($1.00) per
share.
1.6 "Corporate Committee" shall mean the CIGNA Corporation
Corporate Benefit Plan Committee, or any successor committee.
1.7 "Deferral Election" shall mean the instrument executed by a
Participant which specifies amounts and items of compensation to be deferred.
1.8 "Deferred Compensation Account" or "Account" shall mean the
separate account established under the Plan for each Participant, as described
in Section 3.1.
1.9 "Participant" shall mean each individual who as an employee of
a Participating Company elects to participate in the Plan in accordance with
the terms and conditions of the Plan.
1.10 "Payment Election" shall mean the instrument executed by a
Participant which specifies the method of payment of compensation deferred.
1.11 "Participating Company" shall mean: (a) CIGNA Corporation; and
(b) each Related Company which has been authorized by the Chief Executive
Officer of CIGNA Corporation to participate in the Plan and which, by
resolution of the board of directors (or governing body if the Related Company
is a partnership, joint venture or other unincorporated entity) of the Related
Company, has adopted the Plan and has agreed to comply with the provisions of
the Plan.
1.12 "Plan" shall mean the Deferred Compensation Plan of CIGNA
Corporation and Participating Subsidiaries, as it may be amended or restated
from time to time by the Board of Directors or the Board Committee.
1.13 "Related Company" shall mean a corporation of which more than
50% of the combined voting power of all classes of stock entitled to vote or
equity interest is owned directly or indirectly by CIGNA Corporation or by a
partnership, joint venture or other unincorporated entity of which more than
50% of the capital, equity or profits interest is owned directly or indirectly
by CIGNA Corporation.
1.14 "Restatement Date" shall mean January 1, 1990, the effective
date of the Plan, as amended and restated.
2
<PAGE> 3
1.15 "Termination of Service" shall mean
(a) termination of the employee-employer relationship between a
Participant and either CIGNA Corporation or a Related Company, or
(b) From and after the Restatement Date, occurrence of a
transaction by which a Participant's employer ceases to be a Related Company,
unless such company assumes liabilities and responsibilities under the Plan
with respect to such Participant, however,
(c) a Participant's transfer of employment among CIGNA Corporation
and Related Companies will not be a termination of employment.
1.16 "Valuation Date" shall mean the close of business on the last
business day of each month.
ARTICLE II. PARTICIPATION
2.1 Eligibility to Participate in the Plan.
The individuals who are eligible to participate in the Plan are those
salaried officers or other key employees of a Participating Company who:
(a) occupy a position with the Participating Company which has
been designated by the Corporate Committee as an eligible position for
participation in the Plan, or
(b) specifically have been authorized by the Corporate
Committee to participate in the Plan.
2.2 Participation in the Plan.
(a) A Participant may elect to defer receipt of all or a portion of
his compensation for services as an employee of a Participating Company. The
items or categories of compensation subject to deferral under the Plan shall be
limited to those specified by the Administrator.
(b) The election to defer is made by delivering a properly executed
Deferral Election to the Administrator. The Deferral Election shall specify
the item or items of compensation to be deferred, and the amount of such
compensation to be
3
<PAGE> 4
deferred. The election for payment of compensation deferred is made by
delivering a properly executed Payment Election to the Administrator. The
Payment Election shall specify the method by which such deferred compensation
is to be paid, and the date or dates for payment of such deferred compensation.
(c) An election to defer compensation must be filed by the
Participant prior to the commencement of a calendar year during which such
compensation will be paid.
(d) Notwithstanding Section 2.2(c), an election to defer
compensation made by an individual who subsequently begins active employment
with a Participating Company, by reason of initial employment, or reemployment,
if filed prior to the date of such active employment, shall be effective
according to Section 2.2(e)(2), hereof.
(e) An election to defer compensation is effective: (1) for the
year beginning after the election, and for subsequent years, unless modified or
revoked; or, (2) if Section 2.2(d) applies, for the remainder of the first year
of active employment, and for subsequent years, unless modified or revoked.
2.3 Elections Pertaining to Payments.
In executing a Payment Election, the Participant shall elect among the
methods of payment as are specified by the Corporate Committee.
(a) If a method of payment provides for periodic payments, the
payments shall be made at least annually, over a period not to exceed 10 years.
(b) If the payments are to commence after Termination of
Employment, no payments may be made before the first day of January following
the calendar year during which the Participant terminates employment.
(c) The balance of a Participant's Account shall be paid, in all
events, no later than January of the tenth year following Termination of
Employment.
2.4 Modification of Elections Pertaining to Payments.
With respect to payment of deferred compensation following Termination
of Employment, a Participant may request modification of his existing Payment
Election, for payment under another method among those specified by the
Corporate Committee. Any request for modification of such Payment Election
shall be made before the Participant terminates employment. The Corporate
Committee shall
4
<PAGE> 5
consider any such modification request. In determining whether the request
should be allowed, the Corporate Committee shall consider the Participant's
financial needs, including any changed circumstances, as well as the projected
financial needs of the Participating Company that is liable for such future
payments. If the Corporate Committee determines that the request should be
allowed, the requested modifications shall be made. The Participant shall
effect the modifications through execution of a new Payment Election, which
shall constitute the only Payment Election which is outstanding and effective.
2.5 Reduction or Termination of Future Deferral.
(a) A Participant may elect to reduce or to revoke his deferral of
compensation, but such election shall have effect only prospectively. A
Participant shall effect an election to reduce his deferral of compensation by
execution of a new Deferral Election, which shall constitute the only Deferral
Election which is outstanding and effective. A Participant shall effect an
election to revoke his deferral of compensation by informing the Administrator
in writing. Only one election to reduce and one election to revoke may be made
under this Section 2.5 by each Participant in a calendar year.
(b) An election to reduce or to revoke deferral of compensation
shall become effective in the second calendar month following receipt of such
election by the Administrator.
ARTICLE III. COMPENSATION DEFERRED
3.1 Deferred Compensation Account.
A Deferred Compensation Account shall be established for each employee
when the employee becomes a Participant. Compensation deferred by a
Participant under the Plan shall be credited to the Account on the date such
compensation would have been paid to the Participant. Hypothetical income on
deferred compensation shall be credited to the Account as provided in Section
3.3, hereof.
3.2 Balance of Deferred Compensation Account.
The balance of each Participant's Deferred Compensation Account shall
include compensation deferred by the Participant, plus income and gains
credited with respect to hypothetical investment. Losses from hypothetical
investment shall reduce the Participant's Account balance. The balance of each
Participant's Account shall be determined as of each Valuation Date.
5
<PAGE> 6
3.3 Hypothetical Investment.
(a) Compensation deferred under the Plan which would have been
paid in cash shall be assumed to be invested, without charge, in one or more
hypothetical investment vehicles as are specified from time to time by the
Corporate Committee. With respect to such hypothetical investment:
(1) Cash compensation deferred shall be deemed to earn income
under the hypothetical investment vehicle, which the Administrator shall credit
to the Participant's Account, pursuant to Section 3.4, below.
(2) The Corporate Committee, in its sole discretion, may
provide that cash compensation deferred after the Restatement date is deemed
invested in a different hypothetical investment vehicle or vehicles than the
investment vehicle in which cash compensation deferred before the Restatement
Date is deemed invested.
(3) The Corporate Committee, in its sole discretion, may
provide Plan Participants with options for one or more additional hypothetical
investment vehicles for investment of cash compensation deferred under the
Plan, with respect to which:
(A) a Participant may modify his election of
hypothetical investment, through a written request to the Administrator;
provided that,
(B) only one such modification shall be allowed during
any calendar year, and no modification in the following calendar year shall be
allowed, and
(C) any such modification shall be effective in the
second calendar month following receipt of the request by the Plan
Administrator.
(b) Compensation deferred under the Plan, which would have been
paid in CIGNA Common Stock, shall be assumed invested, without charge, in the
same number of shares of Common Stock (as adjusted to reflect stock dividends,
splits and reclassification in accordance with the terms of the CIGNA
Corporation Executive Stock Incentive Plan) as would have been paid but for
such deferral, and such compensation may not be deemed invested in any other
hypothetical investment vehicle. In addition, an amount equal to dividends
which otherwise would have been paid on such hypothetically invested Common
Stock shall be deemed paid and hypothetically invested pursuant to Section
3.3(a), above.
6
<PAGE> 7
(c) In the event of a Change of Control, the annual income
earned on at least one hypothetical fixed return guaranteed principal
investment must be not less than fifty (50) basis points over the Ten-year
Constant Treasury Maturity Yield as reported by the Federal Reserve Board,
based upon the November averages for the preceding year.
3.4 Time of Hypothetical Investment.
The balance of each Participant's Deferred Compensation Account shall
be deemed invested in one or more hypothetical investment vehicles on each
Valuation Date, and income shall accrue on such balance upon such date, from
the previous Valuation Date. Compensation which would have been paid in CIGNA
Common Stock shall be deemed hypothetically invested in Common Stock, pursuant
to Section 3.3(b) hereof, as of the date on which the number of shares
comprising the compensation deferred was determined in accordance with the
CIGNA Corporation Executive Stock Incentive Plan.
3.5 Prior Plans.
If a Participant participated in a deferred compensation plan or
agreement of a Related Company immediately before this Plan became effective,
or immediately before the Restatement Date of this Plan, or immediately before
becoming an employee of a Participating Company, the balance of his deferred
compensation account under such prior plans or agreements shall, if the prior
plan or agreement so provides, be transferred to his Deferred Compensation
Account under this Plan.
3.6 Statement of Account.
The Administrator shall provide each Participant a statement of his
Deferred Compensation Account at least annually.
ARTICLE IV. PAYMENT OF DEFERRED COMPENSATION
4.1 Payment of Deferred Compensation.
(a) The Administrator shall pay amounts from the Participant's
Account, according to the Participant's Payment Election.
(b) Compensation which, but for deferral, would have been paid
in CIGNA Common Stock shall be paid in Common Stock. Notwithstanding
the foregoing, upon the application of a Participant, the Corporate Committee
may direct that all or a portion of the Participant's distribution otherwise
payable in Common Stock be paid in cash.
7
<PAGE> 8
4.2 Financial Necessity Payment.
Notwithstanding any other provision of the Plan, if the Corporate
Committee, after consideration of a Participant's application, determines
that the Participant has a financial necessity which is beyond the
Participant's control, and of such a substantial nature that immediate payment
of compensation deferred under the Plan is warranted, the Committee in its sole
and absolute discretion may direct that all or a portion of the balance of the
Participant's Deferred Compensation Account, including that portion
hypothetically invested in Common Stock, be paid to the Participant in cash or
in such other form as may be specified by the Corporate Committee. The amount
of any such distribution shall be limited to the amount deemed necessary by the
Corporate Committee to alleviate or remedy the hardship. The payment shall be
made in the manner and at the time specified by the Corporate Committee. A
Participant receiving a Financial Necessity Payment is deemed to have revoked
his election for deferral of compensation under the Plan, as of the time of the
Financial Necessity Payment. Any subsequent deferral of compensation under the
Plan shall require that the Participant execute a new Deferral Election,
subject to terms of Section 2.2(e)(1) hereof.
4.3 Certain Payments Upon Termination of Service.
If a Participant terminates employment under circumstances which are
such that the Corporate Committee deems it in the best interests of the
Participant and of a Participating Company that payment of the Participant's
Deferred Compensation Account be accelerated, then the Corporate Committee,
upon its own motion and in its sole discretion, may direct that the
Participant's Account balance be paid to him immediately.
4.4 Payments of a Deceased Participant's Account.
In the event of the Participant's death, the Plan Administrator shall
pay the Account balance to the Participant's estate.
ARTICLE V. GENERAL PROVISIONS
5.1 Committee Membership.
A Participant who is also a member of the Corporate Committee shall
take no part in any decision pertaining to a request by such Participant
under Sections 2.4, 4.1(b), 4.2, and 4.3 hereof.
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<PAGE> 9
5.2 Participant's Rights Unsecured.
The right of any Participant to receive payments under the provisions
of the Plan represents an unsecured claim against the general assets of
the Participating Company employing the Participant at the time that the
compensation deferred otherwise would have been paid, or against the general
assets of any successor company which assumes the liabilities of any such
Participating Company. No Participating Company guarantees or is liable for
payments to any Participant employed by any other participating Company.
5.3 Assignability.
No right to receive payments hereunder shall be transferable or
assignable by a Participant. Any attempted assignment or alienation of
payments hereunder shall be void and of no force or effect.
5.4 Administration.
Except as otherwise provided herein, the Plan shall be administered
by the Administrator who shall have the authority to adopt rules and
regulations for carrying out the Plan, and who shall interpret, construe
and implement the provisions of the Plan.
5.5 Amendment.
The Plan may be amended, restated, modified, or terminated by the
Board of Directors or the Board Committee. No amendment, restatement,
modification, or termination shall reduce the balance of a Participant's
Deferred Compensation Account as of the Valuation Date immediately preceding
such action.
5.6 Corporate Reorganization
In the event that a company which employs Plan Participants ceases to
meet the definition of "Related Company" under Section 1.13, and such company
assumes liabilities and responsibility under the Plan, then the Corporate
Committee and Administrator shall have no liability or responsibility for
administration of the Plan, as such administration might affect Participants
employed by such company or Participants terminating employment with
such company after the date upon which such company ceases to be a Related
Company; nor shall the Corporate Committee or Administrator have any legal
obligation toward such Participants after such date. The company which
ceases to be a Related Company shall designate a governing committee and
plan administrator, as appropriate, which shall assume liability and
responsibility for
9
<PAGE> 10
administration of the Plan, as such administration might affect Participants
employed by such company or Participants terminating employment with such
company after the date upon which such company ceases to be a Related Company.
5.7 Correction of Errors and Inconsistencies.
The Corporate Committee upon its own motion, or at the request of the
Administrator or of a Participant, shall have authority to effect
consistency among deferral elections, payment elections, or hypothetical
investment with respect to amounts deferred by a Participant under the
Plan, so as to avoid or to rectify difficulties in Plan administration. In
no event shall such action by the Committee reduce the dollar value of a
Participant's Account balance existing on the Valuation Date immediately
preceding such action, nor shall the Committee take action inconsistent
with Section 3.3(b) hereof. The Committee may take such action with
respect to a Participant's Account, regardless of whether such Participant
may remain employed by a Participating Company or whether he may have
terminated employment. Without limiting the generality of the foregoing,
the Committee may take such action upon the request of the Administrator,
in order to avoid deferral, or payment or other distribution of fractional
shares of Stock.
5.8 Construction.
The masculine gender where appearing in the Plan shall be deemed to
include the feminine gender. The singular shall be deemed to include the
plural; and the plural the singular.
10
<PAGE> 1
DEFERRED COMPENSATION PLAN FOR DIRECTORS OF CIGNA CORPORATION
Amended and Restated as of May 1, 1991
ARTICLE I. DEFINITIONS
The following are defined terms wherever they appear in the Plan.
1.1 "Administrator" shall mean the person, or committee,
appointed by the Chief Executive Officer of CIGNA Corporation,
and charged with responsibility for administration of the Plan.
1.2 "Committee" shall mean the Committee on Directors of
the Board of Directors of CIGNA Corporation, or the successor to
such committee.
1.3 "Board of Directors" or "Board" shall mean the Board
of Directors of CIGNA Corporation.
1.4 "Change of Control" shall mean that:
(a) A corporation, person or group acting in concert
as described in Section 14(d)(2) of the Securities Exchange Act
of 1934 as amended ("Exchange Act"), holds or acquires beneficial
ownership, within the meaning of Rule 13d-3 promulgated under the
Exchange Act, of a number of preferred or common shares of CIGNA
Corporation having voting power which is either: (1) more than 50
percent of the voting power of the shares which voted in the
election of directors of CIGNA Corporation at the shareholders'
meeting immediately preceding such determination; or, (2) more
than 25 percent of the voting power of common shares outstanding
of CIGNA Corporation; or,
(b) As a result of a merger or consolidation to which
CIGNA Corporation is a party, either: (1) CIGNA Corporation is
not the surviving corporation; or, (2) Directors of CIGNA
Corporation immediately prior to the merger or consolidation
constitute less than a majority of the Board of Directors of the
surviving corporation; or,
(c) A change occurs in the composition of the Board
at any time during any consecutive 24-month period such that the
"Continuity Directors" cease for any reason to constitute a
majority of the Board. For purposes of the preceding sentence,
"Continuity Directors" shall mean those members of the Board who
either: (1) were directors at the beginning of such consecutive
24-month period, or, (2) were elected by, or upon nomination or
recommendation of, at least a majority (consisting of at least
nine directors) of the Board.
<PAGE> 2
1.5 "CIGNA Common Stock" or "Common Stock" or "Stock"
shall mean the common stock of CIGNA Corporation, par value of
one dollar ($1.00) per share.
1.6 "Deferral Election" shall mean the instrument executed
by a Participant which specifies amounts and items of
compensation to be deferred.
1.7 "Deferred Compensation Account" or "Account" shall
mean the separate account established under the Plan for each
Participant, as described in Section 3.1.
1.8 "Participant" shall mean each individual who as a
director of CIGNA Corporation elects to participate in the Plan
in accordance with the terms and conditions of the Plan.
1.9 "Payment Election" shall mean the instrument executed
by a Participant which specifies the method of payment of
compensation deferred.
1.10 "Plan" shall mean the Deferred Compensation Plan for
Directors of CIGNA Corporation, as it may be amended or restated
from time to time by the Board of Directors.
1.11 "Restatement Date" shall mean January 1, 1991, the
effective date of the Plan, as amended and restated.
1.12 "Termination of Service" shall mean termination of
services as a director of CIGNA Corporation.
1.13 "Valuation Date" shall mean the close of business on
the last business day of each month.
ARTICLE II. PARTICIPATION
2.1 Eligibility to Participate in the Plan.
The individuals who are eligible to participate in the Plan
are those persons who serve as directors of CIGNA Corporation.
2.2 Participation in the Plan.
(a) A Participant may elect to defer receipt of all
or a portion of those items of compensation for services as a
director as are specified by the Administrator.
<PAGE> 3
(b) The election to defer is made by delivering a
properly executed Deferral Election to the Administrator. The
Deferral Election shall specify the item or items of compensation
to be deferred, and the amount of such compensation to be
deferred. The election for payment of compensation deferred is
made by delivering a properly executed Payment Election to the
Administrator. The Payment Election shall specify the method by
which such deferred compensation is to be paid, and the date or
dates for payment of such deferred compensation. With respect to
payment of deferred compensation invested in hypothetical Common
Stock, as provided in Section 3.3(b), a Participant must elect
payment upon a fixed date or dates occurring at least six months
following the date upon which the compensation deferred would
otherwise have been paid, or upon death or Termination of
Service.
(c) An election to defer compensation must be filed
by the Participant prior to the commencement of a calendar year
during which such compensation will be paid.
(d) Notwithstanding Section 2.2(c), an election to
defer compensation made by an individual who subsequently begins
active service as a director of CIGNA Corporation, is filed prior
to the date upon which such active service begins, shall be
effective according to Section 2.2(e)(2), below.
(e) An election to defer compensation is effective:
(1) for the year beginning after the election, and for subsequent
years, unless modified or revoked; or, (2) if Section 2.2(d)
applies, for the remainder of the first year of active service,
as of the first day of active service, and for subsequent years,
unless modified or revoked.
2.3 Elections Pertaining to Payments.
In executing a Payment Election, the Participant shall elect
among the methods of payment as are specified by the Committee.
(a) If a method of payment provides for periodic
payments, the payments shall be made at least annually, over a
period not to exceed 10 years.
(b) If the payments are to commence after Termination
of Service, no payments may be made before the first day of
January following the calendar year during which the Participant
terminates service.
(c) The balance of a Participant's Account shall be
paid, in all events, no later than January of the tenth year
following Termination of Service.
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<PAGE> 4
2.4 Modification of Elections Pertaining to Payments.
With respect to payment of deferred compensation following
Termination of Service, a Participant may request modification of
his existing Payment Election, for payment under another method
among those specified by the Committee. Any request for
modification of such Payment Election shall be made before the
Participant terminates service. The Committee shall consider any
such modification request. In determining whether the request
should be allowed, the Committee shall consider the Participant's
financial needs, including any changed circumstances, as well as
the projected financial needs of CIGNA Corporation. If the
Committee determines that the request should be allowed, the
requested modifications shall be made. The Participant shall
effect the modifications through execution of a new Payment
Election, which shall constitute the only Payment Election which
is outstanding and effective. Notwithstanding the foregoing, a
Participant may not request modification of a fixed date elected
for payment of deferred compensation invested in hypothetical
Common Stock.
2.5 Reduction or Termination of Future Deferral.
(a) A Participant may elect to reduce or to revoke
his deferral of compensation, but such election shall have effect
only prospectively. A Participant shall effect an election to
reduce his deferral of compensation by execution of a new
Deferral Election, which shall constitute the only Deferral
Election which is outstanding and effective. A Participant shall
effect an election to revoke his deferral of compensation by
informing the Administrator in writing. Only one election to
reduce and one election to revoke may be made under this Section
2.5 by each Participant in a calendar year.
(b) An election to reduce or to revoke deferral of
compensation shall become effective in the second calendar month
following receipt of such election by the Administrator.
ARTICLE III. COMPENSATION DEFERRED
3.1 Deferred Compensation Account.
A Deferred Compensation Account shall be established for
each director when the director becomes a Participant.
Compensation deferred by a Participant under the Plan shall be
credited to the Account on the date such compensation would have
been paid to the Participant. Hypothetical income on deferred
compensation shall be credited to the Account as provided in
Section 3.3, below.
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<PAGE> 5
3.2 Balance of Deferred Compensation Account.
The balance of each Participant's Deferred Compensation
Account shall include compensation deferred by the Participant,
plus income and gains credited with respect to hypothetical
investment. Losses from hypothetical investment shall reduce the
Participant's Account balance. The balance of each Participant's
Account shall be determined as of each Valuation Date.
3.3 Hypothetical Investment.
(a) Compensation deferred under the Plan which would
have been paid in cash shall be assumed to be invested, without
charge, in one or more hypothetical investment vehicles as are
specified from time to time by the Committee. With respect to
such hypothetical investment:
(1) Cash compensation deferred shall be deemed
to earn income under the hypothetical investment vehicle. The
Administrator shall credit such income to the Participant's
Account, pursuant to Section 3.4 below.
(2) The Committee, in its sole discretion, may
provide that cash compensation deferred after the Restatement
date is deemed invested in a different hypothetical investment
vehicle or vehicles than the investment vehicle in which cash
compensation deferred before the Restatement Date is deemed
invested.
(3) The Committee, in its sole discretion, may
provide Plan Participants with options for one or more additional
hypothetical investment vehicles for investment of cash
compensation deferred under the Plan, with respect to which:
(A) a Participant may modify his election of
hypothetical investment, through a written request to the
Administrator; provided that,
(B) only one such modification shall be
allowed during any calendar year, and no modification in the
following calendar year shall be allowed, and
(C) any such modification shall be effective
in the second calendar month following receipt of the request by
the Plan Administrator.
(b) Compensation deferred under the Plan as an
alternative to receipt of Common Stock shall be assumed to be
invested, hypothetically and without charge, in whole shares of
hypothetical Common Stock. Amounts equal to cash dividends which
would have been paid on shares of Common Stock shall be deemed
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<PAGE> 6
paid on whole shares of hypothetical Common Stock and credited
and hypothetically invested pursuant to Section 3.3(a), above.
Shares of hypothetical Common Stock shall be subject to
adjustment in order to reflect Common Stock dividends, splits,
and reclassification. Notwithstanding any other provision of the
Plan, deferred compensation invested in hypothetical Common Stock
must remain so invested for a period of not less than six months
or until Termination or death, whichever is earlier. Deferred
compensation invested in hypothetical Common Stock must remain
deemed invested in hypothetical Common Stock, and no other
investment vehicle available hereunder may be substituted
therefor.
(c) In the event of a Change of Control, the
Committee shall provide Participants with the option for
investment in at least one hypothetical investment vehicle, the
annual income earned on which must be not less than 50 basis
points over the Ten-Year Constant Treasury Maturity Yield as
reported by the Federal Reserve Board, based upon the November
averages for the preceding year.
3.4 Time of Hypothetical Investment.
(a) The balance of each Participant's Deferred
Compensation Account shall be deemed hypothetically invested on
each Valuation Date, and income shall accrue on such balance upon
such date, from the previous Valuation Date.
(b) Compensation which would have been paid in cash
shall be deemed invested on the Valuation Date next following
such hypothetical investment or credit.
(c) Compensation hypothetically invested in Common
Stock shall be deemed invested in whole shares of Common Stock as
of the date such compensation otherwise would have been payable
to the Participant. The number of whole shares of Common Stock
in which compensation is deemed hypothetically invested shall be
determined with respect to the last trade date in the month in
which such compensation otherwise would have been payable, by
reference to the last quoted transaction in such month as
reported on the Composite tape (or successor means of publishing
stock prices), provided, that in absence of such information, the
Stock value shall be determined by the Committee.
3.5 Statement of Account.
The Administrator shall provide each Participant a statement
of his Deferred Compensation Account at least annually.
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<PAGE> 7
ARTICLE IV. PAYMENT OF DEFERRED COMPENSATION
4.1 Payment of Deferred Compensation.
(a) The Administrator shall pay amounts from the
Participant's Account, according to the Participant's Payment
Election.
(b) Compensation deferred under the Plan shall be
paid to the Participant in cash pursuant to Section 4.1(a).
4.2 Financial Necessity Payment.
Notwithstanding any other provision of the Plan, if the
Committee, after consideration of a Participant's application,
determines that the Participant has a financial necessity beyond
the Participant's control, and of such a substantial nature that
immediate payment of compensation deferred under the Plan is
warranted, the Committee in its sole and absolute discretion may
direct that all or a portion of the balance of the Participant's
Deferred Compensation Account (except that portion which has been
invested in hypothetical Common Stock) be paid to the Participant
in cash. The amount of any such distribution shall be limited to
the amount deemed necessary by the Committee to alleviate or
remedy the hardship. The payment shall be made in a manner and
at the time specified by the Committee. A Participant receiving
a Financial Necessity Payment is deemed to have revoked his
election for deferral of compensation under the Plan, as of the
time of the Financial Necessity Payment. Any subsequent deferral
of compensation under the Plan shall require that the Participant
execute a new Deferral Election, subject to terms of Section
2.2(e)(1) hereof. The limitation specifically imposed by this
paragraph on payment of that portion of a Participant's Deferred
Compensation account invested in hypothetical Common Stock shall
not apply to hypothetical Common Stock acquired prior to May 1,
1991, if rules adopted by the Securities and Exchange Commission
(the "SEC") and/or pronouncement of the staff of the SEC's
Division of Corporation Finance establish that the absence of
such limitation on hypothetical Common Stock acquired prior to
May 1, 1991, will not cause hypothetical Common Stock to fall
within the definitions of "equity security" or "derivative
security" set forth in rules promulgated under Section 16 of the
Securities Exchange Act of 1934.
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<PAGE> 8
4.3 Certain Accelerated Payments.
(a) If a Participant terminates service under
circumstances which are such that the Committee deems it in the
best interest of the Participant and of CIGNA Corporation that
payment of the Participant's Deferred Compensation Account be
accelerated, then the Committee, upon its own motion and in its
sole discretion, may direct that the Participant's Account
balance be paid to him immediately.
(b) If, as a result of substantial and unforeseen
changes affecting (1) the business of CIGNA Corporation, (2) the
personal or professional circumstances of a Participant, or (3)
operation or administration of the Plan, the Committee determines
that the interests of the Participant and of CIGNA Corporation
are best served through accelerated payment of the Participant's
Deferred Compensation Account, the Committee on its own motion
and in its sole discretion may direct that the Participant's
account balance be paid to him immediately (except that portion
which has been invested in hypothetical Common Stock). The
limitation specifically imposed by this paragraph on payment of
that portion of a Participant's Deferred Compensation account
invested in hypothetical Common Stock shall not apply to
hypothetical Common Stock acquired prior to May 1, 1991, if rules
adopted by the Securities and Exchange Commission (the "SEC")
and/or pronouncement of the staff of the SEC's Division of
Corporation Finance establish that the absence of such limitation
on hypothetical Common Stock acquired prior to May 1, 1991, will
not cause hypothetical Common Stock to fall within the
definitions of "equity security" or "derivative security" set
forth in rules promulgated under Section 16 of the Securities
Exchange Act of 1934.
4.4 Payments of a Deceased Participant's Account
(a) In the event of the participant's death, the Plan
Administrator shall pay the balance of the Participant's Account
to the Participant's estate.
(b) Notwithstanding Section 4.4(a), the Committee may
direct that the Plan Administrator make payment from the Account
of a deceased Participant according to an election made by the
Participant before the Restatement Date, if such payment is
necessary to the orderly consummation of the Participant's estate
plan, and if such election and payment are valued under
applicable state law, and not in conflict with such law.
ARTICLE V. GENERAL PROVISIONS
5.1 Committee Membership.
A Participant who is also a member of the Committee shall
take no part in any decision pertaining to a request by such
Participant under Sections 2.4, 4.1(c), 4.2, and 4.3 hereof.
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<PAGE> 9
5.2 Participant's Rights Unsecured.
The right of any Participant to receive payments under the
provisions of the Plan represents an unsecured claim against the
general assets of CIGNA Corporation, or against the general
assets of any successor company which assumes the liabilities of
CIGNA Corporation.
5.3 Assignability.
No right to receive payments hereunder shall be transferable
or assignable by a Participant. Any attempted assignment or
alienation of payments hereunder shall be void and of no force or
effect.
5.4 Administration.
Except as otherwise provided herein, the Plan shall be
administered by the Administrator who shall have the authority to
adopt rules and regulations for carrying out the Plan, and who
shall interpret, construe and implement the provisions of the
Plan.
5.5 Amendment.
The Plan may be amended, restated, modified, or terminated
by the Board of Directors. No amendment, restatement,
modification, or termination shall reduce the balance of a
Participant's Deferred Compensation Account as of the Valuation
Date immediately preceding such action.
5.6 Correction of Errors and Inconsistencies.
The Committee upon its own motion, or at the request of the
Administrator or of a Participant, shall have authority to effect
consistency among deferral elections, payment elections, or
hypothetical investment with respect to amounts deferred by a
Participant under the Plan, so as to avoid or to rectify
difficulties in Plan administration. In no event shall such
action by the Committee reduce the dollar value of a
Participant's Account balance existing on the Valuation Date
immediately preceding such action, nor shall the Committee take
action inconsistent with Section 3.3(b) hereof. The Committee
may take such action with respect to a Participant's Account,
regardless of whether such Participant may continue as a director
of CIGNA Corporation, or whether he may have terminated service.
Without limiting the generality of the foregoing, the Committee
may take such action upon the request of the Administrator, in
order to avoid deferral, or payment or other distribution of
fractional shares of Stock.
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<PAGE> 10
5.7 Construction.
The masculine gender where appearing in the Plan shall be
deemed to include the feminine gender. The singular shall be
deemed to include the plural; and the plural the singular.
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<PAGE> 1
RETIREMENT AND CONSULTING PLAN FOR
DIRECTORS OF CIGNA CORPORATION
Amended Effective May 29, 1991
1. Eligibility
Each member of the Board of Directors (the "Board") of CIGNA
Corporation (the "Corporation") who at the time of Retirement
from the Board shall have served five years on the Board or
the Board of Directors of Connecticut General Corporation, the
Board of Directors of Connecticut General Life Insurance
Company, the Board of Directors of INA Corporation, the Board
of Directors of Insurance Company of North America, or any
combination thereof (the "Boards"), and shall have attained at
least age 60 (an "Eligible Director") shall be eligible to
receive fees under this Plan.
2. Amount of Fees
(a) An Eligible Director who at the time of Retirement from
the Board shall have attained age 70 shall be entitled to
receive, for the remainder of the Director's lifetime,
fees at an annual rate equal to the annual retainer in
effect for non-employee directors of the Board at the
time of such Retirement.
(b) An Eligible director who at the time of Retirement from
the Board shall have attained age 60 but not age 70 shall
be entitled to receive, for a period of time equal to the
number of months such Director served as director of the
Boards, fees at an annual rate equal to the annual
retainer in effect for non-employee directors of the
Board at the time of such Retirement. Concurrent service
on Boards shall be counted as service on a single board.
<PAGE> 2
(c) Notwithstanding any other provision of this Plan, an
Eligible Director who qualifies for the payment of fees
under Paragraph 2(b) but not Paragraph 2(a), may, prior
to his retirement, request the Board's Committee on
Directors approve payment to him upon his Retirement of
a lump-sum equal to the discounted present value of the
total amount of fees which would be payable to the
Eligible Director under Paragraph 2(b). The discounted
present value shall be computed using the same mortality
and discount rate assumptions used in the measurement of
the Corporation's annual pension expense pursuant to
Financial Accounting Standards Board Statement No. 87 for
the year in which the Director's retirement occurs.
(d) Fees paid in any calendar year shall be reduced by any
other pension or retirement payment the Director or
surviving spouse receives on account of service as a
Director or employee under any other retirement plan or
arrangement of the Corporation or any entity which
controls or is controlled by the Corporation.
3. Time of Payment
The fees shall be paid to an Eligible Director commencing upon
such Director's Retirement from the Board (a "Retired
Director") in as nearly equal as possible quarterly
installments at the same time as payments of annual
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<PAGE> 3
retainers are made to non-employee directors serving on the
Board at the time of the payment. If such payments are made
to current directors more frequently than quarterly, then
amounts due under the Plan shall be paid on such more frequent
basis.
4. Services of Retired Director
A Retired Director receiving payments under the Plan (a) shall
be available at such reasonable times and places as the
Chairman of the Board of Directors may request to render
consultative services and advice to the Corporation and (b)
shall not engage in any activity in competition with the
Corporation's business without prior written agreement of the
Corporation. If a Retired Director fails to render such
services and advice (unless physically unable to do so) or
engages in such competition without agreement of the
Corporation, the Corporation shall be entitled, at its option
after considering all the circumstances, to suspend or
terminate future payments to such Director under the Plan or
to recover payments already made under the Plan. If an
Eligible Director receives fees pursuant to Paragraph 2(c) of
this Plan, the Eligible Director's obligations under this
Paragraph 4 shall continue for a period of time equal to the
number of months such Director served as a Director of the
Boards.
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<PAGE> 4
5. Payments on Death
In the event of the death of an Eligible Director (before or
after retirement) prior to receiving payments for a period
equal to the lesser of (a) the total number of months of such
Director's surviving lawful spouse, if any, will be entitled
to such payments for the remainder of such lesser period or
until such spouse's death, whichever occurs first. No
payments shall, however, be made under this Paragraph 5 with
respect to any Eligible Director who has received a lump sum
payment under Paragraph 2(c).
6. Miscellaneous
(a) The right to receive any payment under the Plan shall not
be transferrable or assignable.
(b) The Corporation shall not be required to set aside funds
for the payment of its obligations under the Plan.
(c) Nothing in the Plan shall create any benefit, cause of
action, right of sale, transfer, assignment, pledge,
encumbrance, or other such right in any heirs or the
estate of any Retired Director.
(d) The Board may at any time amend or terminate the Plan
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<PAGE> 5
provided that no amendment or termination shall impair
the rights of an Eligible Director to receive upon
retirement from the Board the payments which would have
been made to such Director had the Plan not been amended
or terminated (based upon such Director's service on the
Board, to the date of such amendment or termination) or
the rights of a Retired Director (or such Director's
surviving spouse) to receive any remaining payments due
under the Plan.
(e) Nothing in the Plan shall be deemed to create any
obligation on the part of the Board to nominate any
Director for reelection by the Corporation's
shareholders.
(f) Any questions involving entitlement to payments under the
Plan shall be referred to the Committee on Directors of
the Board or any successor thereto (the "Committee") for
resolution. The determination of such Committee shall be
conclusive. Such Committee may obtain such advice or
assistance as it deems appropriate from persons not
serving on the Committee.
(g) As used in the Plan, "Retirement" shall include any
termination of service (other than by death) of an
Eligible Director after the effective date of this Plan
except any termination which the Committee determines to
have resulted from gross cause. "Gross cause" shall
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<PAGE> 6
include fraud, misappropriation of or intentional
misconduct damaging to the property or business of the
Corporation or any of its subsidiaries, or commission of
a felony directed against the Corporation.
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<PAGE> 1
CIGNA CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
This Agreement made as of the 31st day of October, 1988,
between ROBERT D. KILPATRICK ("R.D.K.") and CIGNA Corporation,
a Delaware corporation with its principal place of business in
Philadelphia, Pennsylvania ("CIGNA")
W I T N E S S E T H :
WHEREAS, R.D.K. and CIGNA wish to enter into this
Agreement in order to supplement any retirement benefits
accruing to R.D.K. pursuant to any qualified or non-qualified
pension plans of CIGNA ("Pension Plans").
NOW, THEREFORE, in consideration of the premises and
intending to be legally bound, the parties hereto agree as
follows:
1. Normal Supplemental Retirement Benefit. In
consideration of R.D.K.'s long and significant employment,
CIGNA agrees that, effective March 1, 1989, R.D.K. will receive
pursuant to this Agreement a Supplemental Retirement Benefit
payable monthly. The annual amount of this Supplemental
Retirement Benefit shall equal:
<PAGE> 2
a. $37,000 a year (reflecting both lost salary and
incentive-related compensation because of
R.D.K.'s early retirement and the salary R.D.K.
would have earned in the four-month period of
November 1, 1988 to February 28, 1989); plus
b. An amount equal to 20% of any excess over
$280,000 of any bonus awarded to R.D.K. in March
1989 for 1988 performance.
2. Post-Retirement Surviving Spouse Benefit. If R.D.K.
is married on the date of his death to the spouse he had on
November 1, 1988, such surviving legal spouse shall be entitled
to a supplemental retirement income benefit under this
Agreement. This benefit shall be 30% of the annual
Supplemental Retirement Benefit R.D.K. was receiving, or
entitled to receive, pursuant to Paragraph 1 above, and shall
be payable to R.D.K.'s spouse beginning with the month
following the later of March 31, 1989 or the date of R.D.K.'s
death and shall continue until her death. This benefit shall
be paid regardless of whether R.D.K. elects one of the optional
forms of supplemental benefits provided in Paragraph 3 below.
3. Optional Forms of Supplemental Benefits. Prior to
March 31, 1989 R.D.K. may elect in writing to receive the
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<PAGE> 3
Supplemental Retirement Benefit provided by this Agreement in
one of the optional forms provided under Section 5.04 of the
CIGNA Supplemental Pension Plan, as amended.
IN WITNESS WHEREOF, the parties have hereto set their
hands and seals intending to be legally bound hereby as of the
day and year first above written.
CIGNA CORPORATION
By:__________________________
_____________________________
Robert D. Kilpatrick
Date: MARCH 23, 1989
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<PAGE> 1
CIGNA Corporation
One Libert Place
1650 Market Street
P. O. Box 7716
Philadelphia, PA 19192-1550
(215) 761-6001 LOGO
Wilson H. Taylor
Chairman and Chief Executive Officer
February 9, 1993
Mr. Gerald A. Isom
4421 Alta Tupelo Drive
Calabasas, CA 91302
Dear Gerry,
It is a pleasure to confirm my offer of employment to you for the
position of President, Domestic Property and Casualty Division,
reporting to me.
Compensation opportunity for this position includes:
. Salary, paid bi-weekly, at a pretax annualized rate of
$475,000. The salary range for your job is $350,000 to
$580,000. You will receive annual consideration for salary
increases.
. Signing bonus of $50,000 to be paid within the first month
after your start date.
. Target bonus opportunity of $255,000 for the 1993
performance year. Bonus amounts can vary from 0 to 200% of
target based on performance during a calendar year. Bonuses
are typically paid in the first quarter of the year
following the performance period and are not considered
earned until the date paid. Your earned bonus for the 1993
performance year is guaranteed at $150,000 or greater
dependent upon performance.
. Performance units, under the Strategic Performance Plan,
will be awarded to you in 1993. Unit values are determined
at the end of a three-year performance period. The target
for the award is $210,000, to be valued based on CIGNA's
returns over the 1993-1995 period and to be paid in the
first quarter of 1996. In addition, you will be given two
transition awards, each with a target of $210,000 and
payable in 1994 and 1995. These awards are not considered
earned until the date paid.
<PAGE> 2
February 9, 1993
Page 2
. Stock grants are made annually in the first quarter. Half
of the value is in the form of restricted stock (RSGS) and
half in options. RSGs vest after five years. During the
vesting period, dividends, and interest on those dividends,
will accrue. Half of the options are exercisable after one
year, and the remaining half, after two years. Options have
a 10 year exercise period. The target value of the stock
award for your grade is $150,000 and your first regular
grant will be in 1994.
This year the Board of Directors will award you two special stock
grants: (1) a 20,000 share option grant, target value $300,000,
and (2) a restricted stock grant, approximately equal to
$150,000. Both grants will conform to the guidelines in our
current stock program described in the previous paragraph.
. Your base salary rate is guaranteed for three years from
your start date. If your employment is terminated
involuntarily, except for gross misconduct, you will receive
a payment equal to the remaining guaranteed salary you would
have been paid through the three-year period.
The executive compensation program elements described here --
bonus, stock, performance units -- are those of our current
program and may be subject to modification or enhancement by the
Board of Directors. As an executive of the company, you will be
eligible for any future program changes.
You will also be eligible for CIGNA's comprehensive employee
benefits program, including the defined benefit pension plan and,
after one year, the 401(k) savings plan. Under this plan, CIGNA
will match your contributions, up to the first 6% of your salary
and bonus, at the rate of 50 cents on the dollar - for a maximum
match of 3% of your eligible earnings.
Beginning in 1994 and each year of your employment thereafter, we
will provide a retirement supplement equal to $100,000. This
supplement is in addition to our nornal defined benefit plan.
Because the form of this supplement and its payout can have
varying tax implications for you, we want your involvement in the
determination of its final structure. Therefore, once you have
joined us, Gerald Meyn, Vice-President, Benefits, will discuss
the alternatives with you before finalizing the pension
supplement.
You will also receive relocation support, including payment of
closing costs on the sale of your existing home, home finding and
final trip expenses, and movement of your household goods to the
Philadelphia area. We will also provide a monthly housing
subsidy
<PAGE> 3
February 9, 1993
Page 3
for you in the Philadelphia area of $3,000 for a period up to 12
months. Upon the purchase of a new home, closing costs, as
defined in our policy, will be reimbursed. At that time, a
settling-in allowance of $10,000 will also be paid. Because the
majority of these payments will be income to you, we will provide
tax gross-up according to the terms of our relocation policy.
Payment of closing costs on both homes is available up to two
years.
Gerry, I'm personally delighted to have you join the CIGNA
management team and I am looking forward to working with you.
Sincerely,
/s/ Bill
Please indicate your acceptance of our offer by signing below and
returning a copy to me.
Acceptance: /s/ Gerald A. Isom
Date: 2/10/93
<PAGE> 1
RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
OF CIGNA CORPORATION
1. Purpose.
The Restricted Stock Plan for Non-Employee Directors of
CIGNA Corporation (the "Plan") is intended to provide
directors of CIGNA Corporation (the "Company") with a
proprietary interest in the Company's success and progress
by granting them shares of the Company's Common Stock
("Common Stock") which are restricted in accordance with
the terms and conditions set forth below ("Restricted
Shares"). The Plan is intended to increase the alignment
of personal economic interest between directors and
shareholders generally and to strengthen the Company's
ability to continue attracting and retaining highly
qualified directors.
2. Administration.
The Plan is to be administered by the Committee on
Directors (the "Committee") of the Company's Board of
Directors (the "Board') or any successor committee with
responsibility for compensation of directors.
3. Eligibility and Grants.
All current and subsequently elected members of the
Company's Board of Directors who have served as directors
for at least six months and at the time such service began
were not, and for the preceding ten years had not been,
officers or employees of the Company or any of its
subsidiaries ("Eligible Directors") shall be eligible to
participate in the Plan.
Each director who is an Eligible Director on the effective
date of the Plan (the "Effective Date") shall be granted
1,500 Restricted Shares, effective as of the Effective
Date. Each director who becomes an Eligible Director after
the Effective Date shall be granted 1,500 Restricted
Shares, effective as of the date such director becomes an
Eligible Director.
4. Terms and Conditions of Restricted Shares.
(a) General. Subject to the provisions of Section 4(c)
below, the restrictions set forth in Section 4(b)
shall apply to each grant of Restricted Shares for a
period (the "Restricted Period") from the date of
grant until the later of the expiration of the
<PAGE> 2
six-month period immediately following the date of
grant or the date on which the Eligible Director's
service as a director of the Company terminates.
(b) Restrictions. A stock certificate representing the
number of Restricted Shares granted shall be
registered in each Eligible Director's name but shall
be held in custody by the Company for the Eligible
Director's account. The Eligible Director shall have
all rights and privileges of a shareholder as to such
Restricted Shares, including the right to receive
dividends and the right to vote such Restricted
Shares, except that the following restrictions shall
apply: (i) the Eligible Director shall not be
entitled to delivery of the certificate until the
expiration of the Restricted Period, (ii) none of the
Restricted Shares may be sold, transferred, assigned,
pledged, or otherwise encumbered or disposed of during
the Restricted Period, and (iii) except as provided in
Section 4(c), all of the Restricted Shares shall be
forfeited and all rights of the Eligible Director to
such Restricted Shares shall terminate without further
obligation on the part of the Company upon the
Eligible Director's ceasing to be a director of the
Company.
(c) Termination of Directorship.
(i) Vesting of Shares. If an Eligible Director
ceases to be a director of the Company by
reason of Disability, Death, Retirement or
Change of Control, the Restricted Shares
granted to such Eligible Director shall
immediately vest. If an Eligible Director
ceases to be a director of the Company for any
other reason, the Eligible Director shall
immediately forfeit all Restricted Shares,
except to the extent that a majority of the
Board other than the Eligible Director approves
the vesting of such Restricted Shares. Upon
vesting, except as provided in Section 5, all
restrictions applicable to such Restricted
Shares shall lapse and a certificate for such
shares shall be delivered to the Eligible
Director, or the Eligible Director's
beneficiary or estate, in accordance with
Section 4(d).
(ii) Disability. For purposes of this Section 4(c),
"Disability" shall mean a permanent and total
disability as defined in Section 22(e)(3) of
the Internal Revenue Code.
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<PAGE> 3
(iii) Retirement. For purposes of this Section 4(c),
"Retirement" shall mean ceasing to be a
director of the Company (i) on or after age 70,
or (ii) on or after age 65 with the consent of
a majority of the members of the Board other
than the Eligible Director.
(iv) Change of Control. For purposes of this
Section 4(c), "Change of Control" shall mean:
(A) a corporation, person or group acting in
concert as described in Section 14(d)(2)
of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), holds or
acquires beneficial ownership within the
meaning of Rule 13d-3 promulgated under
the Exchange Act of a number of preferred
or common shares of the Company having
voting power which is either (i) more than
50% of the voting power of the shares
which voted in the election of directors
of the Company at the shareholders'
meeting immediately preceding such
determination, or (ii) more than 25% of
the voting power of the Company's
outstanding common shares; or
(B) as as result of a merger or consolidation
to which the Company is a party, either
(i) the Company is not the surviving
corporation or (ii) Directors of the
Company immediately prior to the merger or
consolidation constitute less than a
majority of the Board of Directors of the
surviving corporation; or
(C) a change occurs in the composition of the
Board at any time during any consecutive
24-month period such that the "Continuity
Directors" cease for any reason to
constitute a majority of the Board. For
purposes of the preceding sentence
"Continuity Directors" shall mean those
members of the Board who either: (i) were
directors at the beginning of such
consecutive 24-month period; or (ii) were
elected by, or on nomination or
recommendation of, at least a majority
(consisting of at least nine directors) of
the Board.
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<PAGE> 4
(d) Delivery of Restricted Shares. At the end of the
Restricted Period a stock certificate for the number
of Restricted Shares which have vested shall be
delivered free of all such restrictions to the
Eligible Director or the Eligible Director's
beneficiary or estate, as the case may be.
5. Regulatory Compliance.
No Common Stock granted pursuant to this Plan shall be sold
or distributed by an Eligible Director or an Eligible
Director's beneficiary or estate until all appropriate
listing, registration and qualification requirements and
consents and approvals have been satisfied or obtained,
free of any condition unacceptable to the Board of
Directors.
6. Adjustment in Event of Changes in Capitalization.
In the event of a recapitalization, stock split, stock
dividend, combination or exchange of shares, merger,
consolidation, rights offering, separation, reorganization
or liquidation, or any other change in the corporate
structure or shares of the Company, the Committee may make
such equitable adjustments, to prevent dilution or
enlargement of rights, as it may deem appropriate in the
number and class of shares authorized to be granted as
Restricted Shares. Shares issued as a consequence of any
such change in the corporate structure or shares of the
Company shall be issued subject to the same restrictions
and provisions applicable to the Restricted Shares with
respect to which they are issued.
7. Termination or Amendment of the Plan.
The Board may at any time terminate the Plan and may from
time to time alter or amend the Plan or any part hereof
(including any amendment deemed necessary to ensure that
the Company may comply with any regulatory requirement
referred to in Section 5) without shareholder approval,
unless otherwise required by law or by the rules of the
Securities and Exchange Commission or New York Stock
Exchange. No termination or amendment of the Plan may,
without the consent of an Eligible Director impair the
rights of such director with respect to shares of Common
Stock granted under the Plan.
8. Miscellaneous.
(a) Nothing in the Plan shall be deemed to create any
obligation on the part of the Board to nominate any
director for reelection by the Company's shareholders.
-4-
<PAGE> 5
(b) The Company shall have the right to require, prior to
the issuance or delivery of any Restricted Shares,
payment by an Eligible Director of any taxes required
by law with respect to the issuance or delivery of
such shares, or the lapse of restrictions thereon.
(c) The shares of Common Stock granted as Restricted
Shares under the Plan may be either authorized but
unissued shares or shares which have been or may be
reacquired by the Company, as determined from time to
time by the Board.
9. Effective Date.
Provided that the Company's Shareholders shall have
approved the Plan at the Company's 1989 Annual Meeting of
Shareholders, the Plan shall become effective as of
September 30, 1989, or such later date as may be fixed by
the Board.
-5-
<PAGE> 1
Description of First Amendment to Restricted Stock Plan for
Non-Employee Directors of CIGNA Corporation
This statement is being filed pursuant to the requirements of
Securities and Exchange Commission Rule 411(c). By resolution of
the Board of Directors of CIGNA Corporation, adopted at a regular
meeting held October 30, 1991, Section 7 of the Restricted Stock
Plan for Non-Employee Directors of CIGNA Corporation was amended,
effective immediately, by adding the following provision at the
close of such section:
"Notwithstanding the foregoing provisions of this Section
7, the provisions of the Plan governing eligibility of a
Director and the amount, timing and pricing of an award
hereunder shall not be amended more than once every six
months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act,
or the rules thereunder."
<PAGE> 1
Description of
Stock Compensation Plan
for Non-Employee Directors
of CIGNA Corporation (as amended)
The Stock Compensation Plan for Non-Employee Directors of CIGNA
Corporation, as amended (the "Plan"), provides certain stock compensation
arrangements to members of CIGNA Corporation's Board of Directors (the "Board")
who are not in the employ of the company. The Plan has been established by
Board resolutions but has not been set forth in a formal document.
The Plan provides that at least $8,000 of the annual retainer paid to
Directors for their services as Directors (and as members of committees of the
Board) must be taken either in shares of CIGNA Corporation Common Stock or
deferred pursuant to the terms of the Deferred Compensation Plan for Directors
of CIGNA Corporation. If payment is made in shares of Common Stock, the shares
are issued in four equal installments within 30 days of the end of each
calendar quarter. The number of shares in each payment is determined by the
closing price at which the Common Stock trades on the last trade date for
Common Stock in the quarter for which payment is being made. The above
provisions relating to amount, price and timing of Common Stock payments may
not be amended more than once every six months (except where an amendment is
necessary to comply with certain federal laws).
In addition, the Plan provides that Directors may, with respect to any
other fees paid to them for services as Directors, defer receipt of all or any
portion thereof or elect to receive all or any portion thereof in either cash
or an equivalent amount of Common Stock (provided that no fractional shares may
be issued).
<PAGE> 1
EXHIBIT 11
CIGNA CORPORATION
COMPUTATION OF PRIMARY EARNINGS PER SHARE
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
INCOME AVAILABLE TO COMMON SHARES
- -------------------------------------------------------
PRIMARY:
Income before extraordinary item and cumulative
effect of accounting changes...................... $ 234 $ 337 $ 453
Extraordinary loss:
Loss from early extinguishment of debt............ -- -- (4)
Cumulative effect of accounting changes for
postemployment and postretirement benefits other
than pensions, net of taxes....................... -- (530) --
Cumulative effect of accounting change for income
taxes............................................. -- 504 --
---------- ---------- ----------
Net income available to common shares................ $ 234 $ 311 $ 449
---------- ---------- ----------
---------- ---------- ----------
WEIGHTED AVERAGE SHARES
- -------------------------------------------------------
PRIMARY:
Common shares........................................ 71,933,241 71,694,059 71,470,589
Common share equivalents applicable to stock
options........................................... 88,710 42,716 20,658
---------- ---------- ----------
Total............................................. 72,021,951 71,736,775 71,491,247
---------- ---------- ----------
---------- ---------- ----------
EARNINGS PER SHARE
- -------------------------------------------------------
PRIMARY:
Income before extraordinary loss and cumulative
effect of accounting changes...................... $ 3.25 $ 4.70 $ 6.34
Loss from early extinguishment of debt............... -- -- (.06)
Cumulative effect of accounting changes for
postemployment and postretirement benefits other
than pensions, net of taxes....................... -- (7.39) --
Cumulative effect of accounting change for income
taxes............................................. -- 7.03 --
---------- ---------- ----------
Net income........................................... $ 3.25 $ 4.34 $ 6.28
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE> 2
CIGNA CORPORATION
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
INCOME AVAILABLE TO COMMON SHARES
FULLY DILUTED:
Income before extraordinary item and cumulative
effect of accounting changes................... $ 234 $ 337 $ 453
Adjusted for:
Interest expense (net of tax) on convertible
subordinated debentures...................... 13 13 13
----------- ----------- -----------
Income before extraordinary item and cumulative
effect of accounting changes................... 247 350 466
Extraordinary loss:
Loss from early extinguishment of debt......... -- -- (4)
Cumulative effect of accounting changes for
postemployment and postretirement benefits
other than pensions, net of taxes.............. -- (530) --
Cumulative effect of accounting change for income
taxes.......................................... -- 504 --
----------- ----------- -----------
Net income available to common shares............. $ 247 $ 324 $ 462
----------- ----------- -----------
----------- ----------- -----------
WEIGHTED AVERAGE SHARES
FULLY DILUTED:
Common shares..................................... 71,933,241 71,694,059 71,470,589
Common share equivalents applicable to stock
options........................................ 97,177 57,728 43,631
Assumed conversion of convertible subordinated
debentures..................................... 3,626,395 3,626,395 3,626,395
----------- ----------- -----------
Total.......................................... 75,656,813 75,378,182 75,140,615
----------- ----------- -----------
----------- ----------- -----------
EARNINGS PER SHARE
FULLY DILUTED:
Income before extraordinary loss.................. $ 3.26 $ 4.65 $ 6.20
Loss from early extinguishment of debt............ -- -- (.05)
Cumulative effect of accounting changes for
postemployment and postretirement benefits
other than pensions, net of taxes.............. -- (7.03) --
Cumulative effect of accounting change for income
taxes.......................................... -- 6.69 --
----------- ----------- -----------
Net income........................................ $ 3.26 $ 4.31 $ 6.15
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<PAGE> 1
EXHIBIT 12
CIGNA CORPORATION
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Income from continuing operations before income
tax............................................. $ 165 $ 179 $ 584 $ 352 $ 592
------ ------ ------ ------ ------
Fixed charges included in operations:
Interest expense................................ 124 100 106 115 96
Interest portion of rental expense.............. 114 113 123 116 82
------ ------ ------ ------ ------
Total fixed charges included in
operations.............................. 238 213 229 231 178
------ ------ ------ ------ ------
Income available for fixed charges................ $ 403 $ 392 $ 813 $ 583 $ 770
------ ------ ------ ------ ------
Combined fixed charges and preferred stock
dividend requirements:
Preferred stock dividends....................... -- $ -- $ -- $ -- $ 13
Ratio of pre-tax income from continuing
operations to income after tax............... -- -- -- -- 1.293
------ ------ ------ ------ ------
Preferred stock dividend requirement............ -- -- -- -- 17
Total fixed charges............................. 238 213 229 231 178
------ ------ ------ ------ ------
Total combined fixed charges and preferred
stock dividend requirements............. $ 238 $ 213 $ 229 $ 231 $ 195
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to fixed charges................ 1.7 1.8 3.6 2.5 4.3
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to combined fixed charges and
preferred stock dividends....................... 1.7 1.8 3.6 2.5 3.9
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
<PAGE> 1
HIGHLIGHTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share amounts) 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Premiums and fees $ 13,712 $ 13,924 $ 14,295 $ 13,986 $ 11,494
Net investment income and other revenues 4,408 4,493 4,373 4,198 4,001
Realized investment gains (losses) 282 165 82 (20) 159
- -----------------------------------------------------------------------------------------------------------------------------
Total $ 18,402 $ 18,582 $ 18,750 $ 18,164 $ 15,654
- --------------------------------------------------------=====================================================================
INCOME (LOSS) FROM CONTINUING OPERATIONS:
Employee Life and Health Benefits $ 589 $ 483 $ 329 $ 291 $ 233
Employee Retirement and Savings Benefits 159 216 167 161 158
Individual Financial Services 110 86 76 67 82
Property and Casualty (530) (374) (7) (104) 27
Other Operations (94) (74) (112) (97) (42)
- -----------------------------------------------------------------------------------------------------------------------------
Total $ 234 $ 337 $ 453 $ 318 $ 458
- --------------------------------------------------------=====================================================================
NET INCOME $ 234 $ 311 $ 449 $ 330 $ 562
Per share:
Income from continuing operations 3.25 4.70 6.34 4.20 5.68
Net income 3.25 4.34 6.28 4.36 7.00
Dividends declared 3.04 3.04 3.04 3.04 2.96
Total assets 84,975 77,681 74,100 70,899 65,085
Long-term debt 1,235 929 848 832 640
Shareholders' equity 6,575 5,744 5,863 5,242 5,520
Per share 91.30 80.09 81.93 73.51 70.59
Common shares outstanding (thousands) 72,015 71,720 71,563 71,313 78,203
Shareholders of record 17,491 18,581 19,380 20,234 21,153
Employees 50,624 52,255 55,961 56,973 47,677
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Note 1 to the Financial Statements for information regarding the effect of
adopting accounting pronouncements.
Results for CIGNA include EQUICOR since the acquisition date of March 29, 1990.
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
CONSOLIDATED RESULTS OF OPERATIONS
(In millions)
- ------------------------------------------------------------
FINANCIAL SUMMARY 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Premiums and fees $ 13,712 $13,924 $14,295
Net investment income 3,902 3,914 3,860
Other revenues 506 579 513
Realized investment
gains 282 165 82
-------- ------- -------
Total revenues 18,402 18,582 18,750
Benefits and expenses 18,237 18,403 18,166
-------- ------- -------
Income before taxes,
extraordinary
item and cumulative
effect of
accounting changes 165 179 584
Income taxes (benefits) (69) (158) 131
------- ------- -------
Income before
extraordinary item
and cumulative effect
of accounting changes 234 337 453
Extraordinary item,
net of taxes -- -- (4)
Cumulative effect of
accounting changes -- (26) --
------- ------- -------
Net income $ 234 $ 311 $ 449
- ---------------------------------===========================
Realized investment
gains, net of taxes $ 224 $ 192 $ 52
- ---------------------------------===========================
</TABLE>
CIGNA's consolidated net income decreased 25% for 1993, compared with 1992,
and declined 31% for 1992, compared with 1991. The decrease for 1993 reflects a
third quarter $244 million after-tax charge for legal and associated expenses
for reported asbestos-related, environmental pollution and other long-term
exposure claims and $107 million in after-tax restructuring charges. In
addition, 1993 reflects a benefit of $48 million resulting from the effect on
CIGNA's net deferred tax asset of an increase in the federal tax rate. Results
for 1992 include a $140 million net after-tax charge for London reinsurance
exposures and a $182 million tax benefit (including $24 million related to
realized investment results), reflecting a reduction in income tax expense from
federal tax audits of CIGNA ("tax adjustment").
Excluding the above items and after-tax realized investment gains, income
before extraordinary item and cumulative effect of accounting changes was $313
million, $127 million and $401 million for 1993, 1992 and 1991, respectively.
The 1993 increase primarily reflects overall improvement in the Employee Life
and Health Benefits and Individual Financial Services segments as well as lower
catastrophe losses in the Property and Casualty segment. The 1992 decrease
primarily reflects significant increases in underwriting losses for the
Property and Casualty segment, partially offset by improvement in the Employee
Life and Health Benefits segment.
After-tax realized investment gains for 1993 increased compared with 1992,
primarily due to higher gains from the sale of equity securities resulting from
a restructuring of the portfolio into less volatile investments. Partially
offsetting these gains was a higher effective tax rate in 1993, compared with
1992. The higher effective tax rate for 1993, compared with 1992, was primarily
due to the $24 million benefit for the favorable tax adjustment in 1992. Also
affecting 1993 were higher loss reserves on mortgage loans resulting from
continued adverse real estate market conditions.
After-tax realized investment results increased in 1992, compared with 1991,
reflecting gains on the sales of equity securities and fixed maturities
(including actively traded fixed maturities, which were included in short-term
investments) due to favorable security prices. Partially offsetting these gains
were increased loss reserves for fixed maturities and real estate due to
adverse economic and real estate market conditions. Realized investment results
for 1992 also benefitted from a lower effective tax rate in 1992 than in 1991.
Consolidated revenues decreased slightly in both 1993 and 1992. The decrease
for both years primarily reflects lower premiums and fees for the Property and
Casualty segment, partially offset in 1993 by higher premiums and fees for the
Employee Life and Health Benefits segment and realized investment gains. The
declines in Property and Casualty premiums and fees reflect the continuation of
intense price competition in the property and casualty industry and CIGNA's
decision to de-emphasize, or substantially withdraw from, certain property and
casualty product lines.
Net income for 1994 (including the adverse effect of the Los Angeles
earthquake and the severe winter weather currently estimated at $85 million
after-tax) is expected to improve, compared with 1993's results. However, such
improvement could be materially affected by a continued adverse property and
casualty environment, additional major catastrophes and significant
deterioration in real estate market conditions.
14
<PAGE> 3
OTHER MATTERS
In connection with the federal tax audits discussed above, an adjustment has
been proposed that could result in an assessment of approximately $205 million.
CIGNA is currently contesting in court the issue giving rise to such proposed
adjustment and, although the outcome is uncertain, management believes that
CIGNA should prevail. See Note 8 to the Financial Statements for additional
information.
CIGNA's businesses are subject to a changing social, economic, legal,
legislative and regulatory environment which could adversely affect them. Some
of the changes include initiatives to restrict insurance pricing and the
application of underwriting standards; reform health care; restrict investment
practices; expand regulation; and to reinterpret insurance contracts long after
the policies were written to provide coverage unanticipated by CIGNA. Some of
the more significant issues are discussed below.
Federal reform of the United States health care system has been proposed to
address issues of availability, affordability and quality. A number of
proposals have emerged that could change the way in which health care is
financed and provided. Most proposals include some form of managed care, of
which CIGNA is a major provider, and the administration's proposal includes
price controls. Federal reform could provide flexibility for the states to
adopt their own programs, and the reform could result in more stringent
regulation for CIGNA's health care business. CIGNA is not able to determine
what effect, if any, such enacted reform would have on its future results.
The Federal Comprehensive Environmental Response, Compensation and Liability
Act ("Superfund"), which was passed in 1980, is subject to re-authorization by
Congress in 1994; any changes in Superfund's system of allocating
responsibility or funding clean-up costs could affect the liability of
policyholders and insurers. The proposals being considered by Congress to
reform Superfund are in the early stages of development; therefore, CIGNA is not
able to determine what effect, if any, such enacted reform would have on its
future results.
The National Association of Insurance Commissioners (NAIC) has developed
model solvency-related guidelines ("risk-based capital" rules) to strengthen
regulation of insurance companies. Depending on the ratio of the insurer's
surplus to its risk-based capital, the insurer could be subject to various
regulatory actions ranging from increased scrutiny to conservatorship.
Risk-based capital rules for the domestic life and property and casualty
industries were finalized during 1992 and 1993, respectively. As of December
31, 1993, CIGNA's life insurance and property and casualty insurance
subsidiaries were adequately capitalized under the guidelines. However, as the
guidelines for property and casualty become more stringent in the future and
depending on the future results of the property and casualty operations,
additional capital for the property and casualty subsidiaries may be necessary.
Also, the NAIC is developing risk-based capital guidelines for health
maintenance organizations (HMOs) and a proposal that would limit the types and
amounts of investment assets that an insurance company can hold. These
initiatives are in the preliminary stages and, therefore, CIGNA cannot predict
what effect, if any, such guidelines will have on its operations.
Unfavorable economic conditions have contributed to an increase in the
number of insurance companies that are impaired or insolvent. This is expected
to result in an increase in mandatory assessments by state guaranty funds of,
or voluntary payments by, solvent insurance companies to cover losses to
policyholders of insolvent or rehabilitated companies. Mandatory assessments,
which are subject to statutory limits, can be partially recovered through a
reduction in future premium taxes in some states.
The eventual effect on CIGNA of the changing environment in which it operates
remains uncertain. For additional information, see Note 17 to the Financial
Statements.
Moody's has recently informed CIGNA that the rating agency is reviewing the
debt ratings of CIGNA Corporation and the claims-paying ratings of its
insurance companies. The outcome of this review is not expected to have a
material adverse effect on CIGNA's financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
Several accounting pronouncements have recently been issued. In 1993, CIGNA
adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," and SFAS No. 113,
"Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts." In 1992, several pronouncements were adopted, principally affecting
employee benefits and income taxes, which resulted in the recording of an
adverse cumulative effect adjustment for accounting changes of $26 million. The
following segment discussions exclude the cumulative effect adjustment in 1992,
which increased (decreased) net income for Employee Life and Health Benefits,
($146) million; Employee Retirement and Savings Benefits, ($25) million;
Individual Financial Services, ($37) million; Property and Casualty, $179
million; and Other Operations, $3 million.
See Notes 1 and 12 to the Financial Statements for a detailed discussion of
recently issued accounting pronouncements and their effect on CIGNA and its
business segments.
15
<PAGE> 4
<TABLE>
<CAPTION>
EMPLOYEE LIFE AND HEALTH BENEFITS
(In millions)
- ------------------------------------------------------------
FINANCIAL SUMMARY 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Premiums and fees $ 7,438 $ 7,174 $ 7,137
Net investment income 503 504 488
Other revenues 286 290 314
Realized investment gains 165 53 44
----- ----- -----
Total revenues 8,392 8,021 7,983
Benefits and expenses 7,541 7,506 7,501
----- ----- -----
Income before taxes 851 515 482
Income taxes 262 32 153
----- ----- -----
Income $ 589 $ 483 $ 329
- ----------------------------------==========================
Realized investment gains,
net of taxes $ 126 $ 63 $ 28
- ----------------------------------==========================
</TABLE>
Income for the Employee Life and Health Benefits segment increased 22% in
1993, compared with an increase of 47% in 1992. Results for 1992 include a
significant tax benefit of $108 million related to federal tax audits for the
years 1982 through 1987 and a $20 million after-tax charge related to a review
of account balances.
Excluding the above items and after-tax realized investment gains, income
for 1993 was $463 million, compared with $332 million for 1992 and $301 million
for 1991. The increase for 1993 reflects an improvement of $71 million in the
segment's HMO operations. The HMO improvement reflects approximately $30
million attributable to membership growth, with the balance attributable to
rate increases and medical cost management. Also contributing to the 1993
growth in income were improved operating results of $60 million in the group
indemnity business primarily reflecting: (1) more favorable claim experience
due, in part, to lower medical care cost inflation; and (2) an improvement of
$22 million for long-term disability (LTD), primarily due to favorable claim
experience as well as rate increases.
The 1992 improvement, excluding the 1992 items noted above and after-tax
realized investment gains, reflects increased income for group indemnity
business and HMO operations of $27 million and $4 million, respectively.
Favorable group indemnity claim experience combined with HMO enrollment growth
and rate increases in excess of medical care cost inflation were primarily
responsible for this improvement. Adverse LTD claim experience, resulting in a
$21 million reduction in earnings, partially offset the group indemnity
improvement.
Premiums and fees increased 4% in 1993 and 1% in 1992. The 1993 improvement
reflects: (1) increased premiums and fees for HMOs of $180 million, primarily
reflecting rate increases; and (2) an increase of $84 million in group
indemnity businesses (life, $47 million, and medical, $37 million). Growth in
the medical indemnity business has been constrained by cancellations and
increasing penetration into the indemnity market by prepaid health care
providers, and the effect on existing business of customer-influenced changes
(including conversions to CIGNA's HMOs and alternative funding programs,
reductions in employment levels and benefit plan changes). The slight increase
in 1992 reflects growth in premiums and fees for group life business of $196
million, primarily resulting from new sales, and for HMOs of $129 million
resulting from rate increases. The improvement in 1992 was constrained by a
decline in medical and dental indemnity premiums and fees of $252 million due
to customer cancellations and customer-influenced changes, including reductions
in employment levels, benefit plan changes and conversions to alternative
funding programs.
Management believes that adding premium equivalents to premiums and fees
(adjusted premiums and fees) produces a more meaningful measure of business
volume. Premium equivalents generally represent paid claims and are additional
premiums that would have been earned under alternative funding programs, such
as minimum premium and administrative services only (ASO) plans, if these
coverages had been written as traditional indemnity and HMO programs. ASO plans
generally do not involve the assumption of insurance or significant credit
risks; therefore, profit margins for such plans are often lower than for
traditional programs.
Adjusted premiums and fees were $17.5 billion, $17.0 billion and $16.5
billion in 1993, 1992 and 1991, respectively. Premium equivalents, as a
percentage of total adjusted premiums and fees, were 57% in 1993, 58% in 1992
and 57% in 1991. ASO plans accounted for 45%, 40% and 36% of total adjusted
premiums and fees in 1993, 1992 and 1991, respectively. The increase in premium
equivalents since 1991 reflects continued sales of, as well as conversions of
existing traditional business to, ASO plans (principally HMO programs).
The adjusted premium mix in 1993 was approximately 54% medical insurance,
24% prepaid health and dental care, 8% dental insurance, 9% life, 3% long-term
disability and 2% other coverages.
Indemnity claims paid for insured plans and claims paid for alternative
funding programs, including ASOs, for the year ended December 31 were as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Insured plans $ 3,465 $ 3,378 $ 3,151
Alternative funding programs 9,917 9,606 9,187
- ------------------------------------------------------------
Total $ 13,382 $ 12,984 $ 12,338
- ---------------------------------===========================
</TABLE>
16
<PAGE> 5
<TABLE>
<CAPTION>
EMPLOYEE RETIREMENT AND SAVINGS BENEFITS
(In millions)
- ------------------------------------------------------------
FINANCIAL SUMMARY 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Premiums and fees $ 296 $ 248 $ 300
Net investment income 1,846 1,893 1,879
Realized investment gains (losses) (31) 7 --
----- ----- -----
Total revenues 2,111 2,148 2,179
Benefits and expenses 1,888 1,892 1,937
----- ----- -----
Income before taxes 223 256 242
Income taxes 64 40 75
-- -- --
Income $ 159 $ 216 $ 167
- -------------------------------------=======================
Realized investment gains (losses),
net of taxes $ (23) $ 16 $ --
- -------------------------------------=======================
</TABLE>
Income for the Employee Retirement and Savings Benefits segment decreased
26% in 1993, compared with an increase of 29% in 1992. Included in the results
for both years were favorable tax adjustments resulting from federal tax audits
of $3 million (including a $3 million charge related to realized investment
results) in 1993, compared with $41 million (including a $14 million benefit
related to realized investment results) in 1992.
Excluding after-tax realized investment results and the favorable tax
adjustments, income for 1993 was $176 million, compared with $173 million for
1992 and $167 million in 1991. Earnings growth for 1993 principally reflects
higher earnings from an increased asset base, while the 1992 growth reflects
lower operating expenses as well as higher earnings from an increased asset
base. Earnings growth during 1993 and 1992 was constrained by lower investment
yields due to lower interest rates and, for 1992, the effect of non-accruals.
Assets under management is generally a key determinant of earnings for this
segment. For the year ended December 31, assets under management and related
activity, including amounts attributable to separate accounts, were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Balance at January 1 $ 32,736 $31,826
Premiums and deposits 2,960 2,716
Investment income 2,876 2,785
Appreciation (depreciation)
in fair value of securities 626 (277)
Customer withdrawals (2,915) (2,441)
Benefit payments and other (1,814) (1,873)
- ------------------------------------------------------------
Balance at December 31 $ 34,469 $32,736
- -------------------------------------------=================
</TABLE>
Approximately 45% and 42% of the premiums and deposits for 1993 and 1992,
respectively, were from new customers. Appreciation in the fair value of
securities for 1993 includes $521 million resulting from the implementation of
SFAS No. 115. See Note 1 to the Financial Statements for additional
information.
Asset growth in 1993 was constrained by increased customer withdrawals. The
withdrawals in 1993 reflect approximately $840 million for payment to two large
customers under contracts that were terminated prior to 1993. Management
expects that asset growth will continue to be constrained by withdrawals and
lower deposits resulting from decisions by plan sponsors to diversify assets
and fund management.
Premiums and fees increased 19% in 1993 and decreased 17% in 1992. The
increase in 1993 was due primarily to higher group annuity sales. The decrease
in 1992 primarily reflects lower sales of single premium annuities. Net
investment income decreased 2% in 1993, compared with a modest increase in
1992. The decline for 1993 reflects the effects of lower yields on invested
assets. The 1992 increase reflects growth in assets under management, partially
offset by lower yields.
17
<PAGE> 6
<TABLE>
<CAPTION>
INDIVIDUAL FINANCIAL SERVICES
(In millions)
- ------------------------------------------------------------
FINANCIAL SUMMARY 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Premiums and fees $ 814 $ 710 $ 699
Net investment income 583 457 380
Other revenues 65 98 68
Realized investment losses (15) (15) (7)
------- ----- ------
Total revenues 1,447 1,250 1,140
Benefits and expenses 1,283 1,142 1,023
------- ----- ------
Income before taxes 164 108 117
Income taxes 54 22 41
------- ----- -----
Income $ 110 $ 86 $ 76
- -----------------------------------=========================
Realized investment losses,
net of taxes $ (13) $ -- $ (6)
- -----------------------------------=========================
</TABLE>
Income for the Individual Financial Services segment increased 28% and 13%
in 1993 and 1992, respectively. Included in 1992 results were: (1) an after-tax
loss of $39 million, primarily related to litigation associated with syndicated
investment products, (2) an after-tax gain of $20 million from the sale of a
significant portion of CIGNA's mutual fund advisory business and (3) an
after-tax gain of $12 million relating to the termination of a reinsurance
contract.
Excluding after-tax realized investment results and the above items for
1992, income for 1993 was $123 million, compared with $93 million for 1992 and
$82 million for 1991. The increase for 1993 primarily reflects: (1) $20 million
from improved margins and higher sales for interest-sensitive business
(particularly corporate-owned life insurance) and (2) improved reinsurance
earnings. Results for 1992, compared with 1991, reflect more favorable
mortality and improved margins on interest-sensitive products.
Premiums and fees increased 15% and 2% in 1993 and 1992, respectively.
Universal life deposits, which are not included in revenues, and direct
individual life premiums and fees totaled $2.7 billion, $1.2 billion and $1.1
billion in 1993, 1992 and 1991, respectively. Net investment income increased
28% and 20% in 1993 and 1992, respectively. These increases, as well as the
increase in benefits and expenses, primarily reflect increased sales and
overall growth in interest-sensitive business. Also, the growth in premiums and
fees in 1992 was partially offset by the effects of a 1991 cancellation of a
large unprofitable contract.
<TABLE>
<CAPTION>
PROPERTY AND CASUALTY
(In millions)
- ------------------------------------------------------------
FINANCIAL SUMMARY 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Premiums and fees $ 5,136 $ 5,760 $ 6,114
Net investment income 753 842 898
Other revenues 254 254 220
Realized investment gains 185 119 55
----- ----- -----
Total revenues 6,328 6,975 7,287
Benefits and expenses 7,290 7,604 7,412
----- ----- -----
Loss before tax benefits (962) (629) (125)
Income tax benefits (432) (255) (118)
----- ----- -----
Loss $ (530) $ (374) $ (7)
- ------------------------------------========================
Realized investment gains,
net of taxes $ 150 $ 111 $ 36
- ------------------------------------========================
</TABLE>
Losses for the Property and Casualty segment have risen substantially since
1991. Included in the losses were the following items that affect the
year-over-year comparisons.
* Charges of $244 million after-tax ($375 million pre-tax) were recorded in
the third quarter of 1993 for future legal and associated expenses for
reported asbestos-related, environmental pollution and other long-term
exposure claims.
* An after-tax charge of $97 million for restructuring initiatives in the
domestic and international operations was included in 1993 results. Results
for 1992 include an after-tax charge of $16 million for restructuring
initiatives in the international operations.
* A $24 million tax benefit resulting from the effect on CIGNA's net deferred
tax asset of an increase in the federal income tax rate was recorded in
1993.
* A charge of approximately $40 million after-tax ($60 million pre-tax) for a
reserve increase for CIGNA's self-insurance programs (primarily errors and
omissions and workers' compensation) was reflected in 1993's results.
* Results for 1992 include a net after-tax charge of $140 million, reflecting
a $290 million charge to underwriting losses for London reinsurance
exposures, partially offset by a reduction in other operating expenses of
$150 million for a closed book of reinsurance business. Additional reserves
were established in 1993 for London reinsurance exposures totaling $16
million after-tax ($25 million pre-tax).
* A $22 million benefit was recorded in 1992 reflecting the favorable tax
adjustment related to federal tax audits for the years 1982 through 1987.
18
<PAGE> 7
Excluding the items noted above and after-tax realized investment results,
losses for 1993, 1992 and 1991 were $307 million, $351 million and $43 million,
respectively. The decline in losses for 1993 primarily reflects lower
underwriting losses due principally to lower catastrophes. The increased loss
for 1992 was primarily due to higher underwriting losses.
Underwriting losses, excluding the asbestos and environmental, London
reinsurance and self-insurance reserve items noted above, were $1.2 billion,
$1.3 billion and $973 million in 1993, 1992 and 1991, respectively, and
continue to be adversely affected by the highly competitive pricing
environment. Also affecting underwriting losses in 1993, compared with 1992,
were lower catastrophes, partially offset by higher losses for insured events
of prior years.
In addition to the competitive pricing environment, losses for 1992,
compared with 1991, reflect large catastrophe losses, partially offset by
reduced operating costs resulting from cost reduction initiatives and reduced
losses resulting from de-emphasis of workers' compensation business that
involves standard risk transfer.
Included in underwriting results for 1993, 1992 and 1991 were catastrophe
losses, net of reinsurance, of $145 million (before reinsurance ("gross"), $308
million), $251 million (gross, $402 million) and $68 million (gross, $79
million), respectively. Catastrophe losses for 1993 included $41 million
(gross, $173 million) for the World Trade Center bombing and $36 million
(gross, $38 million) for the East Coast blizzard. Catastrophe losses for 1992
included $95 million (gross, $194 million) for Hurricane Andrew, $56 million
(gross, $88 million) for Hurricane Iniki and $42 million (gross, $53 million)
for the Los Angeles riots.
CIGNA's principal property catastrophe reinsurance program provides
approximately 95% recovery of losses between $70 million and $350 million,
except for international losses, for which recovery begins at $40 million. As a
result of the increased cost and decreased availability of reinsurance
coverages, effective July 1, 1993, CIGNA increased its retention limits on
catastrophe reinsurance coverages from $50 million to $70 million per
occurrence for its domestic operations and from $20 million to $40 million for
international operations. Catastrophe losses below the lower end of the program
coverage are retained by CIGNA. As a result of these coverage changes, CIGNA's
future results of operations could be more volatile, depending on the frequency
and severity of future catastrophes.
Results for 1991 reflect fresh start benefits of $38 million and Section 847
benefits of $48 million. For 1993 and 1992, such benefits were not recognized
in accordance with SFAS No. 109, "Accounting for Income Taxes."
Premiums and fees decreased 11% in 1993 and 6% in 1992. Approximately half
of these declines was attributable to reduced writings of workers'
compensation that involves risk transfer and writing workers' compensation
policies with higher customer risk retention. The remaining decrease primarily
reflects reduced writings due to worldwide price competition in CIGNA's core
commercial lines, particularly domestic commercial packages and casualty lines
and the international property lines. The 1992 decline also reflects CIGNA's
decision to substantially withdraw from the personal automobile insurance
market. The decline in premiums and fees for both years was partially offset by
growth in international life business. Premiums and fees are expected to
continue to decrease through 1994 as a result of these factors.
Net investment income decreased 11% and 6% in 1993 and 1992, respectively.
The decrease for 1993 reflects an overall decline in interest rates, negative
cash flows due to underwriting losses, and a decline in business volume. The
1992 decrease primarily reflects an overall decline in interest rates and
changes in investment asset mix.
CIGNA has taken steps to improve its results by reorganizing its domestic
property and casualty operations under new management and by adopting
initiatives to improve the quality of its underwriting. The domestic
operations' strategy is to emphasize specialty lines of business and in certain
commercial lines write business on a group basis, as opposed to individual
risks. In addition, the domestic operations intend to emphasize writings of
workers' compensation that involve standard risk transfer in states with
regulatory climates where CIGNA believes it can operate profitably. Also, CIGNA
has reduced writings of voluntary personal automobile and reinsurance coverages
and has revised its underwriting guidelines for its European property business
in an attempt to improve its results.
19
<PAGE> 8
During the third quarter of 1993, CIGNA recorded an after-tax charge of $97
million ($150 million pre-tax) for Property and Casualty restructuring
initiatives. The restructuring charge consisted of the following on a pre-tax
basis: severance -- $75 million, representing costs associated with
nonvoluntary employee terminations; real estate -- $35 million, primarily
related to office lease terminations; legal and consulting fees -- $18 million,
associated with completing restructuring initiatives; and other costs -- $22
million, primarily for employee relocation and outplacement services. The cash
outlays associated with the restructuring initiatives began in the fourth
quarter of 1993 and will continue through 1995, with the majority of the cash
outlays occurring in 1994. CIGNA will fund the restructuring cost through
liquid assets, and such funding will not have a material adverse effect on its
liquidity. CIGNA expects that the restructuring initiatives, when completed,
will result in annual cost savings of approximately $50 million to $70 million
after-tax.
RESERVES
CIGNA's reserving methodology and significant issues affecting the
estimation of loss reserves are described in its Form 10-K and additional
information is included in Note 16 to the Financial Statements.
In summary, property and casualty reserves are an estimate of future amounts
needed to pay claims and related expenses for insured events that have
occurred, including events that have not been reported to CIGNA. The basic
assumption underlying the many standard actuarial and other methods used in the
estimation of property and casualty loss reserves is that past experience is an
appropriate basis for predicting future events. However, current trends and
other factors that would modify past experience are also considered. Estimating
property and casualty reserves thus relies heavily on judgment and is subject
to uncertainties that are normal, recurring and inherent. CIGNA revises its
estimate of the liability for insured events of prior years as new data become
available.
CIGNA continually attempts to improve its loss estimation process by
refining its ability to analyze loss development patterns, claims payments and
other information, but there remain many reasons for adverse development of
estimated ultimate liabilities. For example, the uncertainties inherent in
estimating losses have grown in the last decade because of changes in social
and legal trends that expand the liability of insureds, establish new
liabilities and reinterpret insurance contracts long after the policies were
written to provide coverage unanticipated by CIGNA. Such changes from past
experience significantly affect the ability of insurers to estimate liabilities
for unpaid losses and related expenses.
In management's judgment, based on known facts and current law, reserves are
appropriate. However, future changes in estimates of CIGNA's liability for
insured events may adversely affect results in future periods.
The following table shows the adverse pre-tax effects on CIGNA's results of
operations from insured events of prior years (prior year development) for the
year ended December 31:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
(Dollars in millions) 1993 % 1992 % 1991 %
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Asbestos-related $ 171 22 $ 69 11 $ 45 13
Environmental pollution 394 50 127 19 83 25
Other long-term exposure 76 10 16 2 21 6
Unrecoverable reinsurance 28 3 89 14 28 8
London reinsurance 31 4 228 35 -- --
- -------------------------------------------------------------------
700 89 529 81 177 52
All other 89 11 127 19 164 48
- -------------------------------------------------------------------
Total $ 789 100 $ 656 100 $341 100
- -------------------------------====================================
</TABLE>
20
<PAGE> 9
ASBESTOS-RELATED, ENVIRONMENTAL POLLUTION AND
OTHER LONG-TERM EXPOSURE CLAIMS
CIGNA continues to receive asbestos and environmental pollution claims
asserting a right to recovery under insurance policies issued by CIGNA. In
addition, other long-term exposure claims, such as those resulting from breast
implants, are beginning to increase.
CIGNA re-evaluated its reported asbestos-related and environmental pollution
claims to determine if legal costs could be reasonably estimated and reserves
established. As a result, prior year development for 1993 includes a pre-tax
charge of $375 million for future legal and associated expenses for reported
asbestos-related ($72 million) and environmental pollution ($268 million)
claims, and $35 million for other long-term exposure claims.
For the reasons discussed in Note 16 to the Financial Statements and in the
Description of Business section of the Form 10-K, CIGNA expects that its future
results will continue to be adversely affected by losses and legal expenses for
these types of claims. Because of the significant uncertainties involved and
the likelihood that they will not be resolved in the near future, CIGNA is
unable to reasonably estimate the additional losses and expenses and,
therefore, is unable to determine whether such amounts will be material to its
future results of operations, liquidity or financial condition.
UNRECOVERABLE REINSURANCE
Losses for unrecoverable reinsurance are principally due to the failure of
reinsurers to indemnify CIGNA, primarily because of reinsurer insolvencies and
disputes under reinsurance contracts. Losses for unrecoverable reinsurance for
1992 included $62 million for London reinsurance exposures. Additional charges
for unrecoverable reinsurance are likely to affect future results adversely,
although the amounts and timing cannot be reasonably estimated.
LONDON REINSURANCE
Losses for London reinsurance in 1992 resulted from a review of CIGNA's
London property and casualty reinsurance exposures related to large
catastrophes occurring in recent years. The losses in 1993 resulted from an
update of that review.
ALL OTHER
The 1993 prior year development was primarily for commercial packages. Prior
year development in 1992 was primarily attributable to domestic and
international reinsurance, commercial packages and workers' compensation. The
1991 development was primarily for workers' compensation and commercial
packages.
OTHER OPERATIONS
Other Operations primarily includes unallocated investment income, expenses
and taxes. Also included in Other Operations are the results of CIGNA's
settlement annuity business, non-insurance operations engaged primarily in
investment and real estate activities, and the California personal automobile
and homeowners insurance businesses that CIGNA retained from the 1989 sale of
the Horace Mann companies. On January 15, 1994, the California business was
sold, resulting in a gain of approximately $20 million after-tax that will be
recognized in 1994.
Net losses for Other Operations were $94 million, $74 million and $112
million for 1993, 1992 and 1991, respectively. After-tax realized investment
results included in these amounts were losses of $16 million, gains of $2
million and losses of $6 million for 1993, 1992 and 1991, respectively.
Included in the losses were: (1) a $6 million tax benefit in 1993 from the
effect of the tax rate change; (2) the unfavorable tax adjustment of $3 million
in 1992; and (3) gains of $11 million after-tax and $4 million after-tax on the
sales of CIGNA's equity interest in Paine Webber Group, Inc. in 1992 and 1991,
respectively.
Excluding after-tax realized investment results and the above items, losses
for both 1993 and 1992 were $84 million and $110 million for 1991. Losses for
1993 were level with 1992 primarily reflecting higher net interest expense of
$4 million after-tax, offset by reduced losses on investment and real estate
operations. The decreased loss for 1992, compared with 1991, primarily reflects
reductions in operating expenses of $14 million, due in part to lower interest
expense; and reduced losses on investment and real estate operations of $7
million.
21
<PAGE> 10
<TABLE>
<CAPTION>
LIQUIDITY AND CAPITAL RESOURCES
(In millions)
- ------------------------------------------------------------
FINANCIAL SUMMARY 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Short-term investments $ 1,357 $ 3,133 $ 2,890
Cash and cash equivalents 1,211 1,011 1,863
Short-term debt 351 475 385
Long-term debt 1,235 929 848
Shareholders' equity 6,575 5,744 5,863
- ------------------------------------------------------------
</TABLE>
CIGNA's operations have liquidity requirements that vary among the principal
product lines. Life insurance and pension plan reserves are primarily long-term
liabilities. Accident and health, as well as property and casualty reserves,
consist of both short-term and long-term liabilities. Life insurance reserve
requirements are usually stable and predictable, and are supported primarily by
long-term, fixed-income investments. Property and casualty claim demands are
less predictable in nature, requiring greater liquidity in the investment
portfolio.
Generally, CIGNA has met its operating requirements by maintaining
appropriate levels of liquidity in its investment portfolio and through
utilization of overall positive cash flows. Overall cash flows have been
constrained by negative cash flows in the property and casualty operations,
resulting from underwriting losses. Liquidity for CIGNA and its insurance
subsidiaries has remained strong, as evidenced by significant amounts of
short-term investments and cash equivalents in the aggregate. The decrease in
short-term investments in 1993 reflects the reclassification of amounts
previously included in short-term investments to fixed maturities as a result
of implementing SFAS No. 115.
During 1993, cash and cash equivalents increased $200 million from $1.0
billion as of December 31, 1992. This increase primarily reflects deposits and
interest credited, net of withdrawals, to contractholder deposit funds;
issuance of long-term debt; and cash flows from operating activities, primarily
resulting from earnings and the timing of cash receipts and cash disbursements.
The increase was partially offset by net investment purchases and payments of
dividends on CIGNA common stock.
The 1992 decline in cash and cash equivalents reflects net investment
purchases, primarily of longer-term securities; and payments of dividends on
CIGNA common stock, partially offset by deposits and interest credited, net of
withdrawals, to contractholder deposit funds; issuance of long-term debt;
proceeds from sales of equity interests in MBIA and Paine Webber, and a mutual
fund advisory business; and cash flows from operating activities. Cash flows
from operating activities primarily resulted from earnings; timing of cash
receipts reflecting, in part, an increased emphasis on receivable collections;
and timing of cash disbursements, including income tax payments and payment of
insurance and other liabilities relating to lines of business that are being
de-emphasized.
The 1991 decrease in cash and cash equivalents primarily reflects investment
purchases net of investments sold, including proceeds from Crusader and
affiliate sales. The decrease also reflects a net reduction in short- and
long-term debt and payments of dividends on CIGNA common stock. The above
factors were partially offset by deposits and interest credited, net of
withdrawals, to contractholder deposit funds, and cash flows from operating
activities, primarily resulting from earnings and the timing of cash receipts
and disbursements.
Funds provided from premiums and fees, investment income and maturities of
investment assets are reasonably predictable and normally exceed liquidity
requirements for payments of claims, benefits and expenses. However, since the
timing of available funds cannot always be matched precisely to commitments,
imbalances may arise when demands for funds exceed those on hand. Also, a
demand for funds may arise as a result of CIGNA taking advantage of current
investment opportunities.
CIGNA's insurance subsidiaries are subject to various regulatory
restrictions that can limit the amount of internal dividends and other
distributions, including loans, that can be utilized to manage liquidity needs.
However, CIGNA's size and diversity generally provide the flexibility to manage
liquidity needs, either internally or externally, through short-term
borrowings. At December 31, 1993, CIGNA had available approximately $650
million of committed and uncommitted lines of credit with banks.
CIGNA's capital resources represent funds available for long-term business
commitments and primarily consist of retained earnings and proceeds from the
issuance of long-term debt and equity securities. Capital resources provide
protection for policyholders and the financial strength to support the
underwriting of insurance risks, and allow for continued business growth. The
amount of capital resources that may be needed is determined by CIGNA's senior
management and Board of Directors, as well as by regulatory requirements. The
allocation of resources to new long-term business commitments is designed to
achieve an attractive return, tempered by considerations of risk and the need
to support CIGNA's existing businesses.
22
<PAGE> 11
CIGNA's financial strength provides the capacity and flexibility to enable
it to raise funds in the capital markets through the issuance of long-term debt
and equity securities. CIGNA continues to be well capitalized, with sufficient
borrowing capacity to meet the anticipated needs of its business.
CIGNA had $1.2 billion of long-term debt outstanding at December 31, 1993,
compared with $929 million at December 31, 1992. This increase primarily
reflects issuances in 1993 of $100 million of 7.4% unsecured Notes due in 2003,
$100 million of 8.3% unsecured Notes due in 2023, $100 million of 7.65%
unsecured Notes due in 2023 and $27 million of Medium-term Notes. The proceeds
from these issues were used for general corporate purposes, including the
repayment of certain debt at maturity. In 1992, CIGNA issued $100 million of
8-1/4% unsecured Notes due in 2007 and $11 million of Medium-term Notes, the
proceeds of which were used for general corporate purposes, including the
repayment at maturity of Medium-term Notes. In 1991, CIGNA issued $100 million
of 8-3/4% unsecured Notes due in 2001 and $119 million of Medium-term Notes.
Substantially all of CIGNA's 13% Sterling Foreign Currency Loan Stock, with an
outstanding principal balance of approximately $53 million, was repurchased in
1991. The effect of this early extinguishment of debt, an after-tax loss of
approximately $4 million, has been reflected in the financial statements as an
extraordinary item.
At December 31, 1993, CIGNA had approximately $950 million remaining under
shelf registration statements that may be issued as debt and equity securities,
depending upon market conditions and CIGNA's capital requirements. In January
1994, CIGNA issued $100 million of unsecured 6-3/8% Notes due in 2006 under one
of the shelf registration statements.
As a result of property and casualty underwriting losses, CIGNA contributed
$150 million of capital in 1993 to enhance the capital base of the domestic
property and casualty operations. Additional capital contributions may be
needed as a result of continued property and casualty losses; however, such
amounts are not reasonably estimable at this time.
During 1993, CIGNA restructured the investment portfolio supporting its
Property and Casualty segment in order to reduce its investment risk by selling
equity securities and reinvesting the proceeds in fixed maturities. Realized
gains for the Property and Casualty segment of $185 million pre-tax primarily
reflect gains resulting from the portfolio restructuring activities and the
sale of short-term investments.
<TABLE>
<CAPTION>
INVESTMENT ASSETS
- ------------------------------------------------------------
As of December 31,
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Fixed maturities: at amortized cost $ 12,375 $ 25,095
Fixed maturities: at fair value 19,380 --
Equity securities 1,849 2,321
Mortgage loans 10,021 10,918
Real estate 1,780 1,452
Other 5,323 5,562
- ------------------------------------------------------------
Total investment assets $ 50,728 $ 45,348
- -------------------------------------=======================
</TABLE>
CIGNA's investment assets are generally managed to reflect the underlying
characteristics of the related insurance and contractholder liabilities.
Additional information regarding CIGNA's investment assets and related
accounting policies is included in Notes 1, 3 and 4 to the Financial
Statements and in CIGNA's Form 10-K.
Significant amounts of CIGNA's investment assets are attributable to
experience-rated contracts with policyholders (policyholder contracts).
Approximate percentages of investments attributable to policyholder contracts
as of December 31 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Fixed maturities 33% 38%
Mortgage loans 59% 60%
Real estate 56% 54%
- ------------------------------------------------------------
</TABLE>
Under the experience-rating process, net investment income and gains and
losses on assets related to policyholder contracts generally accrue to the
policyholders. Consequently, write-downs, changes in valuation reserves and
non-accruals on investments attributable to policyholder contracts do not
affect CIGNA's net income, except under unusual circumstances.
23
<PAGE> 12
FIXED MATURITIES
Investments in fixed maturities (bonds) include publicly traded and private
placement debt securities; mortgage-backed securities, including collateralized
mortgage obligations (CMOs); and redeemable preferred stocks. In accordance
with SFAS No. 115, fixed maturities classified as held to maturity are carried
at amortized cost, net of impairments, and those classified as available for
sale are carried at fair value, with unrealized appreciation or depreciation
included in Shareholders' Equity.
QUALITY RATINGS
The quality ratings of bonds classified as available for sale (primarily
public bonds) and as held to maturity (primarily private placement investments)
as of December 31, 1993 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Available Held to
(In millions) for Sale Maturity Total
- -------------------------------------------------------------
<S> <C> <C> <C>
Aaa $ 8,802 $ 1,172 $ 9,974
Aa 2,410 1,536 3,946
A 5,205 2,646 7,851
Baa 2,589 5,613 8,202
- -------------------------------------------------------------
Investment grade 19,006 10,967 29,973
- -------------------------------------------------------------
Ba 233 1,027 1,260
B 118 353 471
C 15 28 43
In/near default 8 123 131
- -------------------------------------------------------------
Below investment grade 374 1,531 1,905
- -------------------------------------------------------------
Total bonds before cumulative
write-downs and valuation
reserves 19,380 12,498 31,878
Less cumulative write-downs and
valuation reserves -- 123 123
- -------------------------------------------------------------
Total $19,380 $12,375 $31,755
- ---------------------------------============================
</TABLE>
Public bonds were rated by outside rating agencies; private placement
investments were rated by CIGNA on a basis that it believes is generally
consistent with methodologies of outside rating agencies. As of December 31,
1993, the NAIC rated approximately 7% of CIGNA's bonds as below investment
grade, compared with 6% based on the above ratings.
Approximately 36% of the below investment grade securities relate to
policyholder contracts.
All private placement investments are made after credit analysis, and are
diversified by industry and issuer. Private placement investments are generally
less marketable than public bonds, and yields are generally higher for
comparable credit risk. Further, private placement investments generally
contain financial and other covenants that allow CIGNA to monitor the debtor
for early signs of deteriorating financial strength so it can take remedial
actions, if warranted.
As a result of the higher yields and the inherent risk associated with below
investment grade securities, gains or losses could significantly affect future
earnings, although such effects are not expected to be material to CIGNA's
financial condition.
PROBLEM BONDS*
Bonds that are delinquent or restructured as to terms, typically interest
rate and, in certain cases, maturity date, are considered problem bonds. As of
December 31, problem bonds, including amounts attributable to policyholder
contracts, and related cumulative write-downs were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Delinquent bonds $131 $296
Less cumulative write-downs 52 82
--- ---
79 214
--- ---
Restructured bonds 383 401
Less cumulative write-downs 55 37
--- ---
328 364
- ------------------------------------------------------------
Problem bonds $407 $578
- ---------------------------------------------===============
</TABLE>
Problem bonds attributable to policyholder contracts represented 35% and 45%
of total problem bonds at December 31, 1993 and 1992, respectively.
POTENTIAL PROBLEM BONDS*
Potential problem bonds are fully current but judged by management to have
certain characteristics that increase the likelihood of problem classification.
As of December 31, potential problem bonds, including amounts attributable to
policyholder contracts, and related cumulative write-downs and valuation
reserves were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Potential problem bonds $225 $616
Less cumulative write-downs and
valuation reserves 11 47
- ------------------------------------------------------------
Potential problem bonds $214 $569
- ---------------------------------------------===============
</TABLE>
Potential problem bonds attributable to policyholder contracts represented
30% and 43% of total potential problem bonds at December 31, 1993 and 1992,
respectively.
*Bonds in these categories are principally classified as held to maturity.
24
<PAGE> 13
CUMULATIVE WRITE-DOWNS AND VALUATION RESERVES FOR BONDS
The activity in cumulative write-downs and valuation reserves for bonds for
the year ended December 31 was as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
Policyholder Policyholder
(In millions) Contracts CIGNA Total Contracts CIGNA Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance -- January 1 $ 89 $ 81 $170 $ 74 $ 57 $131
Additions to cumulative write-downs 23 37 60 41 43 84
Net increase (decrease) in valuation reserves (8) (10) (18) -- 1 1
Charge-offs upon sales, repayments and other (2) (1) (3) (26) (20) (46)
Transfers to equity securities (48) (38) (86) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Ending balance -- December 31 $ 54 $ 69 $123 $ 89 $ 81 $170
- ----------------------------------------------------------===================================================================
</TABLE>
Included in the total ending balances above as of December 31, 1993 and 1992
were $5 million and $4 million of cumulative write-downs, respectively, for
bonds no longer classified as problem or potential problem bonds.
The after-tax adverse effect of write-downs and net increase (decrease) in
valuation reserves on CIGNA's net income was $18 million, $29 million and $25
million for 1993, 1992 and 1991, respectively.
In 1993, certain bonds were restructured into equity securities.
Accordingly, assets of $102 million, which were net of cumulative write-downs
of $86 million, were transferred from bonds to equity securities. In addition,
during 1993 and 1992, $15 million and $3 million of write-downs were
established for equity securities, including $1 million attributable to
policyholder contracts for 1993. As of December 31, 1993 and 1992, CIGNA had
cumulative write-downs for equity securities of $78 million and $22 million,
respectively, including $39 million and $12 million attributable to
policyholder contracts.
EFFECT OF NON-ACCRUALS FOR BONDS
Interest income is recognized on problem bonds only when payment is
received. The adverse effect of non-accruals for bonds (in total and by type)
on policyholder contracts and on CIGNA's net income for the year ended December
31 is shown in the following table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
Policyholder Policyholder Policyholder
(In millions) Contracts CIGNA Contracts CIGNA Contracts CIGNA
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income under original contract terms $ 35 $ 46 $ 46 $ 50 $ 31 $ 36
Less net investment income received 19 27 22 19 11 11
---- ---- ---- ---- ---- ----
Forgone investment income 16 19 24 31 20 25
Tax effect -- (7) -- (11) -- (8)
- -----------------------------------------------------------------------------------------------------------------------------
Net effect of non-accruals $ 16 $ 12 $ 24 $ 20 $ 20 $ 17
- ------------------------------------------------------=======================================================================
Forgone investment income by type:
Delinquent bonds $ 4 $ 8 $ 11 $ 16 $ 13 $ 11
Restructured bonds 12 11 13 15 7 14
---- ---- ---- ---- ---- ----
Forgone investment income 16 19 24 31 20 25
Tax effect -- (7) -- (11) -- (8)
- -----------------------------------------------------------------------------------------------------------------------------
Net effect of non-accruals $ 16 $ 12 $ 24 $ 20 $ 20 $ 17
- ------------------------------------------------------=======================================================================
</TABLE>
25
<PAGE> 14
<TABLE>
<CAPTION>
MORTGAGE LOANS
- --------------------------------------------------------------
As of December 31,
1993 1992
- --------------------------------------------------------------
<S> <C> <C>
Mortgage loans (in millions) $10,021 $10,918
By type:
Office buildings 40% 42%
Retail facilities 37 35
Hotels 7 8
Apartment buildings 10 9
Other 6 6
- --------------------------------------------------------------
Total 100% 100%
- --------------------------------------------==================
</TABLE>
CIGNA's investment strategy calls for diversification of the mortgage loan
portfolio. CIGNA follows guidelines relative to property type, location,
borrower and loan size to reduce its exposure to potential losses. CIGNA
routinely monitors and evaluates the status of its mortgage loans through the
review of loan and property-related information, including cash flows, expiring
leases, financial health of the borrower and major tenants, loan payment
history, occupancy and room rates for hotels and, for all commercial
properties, significant new competition. CIGNA evaluates this information in
light of current economic conditions as well as geographic and property type
considerations.
Continued adverse conditions in real estate markets and more stringent
lending practices by financial institutions have affected scheduled maturities
of mortgage loans. During 1993, approximately $1.2 billion of mortgage loans
was scheduled to mature, of which $194 million was paid in full, $183 million
was extended at existing loan rates for a weighted average of six months and
$493 million was refinanced at current market rates. Mortgage loan extensions
and refinancings are loans in good standing. The remainder of the scheduled
maturities relate to problem investments, including $129 million that was
foreclosed or was in the process of foreclosure. The effect of not receiving
timely cash payments on maturing mortgage loans is not expected to have a
material adverse effect on CIGNA's results of operations, liquidity or capital
resources.
PROBLEM MORTGAGE LOANS
CIGNA's problem mortgage loans include delinquent and restructured mortgage
loans. Delinquent mortgage loans include those on which payment is overdue
generally 60 days or more. Restructured mortgage loans are those whose basic
financial terms have been modified, typically to reduce the interest rate. As
of December 31, 1993, restructured mortgage loans with a carrying value of
approximately $276 million had their original maturity date extended, with an
average extension of four years. Restructured mortgage loans generated
annualized cash returns averaging approximately 6% as of December 31, 1993.
As of December 31, problem mortgage loans, including amounts attributable to
policyholder contracts, and related valuation reserves were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Delinquent mortgage loans $ 162 $ 238
Less valuation reserves 32 20
---- -----
130 218
---- -----
Restructured mortgage loans 839 962
Less valuation reserves 105 79
---- -----
734 883
- ------------------------------------------------------------
Problem mortgage loans $ 864 $ 1,101
- ----------------------------------------------==============
</TABLE>
Problem mortgage loans attributable to policyholder contracts represented
56% and 52% of total problem mortgage loans at December 31, 1993 and 1992,
respectively.
As of December 31, delinquent and restructured mortgage loans by type and by
region, including amounts attributable to policyholder contracts, were as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
1993 1992
- ------------------------------------------------------------------
(In millions) Delinquent Restructured Delinquent Restructured
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Concentration by type:
Office buildings $105 $376 $ 99 $506
Hotels 13 237 72 215
Apartment buildings 2 51 20 83
Retail facilities 2 41 2 41
Other 8 29 25 38
- ------------------------------------------------------------------
Total $130 $734 $218 $883
- ------------------------==========================================
Concentration by region:
Central $ 22 $245 $ 12 $311
Middle Atlantic 67 181 150 134
Pacific 30 84 45 161
South Atlantic 9 110 9 111
New England 1 85 1 129
Other 1 29 1 37
- ------------------------------------------------------------------
Total $130 $734 $218 $883
- ------------------------==========================================
</TABLE>
26
<PAGE> 15
POTENTIAL PROBLEM MORTGAGE LOANS
Potential problem mortgage loans include: (1) fully current loans that are
judged by management to have certain characteristics that increase the
likelihood of problem classification; (2) fully current loans for which the
borrower has requested restructuring; and (3) loans that are 30 to 59 days
delinquent with respect to interest or principal payments. As of December 31,
1993, approximately 80% of potential problem mortgage loans were fully current
under their original terms. As of December 31, potential problem mortgage
loans, including amounts attributable to policyholder contracts, and related
valuation reserves were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(In millions) 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Potential problem mortgage loans $ 627 $ 745
Less valuation reserves 79 74
- -----------------------------------------------------------------------------------------------------------------------------
Potential problem mortgage loans $ 548 $ 671
- -------------------------------------------------------------------------------------------------------======================
</TABLE>
Potential problem mortgage loans attributable to policyholder contracts
represented 59% and 60% of total potential problem mortgage loans at December
31, 1993 and 1992, respectively.
VALUATION RESERVES FOR MORTGAGE LOANS
The activity in valuation reserves for mortgage loans during the year ended
December 31 was as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
Policyholder Policyholder
(In millions) Contracts CIGNA Total Contracts CIGNA Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance -- January 1 $ 106 $ 78 $ 184 $ 109 $ 61 $ 170
Net increase in valuation reserves 48 62 110 51 32 83
Charge-offs upon sales, repayments and other (13) (10) (23) (10) 1 (9)
Transfers to real estate (36) (19) (55) (44) (16) (60)
- -----------------------------------------------------------------------------------------------------------------------------
Ending balance -- December 31 $ 105 $ 111 $ 216 $ 106 $ 78 $ 184
- ----------------------------------------------------------===================================================================
</TABLE>
The after-tax adverse effect of the net increase in valuation reserves on
CIGNA's net income was $40 million, $21 million and $30 million for 1993, 1992
and 1991, respectively.
Valuation reserves for mortgage loans include reserves for loans which are
in-substance foreclosures (classified as problem mortgage loans) and such loans
are carried at the fair value of the underlying property. As of December 31,
1993, such loans amounted to approximately $17 million and are net of valuation
reserves of approximately $17 million. The carrying value of such loans, net of
valuation reserves of $45 million, was $121 million as of December 31, 1992.
EFFECT OF NON-ACCRUALS FOR MORTGAGE LOANS
Interest income is recognized on problem mortgage loans only when payment is
received. The adverse effect of non-accruals for mortgage loans (in total and
by type) on policyholder contracts and on CIGNA's net income for the year ended
December 31 is shown in the following table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
Policyholder Policyholder Policyholder
(In millions) Contracts CIGNA Contracts CIGNA Contracts CIGNA
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income under original contract terms $ 96 $ 54 $ 135 $ 55 $ 112 $ 44
Less net investment income received 68 30 80 31 63 23
--- --- --- --- --- ---
Forgone investment income 28 24 55 24 49 21
Tax effect -- (8) -- (8) -- (8)
- -----------------------------------------------------------------------------------------------------------------------------
Net effect of non-accruals $ 28 $ 16 $ 55 $ 16 $ 49 $ 13
- -----------------------------------------------------========================================================================
Forgone investment income by type:
Delinquent mortgage loans $ 13 $ 11 $ 33 $ 16 $ 24 $ 8
Restructured mortgage loans 15 13 22 8 25 13
--- --- --- --- --- ---
Forgone investment income 28 24 55 24 49 21
Tax effect -- (8) -- (8) -- (8)
- -----------------------------------------------------------------------------------------------------------------------------
Net effect of non-accruals $ 28 $ 16 $ 55 $ 16 $ 49 $ 13
- -----------------------------------------------------========================================================================
</TABLE>
27
<PAGE> 16
REAL ESTATE
Investment real estate includes real estate held for the production of
income and properties acquired as a result of foreclosure of mortgage loans
(foreclosure properties).
As of December 31, investment real estate, including amounts attributable to
policyholder contracts, and related cumulative write-downs and valuation
reserves were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Foreclosure properties $ 1,289 $ 930
Less cumulative write-downs 301 213
Less valuation reserves 59 37
------ -----
929 680
------ -----
Real estate held for the
production of income 890 814
Less valuation reserves 39 42
------ -----
851 772
- ------------------------------------------------------------
Investment real estate $ 1,780 $ 1,452
- ----------------------------------------====================
</TABLE>
Foreclosure properties attributable to policyholder contracts represented
56% and 64% of total foreclosure properties as of December 31, 1993 and 1992,
respectively.
As of December 31, foreclosure properties by type and by region, including
amounts attributable to policyholder contracts, were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Concentration by type:
Office buildings $ 638 $ 445
Hotels 202 139
Retail facilities 62 78
Other 27 18
- ------------------------------------------------------------
Total $ 929 $ 680
- -------------------------------------------=================
Concentration by region:
South Atlantic $ 201 $ 214
Central 212 192
Pacific 232 60
Middle Atlantic 128 84
New England 85 61
Other 71 69
- ------------------------------------------------------------
Total $ 929 $ 680
- -------------------------------------------=================
</TABLE>
28
<PAGE> 17
RESERVES FOR REAL ESTATE
The activity in cumulative write-downs and valuation reserves for real
estate during the year ended December 31 was as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
Policyholder Policyholder
(In millions) Contracts CIGNA Total Contracts CIGNA Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance -- January 1 $ 184 $ 108 $ 292 $ 73 $ 76 $ 149
Additions to cumulative write-downs 30 29 59 53 31 84
Net increase in valuation reserves 21 8 29 29 8 37
Charge-offs upon sales and other (32) (4) (36) (15) (23) (38)
Transfers from mortgage loans 36 19 55 44 16 60
- -----------------------------------------------------------------------------------------------------------------------------
Ending balance -- December 31 $ 239 $ 160 $ 399 $ 184 $ 108 $ 292
- ----------------------------------------------------------===================================================================
</TABLE>
The after-tax adverse effect of write-downs and the net increase in
valuation reserves on CIGNA's net income was $24 million, $26 million and $7
million for 1993, 1992 and 1991, respectively.
SUMMARY
The adverse effects of non-accruals, write-downs and changes in valuation
reserves ("write-downs and reserves") on policyholder contracts and on CIGNA's
net income for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
Policyholder Policyholder Policyholder
(In millions) Contracts CIGNA Contracts CIGNA Contracts CIGNA
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Write-downs and reserves:
Bonds $ 15 $ 18 $ 41 $ 29 $ 51 $ 25
Mortgage loans 48 40 51 21 97 30
Real estate 51 24 82 26 18 7
- -----------------------------------------------------------------------------------------------------------------------------
Net effect of write-downs and reserves $ 114 $ 82 $ 174 $ 76 $ 166 $ 62
- -----------------------------------------------------========================================================================
Effect of non-accruals:
Bonds $ 16 $ 12 $ 24 $ 20 $ 20 $ 17
Mortgage loans 28 16 55 16 49 13
- -----------------------------------------------------------------------------------------------------------------------------
Net effect of non-accruals $ 44 $ 28 $ 79 $ 36 $ 69 $ 30
- -----------------------------------------------------========================================================================
</TABLE>
The effect of adverse economic conditions on certain industry segments and
adverse real estate market conditions is expected to continue, resulting in
additional problem investments and foreclosures. Investments in California and
in office buildings are particularly vulnerable to deterioration. Although
additional non-accruals, write-downs and reserves will adversely affect future
results, the amounts and timing cannot be reasonably estimated. CIGNA currently
does not expect such non-accruals, write-downs and reserves to result in a
significant decline in the aggregate carrying value of its assets or a material
adverse effect on its financial condition.
29
<PAGE> 18
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(In millions, except per share amounts)
- -----------------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and fees $ 13,712 $ 13,924 $ 14,295
Net investment income 3,902 3,914 3,860
Other revenues 506 579 513
Realized investment gains 282 165 82
------ ------ ------
Total revenues 18,402 18,582 18,750
------ ------ ------
BENEFITS, LOSSES AND EXPENSES
Benefits, losses and settlement expenses 13,419 13,857 13,712
Policy acquisition expenses 1,210 1,280 1,268
Other operating expenses 3,608 3,266 3,186
------ ------ ------
Total benefits, losses and expenses 18,237 18,403 18,166
------ ------ ------
INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 165 179 584
------ ------ ------
Income taxes (benefits):
Current 413 136 215
Deferred (482) (294) (84)
------ ------ ------
Total taxes (69) (158) 131
------ ------ ------
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES 234 337 453
Extraordinary loss from early extinguishment
of debt, net of taxes -- -- (4)
Cumulative effect of accounting changes
for postemployment and postretirement
benefits other than pensions, net of taxes -- (530) --
Cumulative effect of accounting change
for income taxes -- 504 --
------ ------ ------
NET INCOME 234 311 449
Common dividends declared (219) (218) (217)
Retained earnings, beginning of year 3,702 3,609 3,377
- -----------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS, END OF YEAR $ 3,717 $ 3,702 $ 3,609
- ---------------------------------------------------------------------------------------======================================
EARNINGS PER SHARE
Income before extraordinary item and cumulative effect
of accounting changes $ 3.25 $ 4.70 $ 6.34
Extraordinary loss from early extinguishment
of debt, net of taxes -- -- (.06)
Cumulative effect of accounting changes for
postemployment and postretirement benefits
other than pensions, net of taxes -- (7.39) --
Cumulative effect of accounting change
for income taxes -- 7.03 --
------ ------ ------
NET INCOME $ 3.25 $ 4.34 $ 6.28
- ---------------------------------------------------------------------------------------======================================
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
30
<PAGE> 19
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(In millions, except per share amounts)
- -----------------------------------------------------------------------------------------------------------------------------
As of December 31, 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities: at amortized cost (fair value, $13,807; $27,184) $ 12,375 $ 25,095
Fixed maturities: at fair value (amortized cost, $17,618) 19,380 --
Equity securities: at fair value (cost, $1,626; $2,028) 1,849 2,321
Mortgage loans 10,021 10,918
Policy loans 3,663 2,086
Real estate 1,780 1,452
Other long-term investments 303 343
Short-term investments 1,357 3,133
----- -----
Total investments 50,728 45,348
Cash and cash equivalents 1,211 1,011
Accrued investment income 764 734
Premiums, accounts and notes receivable 4,065 3,634
Reinsurance recoverables 8,338 8,365
Deferred policy acquisition costs 1,085 1,061
Property and equipment, net 930 945
Deferred income taxes, net 1,703 1,720
Goodwill 1,262 1,384
Other assets 1,209 1,236
Separate account assets 13,680 12,243
- -----------------------------------------------------------------------------------------------------------------------------
Total $ 84,975 $ 77,681
- ------------------------------------------------------------------------------------------------------=======================
LIABILITIES
Future policy benefits $ 9,935 $ 9,380
Contractholder deposit funds 25,328 22,598
Unpaid claims and claim expenses 20,144 19,412
Unearned premiums 2,711 2,594
------- -------
Total insurance and contractholder liabilities 58,118 53,984
Short-term debt 351 475
Accounts payable, accrued expenses and other liabilities 4,555 4,117
Current income taxes 468 193
Long-term debt 1,235 929
Separate account liabilities 13,673 12,239
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 78,400 71,937
- -----------------------------------------------------------------------------------------------------------------------------
CONTINGENCIES -- NOTE 17
SHAREHOLDERS' EQUITY
Common stock (shares issued, 83 and 82) 83 82
Additional paid-in capital 2,222 2,206
Net unrealized appreciation -- fixed maturities 961 12
Net unrealized appreciation -- equity securities 211 325
Net translation of foreign currencies (74) (46)
Retained earnings 3,717 3,702
Less treasury stock, at cost (545) (537)
- -----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 6,575 5,744
- -----------------------------------------------------------------------------------------------------------------------------
Total $ 84,975 $ 77,681
- ------------------------------------------------------------------------------------------------------=======================
SHAREHOLDERS' EQUITY PER SHARE $ 91.30 $ 80.09
- ------------------------------------------------------------------------------------------------------=======================
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
31
<PAGE> 20
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(In millions)
For the year ended December 31, 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income before extraordinary item and
cumulative effect of accounting changes $ 234 $ 337 $ 453
Adjustments to reconcile income before extraordinary item and
cumulative effect of accounting changes to net cash
provided by (used in) operating activities:
Insurance liabilities 928 1,077 506
Reinsurance recoverables 27 (398) (208)
Premiums, accounts and notes receivable 94 239 154
Accounts payable, accrued expenses, other liabilities
and current income taxes 608 (77) (97)
Deferred income taxes, net (479) (335) (86)
Realized investment gains (282) (165) (82)
Gain on sale of subsidiaries and other equity interests (29) (85) (12)
Other, net 19 103 116
------- ------- -------
Net cash provided by operating activities 1,120 696 744
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments sold:
Fixed maturities 1,012 1,420 2,242
Mortgage loans 1,182 435 433
Equity securities 2,259 1,199 1,276
Other (primarily short-term investments) 19,317 16,064 17,509
Investment maturities and repayments:
Fixed maturities 5,162 4,517 2,977
Mortgage loans 210 298 177
Investments purchased:
Fixed maturities (8,553) (7,440) (6,437)
Mortgage loans (1,005) (946) (769)
Equity securities (1,587) (1,395) (1,272)
Other (primarily short-term investments) (21,133) (16,775) (18,840)
Proceeds from sale of subsidiaries and other equity interests 36 147 203
Other, net (105) (154) (254)
------- ------- -------
Net cash used in investing activities (3,205) (2,630) (2,755)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits and interest credited to contractholder deposit funds 7,565 5,344 6,136
Withdrawals from contractholder deposit funds (5,166) (4,080) (3,755)
Net change in commercial paper (48) 92 (281)
Issuance of long-term debt 327 111 219
Repayment of debt (148) (135) (120)
Dividends paid (219) (218) (217)
------- ------- -------
Net cash provided by financing activities 2,311 1,114 1,982
------- ------- -------
Effect of foreign currency rate changes on cash (26) (32) (4)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 200 (852) (33)
Cash and cash equivalents, beginning of year 1,011 1,863 1,896
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 1,211 $ 1,011 $ 1,863
- --------------------------------------------------------------------------------------=======================================
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds $ 121 $ 319 $ 155
Interest paid $ 116 $ 96 $ 103
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
32
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
A) BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of CIGNA Corporation (CIGNA) and all significant subsidiaries. These
consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. Certain reclassifications have been
made to 1992 and 1991 amounts to conform with the 1993 presentation.
B) RECENT ACCOUNTING PRONOUNCEMENTS: In the fourth quarter of 1993, CIGNA
implemented Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," which was
issued by the Financial Accounting Standards Board (FASB) in May 1993. SFAS No.
115 requires that debt and equity securities be classified into different
categories and carried at fair value if they are not classified as held to
maturity. SFAS No. 115 does not permit retroactive application of its
provisions. The effect of implementing SFAS No. 115 as of December 31, 1993
resulted in an increase in investment assets of $1.6 billion and an increase in
shareholders' equity of approximately $900 million resulting from the
classification of certain fixed maturities previously carried at amortized cost
to available for sale. The increase in shareholders' equity is net of
policyholder share of $307 million and deferred income taxes of $452 million.
See Note 3 for additional information.
In 1993, CIGNA implemented SFAS No. 113, "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts," which requires
reinsurance recoverables previously netted against insurance reserves to be
reclassified and reported as assets, and earned premiums ceded and recoveries
recognized under reinsurance contracts to be disclosed. Upon adoption of SFAS
No. 113, total assets and total liabilities as of December 31, 1992 were
restated and increased by approximately $7.9 billion. The statement also
requires gains on certain reinsurance contracts to be deferred and recognized
over the contract settlement period. The effect on net income from
implementation of the income recognition provisions of SFAS No. 113 was not
material.
In 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," which provides guidance on valuing impaired loans, and
must be implemented by the first quarter of 1995, with the cumulative effect of
implementation included in net income. The FASB has recently added to its
agenda a project to amend the income recognition provisions of SFAS No. 114. As
a result, CIGNA cannot determine the timing or effect on results of operations
or financial condition of adopting SFAS No. 114.
In 1992, CIGNA implemented SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions"; SFAS No. 109, "Accounting for
Income Taxes"; and SFAS No. 112, "Employers' Accounting for Postemployment
Benefits." These accounting changes were implemented as of January 1, 1992
through cumulative effect adjustments. Prior year financial statements were not
restated.
SFAS No. 106 requires employers to recognize the costs and obligations of
postretirement benefits other than pensions over the period ending with the
date an employee is fully eligible to receive benefits. Previously, such costs
were generally recognized as expense when paid. The cumulative effect of
implementing SFAS No. 106 as of January 1, 1992 resulted in a non-cash
after-tax charge to net income of $517 million. In addition, the implementation
of SFAS No. 106 increased 1992 other operating expenses by $52 million ($34
million after-tax). Implementation of SFAS No. 106 for non-U.S. plans is not
required until 1995. CIGNA has not determined the amount or timing of
implementation of SFAS No. 106 for its non-U.S. plans. However, the effect on
net income is not expected to be material. See Note 9 for additional
information.
SFAS No. 109 establishes new accounting and reporting standards for income
taxes and requires adopting the liability method, which replaces the deferred
method required by Accounting Principles Board Opinion (APB) No. 11. The
liability method recognizes, as of the date of the financial statements, the
amount of current and deferred tax assets and liabilities utilizing currently
enacted tax laws and rates. SFAS No. 109 requires that changes in tax laws and
rates that affect the deferred tax asset and liability accounts be reflected in
the income statement. In addition, SFAS No. 109 allows recognition of deferred
tax assets that are more likely than not to be realized in future years. The
standard also eliminates the requirement to report the utilization of net
operating loss carryforwards as an extraordinary item and requires the tax
effect of a change in tax laws or rates associated with unrealized investment
and foreign currency gains and losses be reflected in the income statement. The
cumulative effect of implementing SFAS No. 109 as of January 1, 1992 resulted
in a non-cash increase to net income of $504 million. In addition,
implementation of SFAS No. 109 resulted in a $29 million decrease to income tax
expense for 1992, net of a tax benefit of $59 million related to realized
investment results. See Note 8 for additional information.
SFAS No. 112 requires employers to recognize the costs and obligations of
severance, disability, and related life insurance and health care benefits to
be paid to inactive or former employees. If these benefits accumulate or vest
as a result of employee service and future payments are probable and estimable,
the obligation must be recognized over the service period of the employees. If
these benefits do not accumulate
33
<PAGE> 22
or vest, the estimated cost of such benefits is accrued when determined to be
probable and estimable. Prior to adoption, CIGNA had recognized expense for the
cost of these benefits either on an accrual or a paid basis, depending on the
plan. The cumulative effect of implementing SFAS No. 112 as of January 1, 1992
was a non-cash after-tax charge to net income of $13 million. There was no
incremental effect on 1992 net income from adopting SFAS No. 112. See Note 9
for additional information.
The increase (decrease) in 1992 net income for the segments due to the
cumulative effect for prior years and the incremental effect, respectively, for
the implementation of SFAS Nos. 106, 109 and 112 was as follows: Employee Life
and Health Benefits, ($146) million and $5 million; Employee Retirement and
Savings Benefits, ($25) million and ($1) million; Individual Financial
Services, ($37) million and ($3) million; Property and Casualty, $179 million
and ($5) million; and Other Operations, $3 million and ($1) million.
In 1992, CIGNA adopted Statement of Position (SOP) 92-3, "Accounting for
Foreclosed Assets," issued by the American Institute of Certified Public
Accountants, which resulted in a realized investment loss of $8 million ($6
million after-tax).
C) FINANCIAL INSTRUMENTS: In the normal course of business, CIGNA enters
into transactions involving various types of financial instruments, including
debt; investments such as fixed maturities and equity securities; and
off-balance-sheet financial instruments such as investment and loan
commitments, financial guarantees, and interest rate swap and futures
contracts. These instruments have credit risk and may also be subject to risk
of loss due to interest rate fluctuations. CIGNA evaluates and monitors each
financial instrument individually and, where appropriate, obtains collateral or
other forms of security to minimize risk of loss.
Financial instruments that are subject to fair value disclosure requirements
(insurance contracts, real estate, goodwill and taxes are excluded) are carried
in the financial statements at amounts that approximate fair value, unless
otherwise indicated in the Notes to Financial Statements. The fair values used
for financial instruments are estimates, which in many cases may differ
significantly from the amounts which could be realized upon immediate
liquidation. In cases where market prices are not available, estimates of fair
value are based on discounted cash flow analyses which utilize current interest
rates for similar financial instruments with comparable terms and credit
quality. Fair values of off-balance-sheet financial instruments as of December
31, 1993 and 1992 were not material.
D) INVESTMENTS: Investments in fixed maturities include bonds;
mortgage-backed securities, including collateralized mortgage obligations
(CMOs); and redeemable preferred stocks. As of December 31, 1993, in accordance
with SFAS No. 115, fixed maturities classified as held to maturity are carried
at amortized cost, net of impairments, and those classified as available for
sale are carried at fair value, with unrealized appreciation or depreciation
included in Shareholders' Equity. Prior to SFAS No. 115 implementation, fixed
maturities were carried principally at amortized cost, net of impairments.
Fixed maturities are considered impaired and written down when a decline in
value is considered to be other than temporary. CIGNA also establishes a
valuation reserve for potential problem bonds, when they are considered
impaired.
Mortgage loans are carried principally at unpaid principal balances, net of
valuation reserves. Mortgage loans are considered impaired and a valuation
reserve is established when a decline in value is considered to be other than
temporary.
Fixed maturities and mortgage loans that are delinquent or restructured to
modify basic financial terms, typically to reduce the interest rate and, in
certain cases, extend the term, are placed on non-accrual status, and
thereafter interest income is recognized only when payment is received.
Real estate investments are either held for the production of income or held
for sale. Real estate investments held for the production of income are carried
at depreciated cost less valuation reserves when a decline in value is other
than temporary. Depreciation is generally calculated using the straight-line
method based on the estimated useful lives of the assets. CIGNA considers real
estate investments acquired through the foreclosure of mortgage loans as assets
held for sale and values the asset received at its fair value at the time of
foreclosure. The fair value is established as the new cost basis and the
investment asset is reclassified from mortgage loans to real estate held for
sale. Subsequent to foreclosure, these investments are carried at the lower of
depreciated cost or current fair value less estimated costs to sell.
Adjustments to the carrying value as a result of changes in fair value
subsequent to foreclosure are recorded as valuation reserves and reported in
realized investment gains and losses. CIGNA considers several methods in
determining fair value for real estate acquired through foreclosure, with
greater emphasis placed on the use of discounted cash flow analyses and, in
some cases, the use of third-party appraisals. Assets held for sale are
depreciated using the straight-line method based on the estimated useful lives
of the assets.
Equity securities, which include common and non-redeemable preferred stocks,
are carried at fair value. Short-term investments are carried at fair value,
which approximates cost. As of December 31, 1993, equity securities and
short-term investments are classified as available for sale.
Policy loans are carried principally at unpaid principal balances.
34
<PAGE> 23
Realized investment gains and losses result from sales, investment asset
write-downs and changes in valuation reserves, after deducting amounts
attributable to experience-rated pension policyholders' contracts and
participating life policies ("policyholder share"). Generally, realized
investment gains and losses are based upon specific identification of the
investment assets.
Unrealized investment gains and losses, after deducting policyholder share
and net of deferred income taxes, if applicable, for investments carried at
fair value are included in Shareholders' Equity.
E) CASH AND CASH EQUIVALENTS: Short-term investments with a maturity of
three months or less at the time of purchase are reported as cash equivalents.
F) REINSURANCE RECOVERABLES: Reinsurance recoverables are estimates of
amounts to be received from reinsurers. Failure of reinsurers to indemnify
CIGNA, as a result of reinsurer insolvencies or disputes, could result in
losses. Consequently, allowances are established for amounts deemed
uncollectible.
G) DEFERRED POLICY ACQUISITION COSTS: Acquisition costs consist of
commissions, premium taxes and other costs, which vary with, and are primarily
related to, the production of revenues. Property and casualty, group life and a
portion of group health insurance business acquisition costs are deferred and
amortized over the terms of the insurance policies. Acquisition costs related
to universal life products and contractholder deposit funds are deferred and
amortized in proportion to total estimated gross profits over the expected life
of the contracts. Acquisition costs related to annuity and other life insurance
businesses are deferred and amortized, generally in proportion to the ratio of
annual revenue to the estimated total revenues over the contract periods.
Acquisition costs related to prepaid health and dental products are expensed as
incurred. Deferred acquisition costs are reviewed to determine if they are
recoverable from future income, including investment income. If such costs are
determined to be unrecoverable, they are expensed at the time of determination.
H) PROPERTY AND EQUIPMENT: Property and equipment are carried at cost less
accumulated depreciation. When applicable, cost includes interest and real
estate taxes incurred during construction and other construction-related costs.
Depreciation is calculated principally on the straight-line method based on the
estimated useful lives of the assets. Accumulated depreciation was $862 million
and $922 million at December 31, 1993 and 1992, respectively.
I) GOODWILL: Goodwill represents the excess of the cost of businesses
acquired over the fair value of their net assets. These costs are amortized on
systematic bases over periods, not exceeding 40 years, that correspond with the
benefits expected to be derived from the acquisition. CIGNA evaluates the
carrying amount of goodwill by analyzing historical and expected future income
and undiscounted cash flows of the related businesses. Write-downs of goodwill
are recognized when it is determined that the amount has been impaired. Also,
amortization periods are revised if it is determined that the remaining period
of benefit of the goodwill has changed. Accumulated amortization was $778
million and $656 million at December 31, 1993 and 1992, respectively.
J) OTHER ASSETS: Other Assets consists of various insurance-related assets,
principally ceded unearned premiums and reinsurance deposits.
K) SEPARATE ACCOUNTS: Separate account assets and liabilities are
principally carried at market value, with less than 4% carried at amortized
cost, and represent policyholder funds maintained in accounts having specific
investment objectives. The investment income, gains and losses of these
accounts generally accrue to the policyholders and, therefore, are not included
in CIGNA's net income.
L) INSURANCE AND CONTRACTHOLDER LIABILITIES: Future policy benefits are
liabilities for life, health and annuity products, excluding investment-related
and universal life products. Such liabilities are established in amounts
adequate to meet the estimated future obligations of policies in force. These
liabilities are computed using premium assumptions for group annuity policies
and the net level premium method for individual life and annuity policies, and
are based upon estimates as to future investment yield, mortality and
withdrawals that include provisions for adverse deviation. Future policy
benefits for individual life insurance and annuity policies are computed using
interest rates ranging from approximately 2% to 12%, generally graded down
after 10 to 30 years. Mortality, morbidity and withdrawal assumptions for all
policies are based on either CIGNA's own experience or various actuarial
tables.
Contractholder Deposit Funds are liabilities for investment-related and
universal life products which were $19.3 billion and $6 billion as of December
31, 1993, respectively, compared with $18.7 billion and $3.9 billion as of
December 31, 1992, respectively. These liabilities consist of deposits
received from customers and investment earnings on their fund balances, less
administrative charges and, for universal life fund balances, mortality and
surrender charges. The fair value of liabilities for investment-related
products as of December 31, 1993 and 1992 was $20.5 billion and $19.7 billion,
respectively. The fair value was estimated using the amount payable on demand
and, for those not payable on demand, discounted cash flow analyses.
Liabilities for unpaid claims and claim expenses are estimates of payments
to be made on property and casualty and health insurance and prepaid health and
dental claims for reported losses and estimates of losses incurred but not
reported, except as discussed further in Note 16. Estimated amounts of salvage
and subrogation are deducted from the liability for unpaid claims.
Premiums for property and casualty and group life, accident and health
insurance are reported as earned on a pro-rata basis over the contract period.
The unexpired portion of these premiums is recorded as Unearned Premiums.
35
<PAGE> 24
M) OTHER LIABILITIES: Other Liabilities consists principally of
postretirement and postemployment benefits and various insurance-related
liabilities, including amounts related to reinsurance contracts and the present
value of obligations related to a closed book of reinsurance business. Also
included in Other liabilities are liabilities for guaranty fund assessments
that can be reasonably estimated.
N) TRANSLATION OF FOREIGN CURRENCIES: Foreign operations primarily utilize
the local currencies as their functional currencies, and assets and liabilities
are translated at the rates of exchange as of the balance sheet date. Revenues
and expenses are translated at average rates of exchange prevailing during the
year. The translation gain or loss on such functional currencies is generally
reflected in Shareholders' Equity, net of applicable taxes.
O) PREMIUM AND FEE REVENUE AND RELATED EXPENSES: Premiums for individual
life and health insurance and individual and group annuity products, excluding
universal life and investment-related products, are considered revenue when
due. Insurance premiums for property and casualty, group life, accident and
health, and premiums for prepaid health and dental coverages are recognized as
revenue over the related contract periods. Benefits, losses and related
expenses are matched with premiums, resulting in their recognition over the
term of the contracts. This matching is accomplished through the provision for
future benefits, estimated unpaid losses and amortization of deferred policy
acquisition costs. Revenues for investment-related products consist of net
investment income and contract charges assessed against the fund values.
Related benefit expenses primarily consist of net investment income credited to
the fund values after deduction for investment and risk charges. Revenues for
universal life products consist of net investment income and mortality,
administration and surrender charges assessed against the fund values. Related
benefit expenses include universal life benefit claims in excess of fund values
and net investment income credited to universal life fund values.
P) PARTICIPATING BUSINESS: Certain life insurance policies contain dividend
payment provisions that enable the policyholder to participate in the earnings
of the life insurance subsidiaries of CIGNA. The participating insurance in
force accounted for 3.2% of total insurance in force at December 31, 1993,
compared with 0.4% at December 31, 1992 and 1991.
Q) INCOME TAXES: CIGNA and its domestic subsidiaries file a consolidated
United States federal income tax return. Entities included within the
consolidated group are segregated into either a life insurance or non-life
insurance company subgroup. The consolidation of these subgroups is subject to
certain statutory restrictions on the percentage of eligible non-life tax
losses that can be applied to offset life company taxable income.
Deferred income taxes are generally recognized when assets and liabilities
have different values for financial statement and tax reporting purposes. These
differences result primarily from loss reserves, policy acquisition expenses,
reserves for postretirement benefits and unrealized appreciation or
depreciation on investments.
NOTE 2 - ACQUISITIONS AND DISPOSITIONS
During 1993, CIGNA sold all, or a portion, of its equity interest in certain
of its businesses. Total assets and premiums and fees of these businesses were
not material to CIGNA. The gain realized in 1993 from these sales was
approximately $20 million after-tax. During 1992 and 1991, CIGNA had
acquisitions and dispositions that were not material to the financial
statements.
CIGNA sold on January 15, 1994 the California personal automobile and
homeowners insurance business that CIGNA retained from the 1989 sale of the
Horace Mann insurance companies. A gain on the sale of approximately $20
million after-tax will be recognized in 1994.
NOTE 3 - INVESTMENTS
A) FIXED MATURITIES: Fair values are based upon market prices, when
available, or discounted cash flow analyses. Fixed maturities are net of
cumulative write-downs and valuation reserves of $123 million and $170 million,
including policyholder share, as of December 31, 1993 and 1992, respectively.
The amortized cost and fair value by contractual maturity periods for fixed
maturities as of December 31, 1993 were as follows:
<TABLE>
<CAPTION>
HELD TO MATURITY (CARRIED AT AMORTIZED COST)
- ------------------------------------------------------------
Amortized Fair
(In millions) Cost Value
- ------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 113 $ 114
Due after one year through five years 3,148 3,417
Due after five years through ten years 4,346 4,831
Due after ten years 2,979 3,547
Mortgage-backed securities 1,789 1,898
- ------------------------------------------------------------
Total $ 12,375 $ 13,807
- -------------------------------------------=================
</TABLE>
<TABLE>
<CAPTION>
Available for Sale (Carried at Fair Value)
- ------------------------------------------------------------
Amortized Fair
(In millions) Cost Value
- ------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 423 $ 451
Due after one year through five years 4,321 4,564
Due after five years through ten years 4,897 5,227
Due after ten years 3,907 4,653
Mortgage-backed securities 4,070 4,485
- ------------------------------------------------------------
Total $17,618 $19,380
- --------------------------------------------================
</TABLE>
Actual maturities could differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties. Also, CIGNA may extend maturities in some cases.
36
<PAGE> 25
As of December 31, 1993, gross unrealized appreciation (depreciation) for
fixed maturities by type of issuer was as follows:
<TABLE>
<CAPTION>
HELD TO MATURITY (CARRIED AT AMORTIZED COST)
- ---------------------------------------------------------------------
Amortized Fair
(In millions) Cost Appreciation Depreciation Value
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
State and local
government bonds $ 82 $ 13 $ (2) $ 93
Foreign government
bonds 43 2 -- 45
Corporate securities 10,461 1,318 (8) 11,771
Mortgage-backed
securities 1,789 127 (18) 1,898
- ---------------------------------------------------------------------
Total $ 12,375 $ 1,460 $(28) $ 13,807
- --------------------=================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
AVAILABLE FOR SALE (CARRIED AT FAIR VALUE)
- ---------------------------------------------------------------------
Amortized Fair
(In millions) Cost Appreciation Depreciation Value
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal government
bonds $ 1,124 $ 57 $ (5) $ 1,176
State and local
government bonds 1,527 313 (1) 1,839
Foreign government
bonds 1,620 109 (9) 1,720
Corporate securities 9,277 924 (41) 10,160
Mortgage-backed
securities 4,070 446 (31) 4,485
- ---------------------------------------------------------------------
Total $ 17,618 $ 1,849 $(87) $ 19,380
- --------------------=================================================
</TABLE>
For fixed maturities carried at amortized cost, gross unrealized
appreciation (depreciation) by type of issuer as of December 31, 1992 was as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Amortized Fair
(In millions) Cost Appreciation Depreciation Value
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal government
bonds $ 901 $ 139 $ (2) $ 1,038
State and local
government bonds 1,643 386 (11) 2,018
Foreign government
bonds 435 30 (10) 455
Corporate securities 16,817 1,522 (290) 18,049
Mortgage-backed
securities 5,299 398 (73) 5,624
- ---------------------------------------------------------------------
Total $ 25,095 $ 2,475 $ (386) $ 27,184
- --------------------=================================================
</TABLE>
At December 31, 1992, fixed maturities carried at fair value, primarily
foreign government bonds, were included in short-term investments and totaled
$2.1 billion (amortized cost, $2.1 billion). Gross unrealized appreciation and
depreciation on such investments were $39 million and $21 million,
respectively.
Mortgage-backed securities include investments in CMOs as of December 31,
1993 of $2.6 billion carried at fair value (amortized cost, $2.5 billion) and
$316 million carried at amortized cost (fair value, $356 million). As of
December 31, 1992, investments in CMOs were carried at amortized cost and
totaled approximately $2.0 billion, with a fair value of $2.1 billion. Certain
of these securities are backed by Aaa/AAA-rated government agencies. All other
CMO securities have high quality standards through use of credit enhancement
provided by subordinated securities or mortgage insurance from a Aaa/AAA-rated
insurance company. CMO holdings are concentrated in securities with limited
prepayment, extension and default risk, such as planned amortization class
bonds. CIGNA's investments in interest-only and principal-only CMOs, which are
also subject to interest rate risk resulting from accelerated prepayments,
represent approximately 8% of total CMO investments at December 31, 1993 and
1992. CIGNA has minimized the risks resulting from significant interest rate
fluctuations associated with interest-only and principal-only investments by
holding positions in both types of instruments.
At December 31, 1993, contractual fixed maturity investment commitments
approximated $200 million. The majority of investment commitments are for the
purchase of investment grade fixed maturities and require no collateral. These
commitments are diversified by issuer and maturity date, and it is estimated
that the full amount will be disbursed in 1994.
B) SHORT-TERM INVESTMENTS: As of December 31, 1993, short-term investments
include debt securities, principally corporate securities, $954 million;
federal government securities, $257 million; and foreign government securities,
$104 million.
C) MORTGAGE LOANS AND REAL ESTATE: CIGNA's mortgage loans and real estate
investments are diversified by property type and location and, for mortgage
loans, borrower and loan size. Mortgage loans are collateralized by the related
properties and generally approximate 80% of the property's value at the time
the original loan is made.
At December 31, the carrying values of mortgage loans and real estate
investments were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Mortgage loans $ 10,021 $ 10,918
------ ------
Real estate:
Held for sale 929 680
Held for production of income 851 772
------ ------
Total real estate 1,780 1,452
- ------------------------------------------------------------
Total $ 11,801 $ 12,370
- ------------------------------------------==================
</TABLE>
37
<PAGE> 26
The fair value of mortgage loans as of December 31, 1993 and 1992 was $10.2
billion and $11.1 billion, respectively. Fair values were estimated primarily
using discounted cash flow analyses. Valuation reserves for mortgage loans,
including policyholder share, were $216 million and $184 million as of December
31, 1993 and 1992, respectively. Valuation reserves and cumulative write-downs
related to real estate, including policyholder share, were $399 million and
$292 million as of December 31, 1993 and 1992, respectively.
During 1993, 1992 and 1991, non-cash investing activities included real
estate acquired through foreclosure of mortgage loans, which totaled $460
million, $461 million and $348 million, respectively.
At December 31, mortgage loans and real estate investments comprised the
following property types and geographic regions:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Property type:
Office buildings $ 4,868 $ 5,283
Retail facilities 4,225 4,302
Apartment buildings 1,056 998
Hotels 909 1,025
Other 743 762
- ------------------------------------------------------------
Total $ 11,801 $ 12,370
- ------------------------------------------==================
Geographic region:
Central $ 3,493 $ 3,871
Pacific 3,049 2,819
Middle Atlantic 1,896 2,041
South Atlantic 1,780 1,935
New England 1,095 1,175
Other 488 529
- ------------------------------------------------------------
Total $ 11,801 $ 12,370
- ------------------------------------------==================
</TABLE>
At December 31, 1993, scheduled mortgage loan maturities were as follows:
1994 -- $926 million; 1995 -- $1 billion; 1996 -- $1.3 billion; 1997 -- $1.4
billion; 1998 -- $791 million; and $4.6 billion thereafter. Actual maturities
could differ from contractual maturities because borrowers may have the right
to prepay obligations with or without prepayment penalties and loans may be
refinanced. During 1993 and 1992, CIGNA refinanced approximately $900 million
and $1.0 billion of its mortgage loans relating to borrowers that were unable
to obtain alternative financing.
At December 31, 1993, contractual commitments to extend credit under
commercial mortgage loan agreements amounted to approximately $257 million.
These commitments generally expire within one year and are diversified by
property type and geographic region.
D) NET UNREALIZED APPRECIATION OF INVESTMENTS: Unrealized appreciation and
depreciation for investments carried at fair value as of December 31, 1993 and
1992 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Unrealized appreciation:
Fixed maturities $ 1,849 $ 39
Equity securities 287 477
Other investments 14 5
-------- ------
2,150 521
-------- ------
Unrealized depreciation:
Fixed maturities (87) (21)
Equity securities (64) (184)
-------- ------
(151) (205)
-------- ------
1,999 316
Policyholder share (310) 27
Deferred income taxes (517) (6)
- ------------------------------------------------------------
Net unrealized appreciation $ 1,172 $ 337
- -------------------------------------------=================
</TABLE>
The increase (decrease) in net unrealized appreciation included in
Shareholders' Equity for investments carried at fair value, excluding
policyholder share, was $835 million, ($149) million and $379 million for the
years ended December 31, 1993, 1992 and 1991, respectively.
The increase (decrease) in net unrealized appreciation on fixed maturities
that are carried at fair value was $949 million, ($14) million and $26 million
in 1993, 1992 and 1991, respectively. Such amounts are included as a separate
component of Shareholders' Equity, net of policyholder share and deferred
income taxes. The increase in unrealized appreciation in 1993 reflects the
implementation of SFAS No. 115, which requires certain fixed maturities to be
carried at fair value.
The net unrealized appreciation on fixed maturities that are carried at
amortized cost is not reflected in the financial statements. The increase
(decrease) in such net unrealized appreciation was ($657) million, $110 million
and $1.3 billion in 1993, 1992 and 1991, respectively. The decrease in
unrealized appreciation in 1993 reflects the implementation of SFAS No. 115 as
discussed above.
E) NON-INCOME PRODUCING INVESTMENTS: At December 31, the carrying values of
investments that were non-income producing during the preceding 12 months,
including policyholder share, were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Fixed maturities $ 375 $ 132
Mortgage loans 91 144
Real estate 356 457
Other long-term investments 5 67
- ------------------------------------------------------------
Total $ 827 $ 800
- ----------------------------------------------==============
</TABLE>
38
<PAGE> 27
F) FUTURES CONTRACTS: CIGNA purchases and sells futures contracts on margin
to hedge against interest rate fluctuations and their effect on the net cash
flows from the investment portfolio supporting its annuity and investment
businesses. Such futures contracts outstanding were $129 million and $524
million at December 31, 1993 and 1992, respectively. Because CIGNA purchases
and sells futures contracts through brokers who assume the risk of loss,
CIGNA's exposure to credit risk under futures contracts is limited to the
amount of margin deposited with the broker, generally 1% of the contractual
amount. Changes in the market value of the futures contracts that qualify as
hedges are recorded as adjustments to the carrying value of the investment
portfolio, and amortization to income begins at the time of reinvestment.
Futures contracts that do not qualify as hedges relate to policyholder
contracts; therefore, changes in the market value are recorded in
contractholder liabilities.
G) INTEREST RATE SWAP CONTRACTS: CIGNA enters into interest rate swap
contracts, which are agreements to exchange interest rate payments at future
dates, to manage exposure to interest rate fluctuations. Under CIGNA's swap
contracts, fixed rate interest payments are generally received in exchange for
variable rate interest payments associated with underlying principal amounts.
Because the underlying principal of interest rate swap contracts is not
exchanged, CIGNA's maximum exposure to credit risk is the difference in
interest payments exchanged. Net interest received or paid is recognized over
the life of the swap contract as an adjustment to net investment income.
Underlying principal amounts associated with interest rate swap contracts
outstanding were $781 million and $628 million at December 31, 1993 and 1992,
respectively. The increase in net investment income related to interest rate
swap contracts was $26 million, $25 million and $16 million for the years ended
December 31, 1993, 1992 and 1991, respectively.
H) OTHER: As of December 31, 1993 and 1992, CIGNA had no concentration of
investments in a single investee exceeding 10% of Shareholders' Equity.
NOTE 4 - INVESTMENT INCOME AND GAINS AND LOSSES
A) NET INVESTMENT INCOME: The components of net investment income, including
policyholder share, for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities $ 2,257 $ 2,301 $ 2,167
Equity securities 80 71 69
Mortgage loans 1,006 1,065 1,114
Policy loans 255 165 126
Real estate 287 173 122
Other long-term investments 62 57 83
Short-term investments 291 313 349
----- ----- -----
4,238 4,145 4,030
Less investment expenses 336 231 170
- ------------------------------------------------------------
Net investment income $ 3,902 $ 3,914 $ 3,860
- ---------------------------------===========================
</TABLE>
Net investment income attributable to policyholder contracts, which is
included in CIGNA's revenues and is primarily offset by amounts included in
Benefits, Losses and Settlement Expenses, was approximately $1.6 billion for
1993, 1992 and 1991. Net investment income for separate accounts, which is not
reflected in CIGNA's revenues, was $611 million, $660 million and $686 million
for 1993, 1992 and 1991, respectively.
As of December 31, 1993, fixed maturities and mortgage loans on non-accrual
status, including policyholder share, were $407 million and $864 million,
including restructured investments of $328 million and $734 million,
respectively. Amounts on non-accrual status as of December 31, 1992 were $578
million of fixed maturities and $1.1 billion of mortgage loans, including
restructurings of $364 million and $883 million, respectively. Excluding
policyholder share, the effect of non-accruals, compared with amounts that
would have been recognized in accordance with the original terms of the
investments, was to reduce net income by $28 million, $36 million and $30
million in 1993, 1992 and 1991, respectively.
B) REALIZED INVESTMENT GAINS AND LOSSES: Realized gains and losses on
investments, excluding policyholder share, for the year ended December 31 were
as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Realized investment gains
(losses):
Fixed maturities $ 50 $ 48 $ 8
Equity securities 257 142 105
Mortgage loans (51) (29) (38)
Real estate (46) (38) 1
Other 72 42 6
-- -- -
282 165 82
Income taxes (benefits) 58 (27) 30
- ------------------------------------------------------------
Net realized investment gains $ 224 $ 192 $ 52
- ---------------------------------===========================
</TABLE>
Impairments in the value of investments, net of recoveries, that are
included in realized investment gains and losses were $100 million, $97 million
and $78 million in 1993, 1992 and 1991, respectively.
Realized investment gains for separate accounts, which are not reflected in
CIGNA's revenues, were $612 million, $244 million and $273 million for the
years ended December 31, 1993, 1992 and 1991, respectively. Realized investment
gains (losses) attributable to policyholder contracts, which also are not
reflected in CIGNA's revenues, were $3 million, ($103) million and ($49)
million for the years ended December 31, 1993, 1992 and 1991, respectively.
Proceeds from voluntary sales of investments in fixed maturities, including
policyholder share, were $1.0 billion, $1.4 billion and $2.2 billion in 1993,
1992 and 1991, respectively. Including policyholder share, realized investment
gains on such sales were $44 million, $80 million and $113 million, and
realized investment losses were $22 million, $18 million and $33 million for
1993, 1992 and 1991, respectively. These amounts exclude the effects of sales
of fixed maturities that were previously classified as short-term investments
but are classified as of December 31, 1993 as fixed maturities available for
sale in accordance with SFAS No. 115.
39
<PAGE> 28
NOTE 5 - DEBT
Short- and long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
SHORT-TERM
Commercial paper $ 304 $ 352
Current maturities of long-term debt 47 123
- ------------------------------------------------------------
Total short-term debt $ 351 $ 475
- ---------------------------------------------===============
LONG-TERM
Unsecured Debt:
8.2% Convertible Subordinated
Debentures due 2010 $ 248 $ 248
8% Notes due 1996 150 150
8-3/4% Notes due 2001 100 100
7.4% Notes due 2003 100 --
8-1/4% Notes due 2007 100 100
7.65% Notes due 2023 100 --
8.3% Notes due 2023 100 --
Medium-term Notes* 202 218
- ------------------------------------------------------------
Total unsecured debt 1,100 816
- ------------------------------------------------------------
Secured Debt (principally by
real estate):
Capitalized leases 8 8
Other secured obligations 127 105
- ------------------------------------------------------------
Total secured debt 135 113
- ------------------------------------------------------------
Total long-term debt $1,235 $ 929
- ---------------------------------------------===============
</TABLE>
*Interest rates on medium-term notes range from 5-3/4% to 10% with original
maturity dates ranging from approximately two to ten years.
The fair value of long-term debt as of December 31, 1993 and 1992 was $1.3
billion and $966 million, respectively. The fair value was estimated by using
market quotes, when available, and when not available, discounted cash flow
analyses.
CIGNA issues commercial paper primarily to manage imbalances between
operating cash flows and existing commitments, to meet working capital needs
and to take advantage of current investment opportunities. Commercial paper
borrowing arrangements are supported by various lines of credit.
As of December 31, 1993, CIGNA had approximately $650 million in unused
committed and uncommitted lines of credit provided by U.S. and foreign banks.
These lines of credit generally have terms ranging from one to three years and
are paid for using a combination of fees and bank balances. Interest that CIGNA
would be charged for usage of these lines of credit is based upon negotiated
arrangements.
In 1993, CIGNA issued $100 million of unsecured 7.4% Notes due in 2003, $100
million of unsecured 8.3% Notes due in 2023 and $100 million of unsecured 7.65%
Notes due in 2023. The proceeds from these issues were used for general
corporate purposes, including the repayment of certain debt at maturity. In
addition, in 1993, CIGNA issued $27 million in medium-term notes.
As of December 31, 1993, CIGNA had approximately $950 million remaining
under effective shelf registration statements filed with the Securities and
Exchange Commission that may be issued as debt and equity securities, depending
upon market conditions and CIGNA's capital requirements. In January 1994, CIGNA
issued $100 million of unsecured 6-3/8% Notes due in 2006 under one of the
shelf registration statements.
In 1992, CIGNA issued $100 million of unsecured 8-1/4% Notes due in 2007 and
$11 million of medium-term notes.
In 1991, CIGNA repurchased substantially all of its 13% Sterling Foreign
Currency Loan Stock due in 2008, with an outstanding principal balance of $53
million at the time of repurchase. The repurchase resulted in a loss of $6
million; the after-tax effect of $4 million has been reflected in CIGNA's net
income as an extraordinary loss.
The 8.2% Convertible Subordinated Debentures are subject to sinking fund
provisions and are convertible into CIGNA common stock at the rate of .7326
shares for each $50 of principal.
Maturities of long-term debt for each of the next five years are as follows:
1994 -- $47 million; 1995 -- $5 million; 1996 -- $160 million; 1997 -- $43
million; 1998 -- $85 million.
Interest expense was $124 million, $100 million and $106 million in 1993,
1992 and 1991, respectively.
NOTE 6 - COMMON AND PREFERRED STOCK
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(Shares in thousands) 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Common: Par value $1
200,000 shares authorized
Outstanding--January 1 71,720 71,563 71,313
Issued for stock option and
benefit plans 295 157 250
--- --- ---
Outstanding--December 31 72,015 71,720 71,563
Treasury shares 10,615 10,612 10,516
- ------------------------------------------------------------
Issued--December 31 82,630 82,332 82,079
- ----------------------------------==========================
</TABLE>
Stock issued under benefit plans resulted in increases in Additional Paid-in
Capital of $16 million in 1993 and $13 million in both 1992 and 1991. Such
stock issuances also resulted in net increases in Treasury Stock of $8 million,
$3 million and $8 million in 1993, 1992 and 1991, respectively.
Under CIGNA's shareholder rights plan, Preferred Stock Purchase Rights
(Rights) attach to all outstanding shares of CIGNA common stock. The Rights,
which expire in 1997, trade with the stock until the Rights become exercisable.
They are exercisable only if a party acquires, or announces a tender offer to
acquire, 20% or more of the outstanding common stock. Each Right entitles the
shareholder to buy for a $200 exercise price 1/100 of a share of Junior
Participating Preferred Stock Series D, having dividend and voting rights
approximately equal to one share of common stock. Under certain circumstances,
including the acquisition of 20% or more of the outstanding common stock by an
acquirer, all Rights holders except the acquirer may purchase shares of common
stock
40
<PAGE> 29
worth twice the exercise price. If CIGNA is acquired in a merger after the
acquisition of 20% of outstanding common stock, Rights holders may purchase the
acquirer's shares at a similar discount. CIGNA may redeem the Rights for five
cents each at any time before an acquirer acquires 20% of its outstanding
common stock, and thereafter under certain circumstances.
CIGNA has authorized a total of 25 million shares of $1 par value preferred
stock. No shares of preferred stock were outstanding at December 31, 1993, 1992
and 1991.
NOTE 7 - SHAREHOLDERS' EQUITY AND DIVIDEND RESTRICTIONS
The insurance departments of various jurisdictions in which CIGNA's
insurance subsidiaries are domiciled recognize as net income and surplus
(shareholders' equity) those amounts determined in conformity with statutory
accounting practices prescribed or permitted by the departments, which differ
in certain respects from generally accepted accounting principles.
The amounts of statutory net income (loss) for the year ended, and surplus
as of, December 31 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Life Insurance Companies:
Net income $ 668 $ 512 $ 588
Surplus 2,920 2,460 2,258
Property and Casualty Insurance
Companies:
Net loss $ (428) $ (132) $ (15)
Surplus 1,285 1,320 1,898
- ------------------------------------------------------------
</TABLE>
As a result of property and casualty underwriting losses, CIGNA contributed
$150 million of capital in 1993 to enhance the capital base of the domestic
property and casualty operations. Also during 1993, management expanded the use
of discounting for certain statutory loss reserves and modified the assumptions
used to discount other reserves, in accordance with state insurance
regulations, which increased statutory surplus by approximately $290 million.
Additional capital contributions may be needed as a result of continued
property and casualty losses; however, such amounts are not reasonably
estimable at this time.
CIGNA's insurance subsidiaries are subject to various regulatory
restrictions that limit the maximum amount of annual dividends or other
distributions, including loans or cash advances, available to shareholders
without prior approval of the insurance regulatory authorities. The maximum
dividend distribution that may be made by CIGNA's insurance subsidiaries during
1994 without prior approval is approximately $900 million. The amount of
restricted net assets as of December 31, 1993 is approximately $5.7 billion.
NOTE 8 - INCOME TAXES
In accordance with SFAS No. 109, CIGNA adopted the liability method of
accounting for income taxes as discussed in Note 1.
In conjunction with the implementation of SFAS No. 109, CIGNA increased its
net deferred tax asset by $1.0 billion to $1.4 billion as of January 1, 1992.
As of December 31, 1993 and 1992 the net deferred tax asset was $1.7 billion.
Management believes, based on CIGNA's earnings history and its future
expectations, that CIGNA's taxable income in future years will be sufficient to
realize the net deferred tax asset. In determining the adequacy of future
taxable income, management considered the future reversal of its existing
taxable temporary differences and available tax planning strategies that could
be implemented, if necessary.
The deferred tax asset was net of valuation allowances of $53 million and
$82 million as of December 31, 1993 and 1992, respectively. The valuation
allowance reflects management's assessment, based on available information,
that it is more likely than not that a portion of the deferred tax asset for
certain foreign operations will not be realized. Adjustments to the valuation
allowance are made if there is a change in management's assessment of the
amount of the deferred tax asset that is realizable. During 1993, the
valuation allowance was decreased by $29 million and during 1992 it increased
by $44 million, to reflect management's assessment of changes related to
certain foreign operations.
Deferred taxes of $165 million for unrealized appreciation on investments
established with the adoption of SFAS No. 109 at January 1, 1992 were included
in the cumulative effect adjustment. Included in 1993 and 1992 deferred income
taxes were benefits of $63 million and $59 million, respectively, attributable
to unrealized appreciation on individual securities held as of January 1, 1992
and sold during the respective years. Deferred tax benefits of $43 million will
be recognized in future years as securities held as of January 1, 1992 are
sold.
As of December 31, 1993 and 1992, the net deferred tax asset included a
benefit of $97 million and $87 million, respectively, resulting from tax basis
net operating loss carryforwards of $278 million and $256 million,
respectively. Subject to statutory limitations, these carryforwards are
available to offset taxable income through the year 2008.
Income for 1991 includes a benefit of $48 million for taxes recoverable
associated with Section 847 of the Internal Revenue Code (Section 847). For
1993 and 1992, Section 847 benefits have not been recognized in accordance with
SFAS No. 109.
In accordance with the Life Insurance Company Income Tax Act of 1959, a
portion of CIGNA's life insurance companies statutory income was not subject to
current income taxation but was accumulated in an account designated
Policyholders' Surplus Account. Under the Tax Reform Act of 1984, no further
additions may be made to the Policyholders' Surplus Account for tax years
ending after December 31, 1983.
41
<PAGE> 30
The balance in the account of approximately $450 million at December 31, 1993
would result in a tax liability of $158 million (at a 35% rate), only if
distributed to shareholders or if the account balance exceeded a prescribed
maximum. No income taxes have been provided on this amount because, in
management's opinion, the likelihood that these conditions will be met is
remote.
CIGNA's federal income tax returns are routinely audited by the Internal
Revenue Service (IRS) and provisions are made in the financial statements in
anticipation of the results of these audits. The IRS has substantially
completed audits of the years 1982 through 1988 and has proposed an adjustment
which could result in an assessment of approximately $205 million for those
years. CIGNA is currently contesting in court the issue giving rise to such
proposed adjustment and, although the outcome is uncertain, management believes
that CIGNA should prevail. CIGNA resolved all other issues, other than the
contested issue, arising out of the audits for 1982 through 1988, which
resulted in an increase to net income of $182 million for 1992 and $3 million
for 1993.
In management's opinion, adequate tax liabilities have been established for
all years.
The tax effect of temporary differences which give rise to deferred income
tax assets and liabilities as of December 31 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Loss reserve discounting $ 716 $ 645
Other insurance and contractholder
liabilities 870 554
Employee and retiree benefit plans 384 355
Investments, net 126 156
Operating loss carryforwards 97 87
Bad debt expense 62 45
Other 351 330
--- ---
Deferred tax assets before
valuation allowance 2,606 2,172
Valuation allowance for
deferred tax assets (53) (82)
--- ---
Deferred tax assets, net of
valuation allowance 2,553 2,090
----- -----
Deferred tax liabilities:
Policy acquisition expenses 71 136
Depreciation 117 114
Unrealized appreciation on investments 584 117
Other 78 3
----- -----
Total deferred tax liabilities 850 370
- ------------------------------------------------------------
Deferred income taxes, net $ 1,703 $ 1,720
- --------------------------------------------================
</TABLE>
The components of income tax expense for each year were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Current Taxes:
U.S. income $ 373 $ 121 $ 178
Foreign income 40 15 37
---- ---- ----
413 136 215
---- ---- ----
Deferred Taxes (Benefits):
U.S. income (499) (296) (74)
Foreign income 17 2 (10)
----- ----- -----
(482) (294) (84)
- ------------------------------------------------------------
Total income tax expense
(benefit) $ (69) $ (158) $ 131
- -----------------------------------=========================
</TABLE>
As a result of the Omnibus Budget Reconciliation Act of 1993 (OBRA), the
federal corporate income tax rate increased by one percent to 35% retroactive
to January 1, 1993. Deferred tax benefits for 1993 included $48 million related
to an increase in CIGNA's net deferred tax asset as of January 1, 1993 due to
the effect of the tax rate increase.
Total income tax expense was less than the amount computed using the nominal
federal income tax rate for the following reasons:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Tax expense at nominal rate
(35% for 1993, 34% for 1992
and 1991) $ 58 $ 61 $ 198
Tax-exempt interest income (45) (45) (45)
Dividends received deduction (14) (14) (14)
Fresh start adjustment -- -- (39)
Amortization of goodwill 43 34 17
Interest on provisions 9 10 20
Resolved federal tax audit issues (3) (182) --
Other foreign 24 -- --
Valuation allowance (29) 44 --
Realized investment gains (63) (59) --
Federal tax rate change (48) -- --
Other (1) (7) (6)
- ------------------------------------------------------------
Total income tax expense
(benefits) $ (69) $ (158) $ 131
- -----------------------------------=========================
</TABLE>
Temporary and other differences which resulted in the deferred tax benefit
for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Operating loss carryforwards $ (10) $ (87)
Loss reserve discounting (71) 12
Other insurance and contractholder
liabilities (316) (131)
Realized investment gains (63) (59)
Policy acquisition expenses (65) (51)
Investments, net 36 (42)
Other foreign 24 --
Valuation allowance (29) 44
Other 12 20
- ------------------------------------------------------------
Deferred tax benefit $ (482) $ (294)
- ---------------------------------------------===============
</TABLE>
42
<PAGE> 31
During 1991, deferred income taxes were provided for significant timing
differences in the recognition of revenues and expenses for tax and financial
statement purposes, as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1991
- ------------------------------------------------------------
<S> <C>
Utilization of tax loss carryforwards $ 98
Loss reserve discounting (66)
Unearned premium reserve (6)
Other property and casualty underwriting (54)
Policy acquisition expenses 13
Benefit and other reserves 9
Bonds/mortgages (5)
Depreciation 8
Foreign subsidiary losses (41)
Investments, net (28)
Other (12)
- ------------------------------------------------------------
Total $ (84)
- -------------------------------------------------------=====
</TABLE>
NOTE 9 - PENSION AND OTHER POSTRETIREMENT AND
POSTEMPLOYMENT BENEFITS PLANS
A) PENSION PLANS: CIGNA and certain of its subsidiaries provide retirement
benefits to eligible employees and agents. These benefits are provided through
a single integrated plan (the Plan) covering most domestic employees and by
several separate pension plans for various subsidiaries, agents and foreign
employees.
The Plan is a non-contributory, defined benefit, trusteed plan available to
eligible domestic employees. Benefits are based on employees' years of service
and compensation during the highest three or, if service commenced after
December 31, 1988, five consecutive years of employment, offset by a portion of
the Social Security benefit for which they are eligible. CIGNA funds at least
the minimum amount required by the Employee Retirement Income Security Act of
1974.
Components of net pension cost for the year ended December 31 were as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Service cost--benefits earned
during the year $94 $83 $82
Interest accrued on
projected benefit
obligation 138 122 119
Actual return on assets (194) (64) (245)
Net amortization and deferral 55 (73) 119
- ------------------------------------------------------------
Net pension cost $93 $68 $75
- --------------------------------------======================
</TABLE>
The following table summarizes the status as of December 31 of pension plans
for which assets exceeded accumulated benefit obligations:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
(In millions) 1993 1992
- --------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $ (1,533) $ (1,326)
--------- --------
Accumulated benefit obligation $ (1,570) $ (1,362)
--------- --------
Pension liability included in
Other Liabilities:
Projected benefit obligation $ (2,028) $ (1,837)
Plan assets at fair value 1,752 1,571
--------- --------
Plan assets less than projected
benefit obligation (276) (266)
Unrecognized net loss from past
experience 298 301
Unrecognized prior service cost 54 58
Unamortized SFAS 87 transition asset (79) (90)
- ---------------------------------------------------------------
Pension asset (liability) $ (3) $ 3
- -----------------------------------------======================
</TABLE>
At December 31, 1993 and 1992, plans under which accumulated benefits
exceeded assets had projected benefit obligations of $143 million and $130
million and related assets at fair value of $27 million and $24 million,
respectively. The accumulated benefit obligation as of December 31, 1993 and
1992 related to these plans was $115 million and $105 million, respectively.
The pension liability included in Other Liabilities related to these plans was
$94 million and $84 million, respectively.
Determination of the projected benefit obligation was based on an assumed
discount rate of 7.1% and 7.3% for 1993 and 1992, respectively. The assumed
long-term rate of compensation increase was 4.7% and 5.2% for 1993 and 1992,
respectively. The assumed long-term rate of return on assets was 9% for 1993
and 1992. Substantially all Plan assets are invested in either the separate
accounts of Connecticut General Life Insurance Company (CGLIC), which is a
CIGNA subsidiary, or immediate participation guaranteed investment contracts
issued by CGLIC. Plan assets also include 1.1 million shares of CIGNA common
stock with a market value of $69 million and $65 million at December 31, 1993
and 1992, respectively.
B) OTHER POSTRETIREMENT BENEFITS PLANS: In addition to providing pension
benefits, CIGNA and certain of its subsidiaries provide certain health care and
life insurance benefits
43
<PAGE> 32
to retired employees, spouses and other eligible dependents through various
plans. A substantial portion of CIGNA's employees may become eligible for these
benefits upon retirement. As of January 1, 1992, the health care benefit plans
required nominal contributions by retirees. In August 1992, CIGNA amended its
plans effective January 1, 1993, whereby CIGNA's contributions for health care
benefits will depend upon a retiree's date of retirement, age and years of
service. In addition, the plan amendments increased the level of other
cost-sharing features, such as deductibles and coinsurance. The effect of the
plan amendments was to reduce the accumulated benefit obligation by
approximately $195 million. The reduction of the liability is being amortized
into income over the average remaining employee service period, approximately
19 years. Under the terms of the benefit plans, benefit provisions and
cost-sharing features can continue to be adjusted. In general, retiree health
care benefits are not funded and are paid as covered expenses are incurred.
Retiree life insurance benefits are paid from plan assets or as covered
expenses are incurred.
Effective January 1, 1992, CIGNA adopted SFAS No. 106 for its domestic
postretirement benefit plans (See Note 1). SFAS No. 106 does not provide for
the restatement of previously presented financial information. Therefore,
expense for 1991 of $25 million, which generally reflects other postretirement
benefit costs when paid, is not comparable with the 1993 and 1992 amounts.
Components of net periodic other postretirement benefit cost for the year
ended December 31 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Service cost--benefits earned
during the year $ 27 $ 24
Interest accrued on benefit
obligation 47 58
Actual return on assets (5) (4)
Net amortization and deferral (9) (4)
- ------------------------------------------------------------
Net other postretirement benefit cost $ 60 $ 74
- -----------------------------------------------=============
</TABLE>
Under SFAS No. 106, an employer's postretirement benefit liability is
primarily measured by determining the present value of the projected future
costs of health benefits based on an estimate of health care cost trend rates.
The following table summarizes the underfunded plans' benefit obligations
reconciled with the other postretirement benefit liability included in Other
Liabilities as of December 31:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Retirees $ (397) $ (492)
Other fully eligible plan
participants (58) (54)
Other active plan participants (269) (194)
---- ----
Total accumulated benefit obligations (724) (740)
Plan assets at fair value 49 44
---- ----
Plan assets less than accumulated
benefit obligations (675) (696)
Unrecognized prior service cost (185) (189)
Unrecognized net (gain) loss from
past experience (9) 51
- ------------------------------------------------------------
Other postretirement benefit liability $ (869) $ (834)
- --------------------------------------------================
</TABLE>
At December 31, 1993 and 1992, plan assets funded retiree life insurance
plans with accumulated benefit obligations of $113 million and $117 million and
were invested in the general account assets of CGLIC with an expected long-term
rate of return of 7% for both 1993 and 1992.
Determination of the accumulated other postretirement benefit obligations
for 1993 and 1992 was based on an assumed discount rate of 7.1% and 7.3% and a
long-term rate of compensation increase of 4.7% and 5.2%. The assumed rate of
future increases in per capita cost of health care benefits (the health care
cost trend rate) was 14.6% decreasing ratably to 5.5% over nine years, which
reflects CIGNA's current claim experience and management's expectation that
future rates of growth will decline. Increasing the health care cost trend rate
by one percentage point for each future year would increase accumulated other
postretirement benefit obligations by $110 million and the annual service and
interest cost by $15 million, before taxes. Gains and losses that occur because
actual experience differs from that assumed are amortized over the average
future service period of employees.
C) OTHER POSTEMPLOYMENT BENEFITS: CIGNA and certain of its subsidiaries
provide certain salary continuation (severance and disability), health care and
life insurance benefits to inactive and former employees, spouses and other
eligible dependents through various employee benefit plans. Those plans are
unfunded and noncontributory, except for the life insurance and health care
plans.
Although severance benefits accumulate with additional service, CIGNA
recognizes severance expense when severance is probable and the costs can be
reasonably estimated. Postemployment benefits other than severance generally do
not vest or accumulate; therefore, the estimated cost of benefits are accrued
when determined to be probable and estimable, generally upon disability or
termination. See Note 1 for additional information regarding implementation of
SFAS No. 112.
D) CAPITAL ACCUMULATION PLANS: CIGNA sponsors various capital accumulation
plans in which employee contributions on a before-tax basis (401(k)) are
supplemented by CIGNA matching contributions. Contributions are invested, at
the election of the employee, in CIGNA common stock, non-CIGNA stock portfolios
and a fixed-income fund. CIGNA's expense for such plans totaled $33 million for
both 1993 and 1992, and $32 million for 1991.
44
<PAGE> 33
NOTE 10 - EMPLOYEE INCENTIVE PLANS
The People Resources Committee of the Board of Directors can award to
certain key employees stock options, stock appreciation rights (SARs) only in
tandem with stock options, restricted stock, dividend equivalent rights or
common stock in lieu of cash payable under other incentive plans.
As of December 31, 1993, 1992 and 1991, stock available for award aggregated
3,020,098 shares, 3,365,402 shares and 3,836,160 shares, respectively. The
decline in 1992 is partly due to the expiration of a plan. Grants of restricted
shares of CIGNA common stock during 1993, 1992 and 1991 totaled 164,994 shares,
182,228 shares and 238,799 shares, respectively. Restricted stock grants of
580,989 shares for 929 employees were outstanding at December 31, 1993.
Options to purchase CIGNA common stock are awarded at market price on the
date of grant. Non-qualified stock options expire 10 years after the date of
grant. SARs permit the holders to receive in cash or stock the excess of the
current market price of the underlying stock over the option price. Either the
stock option or the SAR, but not both, may be exercised. Options and SARs may
be subject to vesting periods. For options with SARs, changes in the market
price of the stock, to the extent it exceeds the option price, are reflected as
an expense.
The following table summarizes the changes in common stock options
outstanding for the year ended December 31:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at January 1 776,617 744,727 845,857
Granted 183,550 238,650 --
Expired or canceled (25,895) (109,963) (72,742)
Exercised (188,658) (96,797) (28,388)
- ------------------------------------------------------------
Outstanding at December 31 745,614 776,617 744,727
- --------------------------------============================
Average exercise price of
options exercised $ 49.45 $ 47.82 $ 46.73
- --------------------------------============================
</TABLE>
All outstanding options were exercisable except for 269,280 and 228,810 at
December 31, 1993 and 1992, respectively.
As of December 31, 1993, the exercise price for options outstanding
(covering 745,614 shares of common stock held by 677 individuals) ranged from
$43.44 to $73.88.
NOTE 11 - EARNINGS PER SHARE
Earnings per share were based on income before extraordinary item and
cumulative effect of accounting changes, and net income amounts divided by
weighted average common shares, including common share equivalents, of 72.0
million, 71.7 million and 71.5 million for 1993, 1992 and 1991, respectively.
There was no significant difference between earnings per share on a primary
and a fully diluted basis.
NOTE 12 - SEGMENT INFORMATION
CIGNA operates principally in four segments: Property and Casualty,
Employee Life and Health Benefits, Employee Retirement and Savings Benefits,
and Individual Financial Services. Other Operations includes unallocated
investment income, expenses and taxes. Also included in Other Operations are
the results of CIGNA's settlement annuity business, non-insurance subsidiaries
engaged primarily in investment and real estate activities, and the California
personal automobile and homeowners insurance businesses that CIGNA retained
from the 1989 sale of the Horace Mann insurance companies and sold to Horace
Mann in January 1994.
Summarized financial information with respect to the business segments for
the year ended and as of December 31 was as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Property and Casualty:
Domestic $ 3,275 $ 3,970 $ 4,342
International 2,365 2,277 2,196
Other, primarily reinsurance 688 728 749
----- ----- -----
Total Property and Casualty 6,328 6,975 7,287
Employee Life and Health
Benefits 8,392 8,021 7,983
Employee Retirement and Savings
Benefits 2,111 2,148 2,179
Individual Financial Services 1,447 1,250 1,140
Other Operations 124 188 161
- ------------------------------------------------------------
Total $ 18,402 $ 18,582 $ 18,750
- ---------------------------------===========================
INCOME (LOSS) BEFORE INCOME
TAXES, EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES
Property and Casualty:
Domestic $ (884)$ (302)$ (45)
International 4 (78) (80)
Other, primarily reinsurance (82) (249) --
--- ---- ---
Total Property and Casualty (962) (629) (125)
Employee Life and Health Benefits 851 515 482
Employee Retirement and Savings
Benefits 223 256 242
Individual Financial Services 164 108 117
Other Operations (111) (71) (132)
- ------------------------------------------------------------
Total $ 165 $ 179 $ 584
- ---------------------------------===========================
IDENTIFIABLE ASSETS
Property and Casualty:
Domestic $ 16,968 $ 16,862 $ 16,754
International 6,192 5,148 5,146
Other, primarily reinsurance 3,309 3,462 2,997
----- ----- -----
Total Property and Casualty 26,469 25,472 24,897
Employee Life and Health
Benefits 11,398 10,058 9,398
Employee Retirement and
Savings Benefits 34,384 32,654 31,777
Individual Financial Services 9,368 6,789 5,618
Other Operations 3,356 2,708 2,410
- ------------------------------------------------------------
Total $ 84,975 $ 77,681 $ 74,100
- ---------------------------------===========================
</TABLE>
45
<PAGE> 34
During 1993, CIGNA announced restructuring initiatives in the Property and
Casualty segment (both the domestic and international operations) and the
Employee Life and Health Benefits segment. These actions were taken to reduce
operating expenses. Income (loss) before income taxes, extraordinary item and
cumulative effect of accounting changes for 1993 reflects a pre-tax charge of
$165 million for the estimated costs of these restructuring actions, of which
$80 million and $70 million relate to Domestic and International Property and
Casualty operations, respectively. The remaining $15 million relates to the
Employee Life and Health Benefits segment.
As discussed in Note 1, CIGNA implemented SFAS No. 115, which increased
segment identifiable assets as of December 31, 1993 as follows: Property and
Casualty, $370 million (primarily Domestic); Employee Life and Health Benefits,
$90 million; Employee Retirement and Savings Benefits, $444 million; Individual
Financial Services, $43 million; and Other Operations, $241 million.
Also, as discussed in Note 1, CIGNA adopted new accounting pronouncements in
1992. Implementation resulted in a charge to income (loss) before income taxes,
extraordinary item and cumulative effect of accounting changes in 1992 with
respect to the business segments reported above as follows: Property and
Casualty, $20 million (primarily Domestic); Employee Life and Health Benefits,
$29 million; Employee Retirement and Savings Benefits, $4 million; and
Individual Financial Services, $7 million.
NOTE 13 - FOREIGN OPERATIONS
CIGNA provides international property and casualty and life and health
insurance coverages on a direct and reinsured basis, primarily in Canada,
Europe, Japan, Latin America and the Pacific Rim.
The change in Net Translation of Foreign Currencies reflects increases
(decreases) of ($28) million (net of tax benefit of $7 million), ($73) million
(net of tax benefit of $8 million) and $5 million (no net tax effect) for the
years ended December 31, 1993, 1992 and 1991, respectively.
Summary financial data of CIGNA's foreign operations for the year ended and
as of December 31 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 2,821 $ 2,711 $ 2,680
Income (loss) before income
taxes, extraordinary item
and cumulative effect of
accounting changes $ 40 $ (271) $ (75)
Identifiable assets $ 8,941 $ 8,005 $ 7,449
- ------------------------------------------------------------
</TABLE>
CIGNA's income (loss) before income taxes, extraordinary item and cumulative
effect of accounting changes included aggregate foreign exchange transaction
losses of $6 million, $5 million and $10 million in 1993, 1992 and 1991,
respectively.
NOTE 14 - REINSURANCE
In the normal course of business, CIGNA's insurance subsidiaries enter into
agreements, primarily relating to short-duration contracts, to assume and cede
reinsurance with other insurance companies. Reinsurance is ceded primarily to
limit losses from large exposures and to permit recovery of a portion of direct
losses, although ceded reinsurance does not relieve the originating insurer of
liability. CIGNA evaluates the financial condition of its reinsurers and
monitors concentrations of credit risk arising from similar geographic regions,
activities, or economic characteristics of its reinsurers. As of December 31,
1993 and 1992, approximately 9% and 6%, respectively, of reinsurance
recoverables were due from certain syndicates affiliated with Lloyd's of
London.
The effects of reinsurance on net earned premiums and fees for the year
ended December 31 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In millions) 1993 1992 1991
- ------------------------------------------------------------
<S> <C> <C> <C>
Premiums and Fees:
Direct $ 13,128 $ 13,495 $ 13,946
Assumed 2,780 3,004 3,048
Ceded (2,196) (2,575) (2,699)
- ------------------------------------------------------------
Net earned premiums and
fees $ 13,712 $ 13,924 $ 14,295
- --------------------------------============================
</TABLE>
The effects of reinsurance on written premiums and fees were not materially
different from the amounts shown above.
Benefits, losses and settlement expenses for 1993, 1992 and 1991 were net
of reinsurance recoveries of $2.8 billion, $3.4 billion and $3.0 billion,
respectively.
Note 15 - LEASES AND RENTALS
Rental expenses for operating leases, principally with respect to buildings,
amounted to $284 million, $283 million and $308 million in 1993, 1992 and 1991,
respectively.
As of December 31, 1993, future net minimum rental payments under
non-cancelable operating leases were approximately $1 billion, payable as
follows: 1994 -- $172 million; 1995 -- $152 million; 1996 -- $136 million;
1997 -- $104 million; 1998 -- $82 million; and $359 million thereafter.
46
<PAGE> 35
NOTE 16 - PROPERTY AND CASUALTY UNPAID CLAIMS
AND CLAIM EXPENSE RESERVES
As described in Note 1, CIGNA establishes loss reserves, which are estimates
of future payments of reported and unreported claims for losses and the related
expenses, with respect to insured events that have occurred. The process of
establishing loss reserves is subject to uncertainties that are normal,
recurring and inherent in the property and casualty business. The process
requires reliance upon estimates based on available data that reflect past
experience, current trends and other information, and the exercise of informed
judgment. As information develops that varies from experience, provides
additional data or, in some cases, augments data that previously were not
considered sufficient for use in determining reserves, changes in CIGNA's
estimate of ultimate liabilities may be required. The effects of these changes,
net of reinsurance, are charged or credited to income for the periods in which
they are determined.
Charges to income for increases in the Property and Casualty segment's
liability for insured events of prior years (prior year development) other than
for asbestos-related, environmental pollution and other long-term exposure
claims and charges for unrecoverable reinsurance, were $120 million, $355
million and $164 million for the years ended December 31, 1993, 1992 and 1991,
respectively. The 1992 charges include $290 million ($62 million for
unrecoverable reinsurance) for losses in the London reinsurance market arising
from large catastrophes occurring in recent years. The charge resulted from an
extensive review of CIGNA's London property and casualty reinsurance exposures.
This review also related to obligations (reported in Other Liabilities) of a
closed book of reinsurance business acquired in 1984, which resulted in a
decrease in such liabilities of $150 million (reported as a reduction in Other
Operating Expenses).
Prior year development for asbestos-related, environmental pollution and
other long-term exposure losses and charges for unrecoverable reinsurance in
the aggregate were $669 million, $301 million and $177 million for the years
ended December 31, 1993, 1992 and 1991, respectively. In 1993, CIGNA
re-evaluated its reported asbestos-related, environmental pollution and other
long-term exposure claims to determine if future legal expenses could be
reasonably estimated and reserves established. Based on this review, CIGNA
added $375 million to its reserves in the third quarter of 1993, which resulted
in an after-tax charge of $244 million for future legal and associated expenses
for reported claims.
Reserving for asbestos-related, environmental pollution and certain other
long-term exposure claims is subject to significant uncertainties that are not
generally present for other types of claims. Developed case law and adequate
claim history do not exist for such claims. CIGNA and the insurance industry
dispute coverage for the environmental pollution and some asbestos-related
liabilities of their policyholders. In addition to the coverage lawsuits, CIGNA
shares in the expense of defending underlying litigation against its
policyholders. The outcome of the coverage litigation will assist in the
determination of amounts that might be paid in the future for similar claims.
These claims differ from almost all others in that it is often not clear that
an insurable event has occurred and which, if any, of multiple policy years and
insurers may be liable. These uncertainties prevent identification of
applicable policies and policy limits until after a claim is reported to CIGNA
and substantial time is spent (many years in some cases), resolving contract
issues and determining facts necessary to evaluate the claim.
Estimating liabilities and recoveries for asbestos-related, environmental
pollution and other long-term exposure claims that will be asserted under
reinsurance policies is also subject to similar uncertainties as those
affecting such claims under direct policies. CIGNA expects recoveries from
ceded reinsurance to reduce its future losses, although the amount of
recoveries cannot be reasonably estimated.
Under current law, CIGNA expects asbestos-related, environmental pollution
and other long-term exposure claims to continue to be reported for the
foreseeable future. The claims to be paid, if any, and timing of any such
payments, depend on resolution of the uncertainties associated with them, and
could extend over several decades under current law.
For asbestos-related claims, CIGNA carries reserves related to certain
insurance policies issued for certain major asbestos manufacturers ("targets"),
under which CIGNA expects to pay the full limits of liability. These reserves
(including amounts for unreported claims) are equal to the policy limits of
liability, minus payments made to date, plus an estimate of the associated
future legal expenses, and were approximately $256 million and $272 million,
before reinsurance, at December 31, 1993 and 1992, respectively.
In addition, CIGNA establishes reserves for reported asbestos-related,
environmental pollution and other long-term exposure claims as information
permits and, during 1993, established reserves for future legal and associated
expenses for such reported claims. Total reserves, including amounts
attributable to targets, were $1.5 billion ($832 million, net of reinsurance)
and $875 million ($394 million, net of reinsurance) at December 31, 1993 and
1992, respectively. Except for asbestos-related claims under the target
policies discussed above, CIGNA does not establish reserves for unreported
asbestos-related, environmental pollution or certain other long-term exposure
claims or for future legal and associated expenses related to such unreported
claims because of the uncertainties involved.
CIGNA expects that its future results will continue to be adversely affected
by losses and legal expenses for these types of claims. Because of the
significant uncertainties involved as discussed above, and the likelihood that
these uncertainties will not be resolved in the near future, CIGNA is unable to
reasonably estimate the additional losses and expenses and therefore is unable
to determine whether such amounts will be material to its future results of
operations, liquidity or financial condition.
In management's judgment, information currently available has been
appropriately considered in estimating CIGNA's loss reserves. However, future
changes in estimates of CIGNA's liability for insured events will adversely
affect results in future periods, although such effects can not be reasonably
estimated.
47
<PAGE> 36
NOTE 17 - CONTINGENCIES
FINANCIAL GUARANTEES
CIGNA Corporation, through its subsidiaries, is contingently liable for
various financial guarantees provided in the ordinary course of business. These
include guarantees for the repayment of industrial revenue bonds as well as
other debt instruments. The contractual amounts of financial guarantees reflect
CIGNA's maximum exposure to credit loss in the event of nonperformance. To
limit CIGNA's exposure in the event of default of any guaranteed obligation,
various programs are in place to ascertain the creditworthiness of guaranteed
parties and to monitor this status on a periodic basis. Risk is further reduced
through reinsurance and, in certain programs, use of letters of credit and
other types of security.
The industrial revenue bonds guaranteed directly by CIGNA have remaining
maturities of up to 22 years. The guarantees provide for payment of debt
service only as it becomes due; consequently, an event of default would not
cause an acceleration of scheduled principal and interest payments. The
principal amount of the bonds guaranteed by CIGNA at December 31, 1993 and 1992
was $323 million and $368 million, respectively. Revenues in connection with
industrial revenue bond guarantees are derived principally from equity
participations in the related projects and are included in Net Investment
Income as earned. During 1992 and 1991, losses for industrial revenue bonds
were $4 million and $6 million, respectively. There were no such losses in
1993.
In addition, CIGNA is liable for guarantee business of $2.2 billion and $2.8
billion at December 31, 1993 and 1992, respectively, fully reinsured through a
subsidiary of MBIA Inc., a corporation that guarantees the scheduled payment of
principal and interest for many types of municipal obligations, including
general obligation and special revenue bonds, which have maturities of up to 40
years. The nature of this guarantee business is similar to the reinsurance
transactions described in Note 14. Municipal guarantees provide for payment of
debt service only as it becomes due; consequently, an event of default would
not cause an acceleration of scheduled principal and interest payments.
Other debt instruments guaranteed by CIGNA consist of commercial paper and
any subsequent rollovers, as well as obligations of limited partnerships and
other notes. Such insured obligations generally are guaranteed for periods of
up to 22 years. The principal amount guaranteed was $16 million and $19 million
at December 31, 1993 and 1992, respectively.
Generally, premiums for insurance provided by guarantees are recognized as
income ratably over the policy period. Amounts included in Unearned Premiums
under these programs were approximately $1 million as of December 31, 1993 and
1992. Loss reserves for financial guarantees are established when a default has
occurred or when CIGNA believes that a loss has been incurred. Loss reserves
included in Unpaid Claims and Claim Expenses were $3 million and $5 million at
December 31, 1993 and 1992, respectively.
CIGNA also guarantees a minimum level of benefits for certain separate
account contracts and, in the event that separate account assets are
insufficient to fund minimum policy benefits, CIGNA is obligated to fund the
difference. As of December 31, 1993 and 1992, the amount of minimum benefit
guarantees for separate account contracts was $4.9 billion and $4.5 billion,
respectively. Reserves in addition to the separate account liabilities are
established when CIGNA believes a payment will be required under one of these
guarantees. As of December 31, 1993, reserves of $6 million were recorded.
Reserves were not required as of December 31, 1992. Guarantee fees are part of
the overall management fee charged to separate accounts and are recognized in
income as earned.
Although the ultimate outcome of any loss contingencies arising from CIGNA's
financial guarantees may adversely affect results of operations in future
periods, they are not expected to have a material adverse effect on CIGNA's
financial condition.
48
<PAGE> 37
REGULATORY AND INDUSTRY DEVELOPMENTS
CIGNA's businesses are subject to a changing social, economic, legal,
legislative and regulatory environment. Some of the changes include initiatives
to restrict insurance pricing and the application of underwriting standards; to
reform health care; to restrict investment practices; to expand regulation; and
to reinterpret insurance contracts long after the policies were written to
provide coverage unanticipated by CIGNA. Current proposals on national health
care reform could significantly change the way health care is financed and
delivered in the United States. CIGNA is not able to predict the outcome of any
legislative or other changes resulting from health care reform and the effect
on its business.
The Federal Comprehensive Environmental Response, Compensation and Liability
Act ("Superfund"), which was passed in 1980, is subject to re-authorization by
Congress in 1994; any changes in Superfund's system of allocating
responsibility or funding clean-up costs could affect the liability of
policyholders and insurers. The proposals being considered by Congress to
reform Superfund are in the early stages of development; therefore, CIGNA is
not able to determine what effect, if any, such enacted reform would have on
its future results.
The National Association of Insurance Commissioners (NAIC) has developed
model solvency-related guidelines ("risk-based capital" rules) to strengthen
solvency regulation of insurance companies. Risk-based capital rules for the
domestic life and property and casualty industries were finalized during 1992
and 1993, respectively. At December 31, 1993, CIGNA's life insurance and
property and casualty insurance subsidiaries were adequately capitalized under
the guidelines. However, as the guidelines for property and casualty become
more stringent in the future and depending on the future results of the
property and casualty operations, additional capital for the property and
casualty subsidiaries may be necessary.
Also, the NAIC is addressing risk-based capital guidelines for health
maintenance organizations (HMOs) and a proposal that would limit the types and
amounts of investment assets that an insurance company can hold. CIGNA cannot
currently predict what effect, if any, such guidelines will have on its
operations.
Unfavorable economic conditions have contributed to an increase in the
number of insurance companies that are impaired or insolvent. This is expected
to result in an increase in mandatory assessments by state guaranty funds of,
or voluntary payments by, solvent insurance companies to cover losses to
policyholders of insolvent or rehabilitated companies. Mandatory assessments,
which are subject to statutory limits, can be partially recovered through a
reduction in future premium taxes in some states. Assessments against CIGNA's
insurance subsidiaries were $28 million, $23 million and $32 million for 1993,
1992 and 1991, respectively, before giving effect to premium tax offsets.
Although future assessments and payments may adversely affect results of
operations in future periods, such amounts are not expected to have a material
adverse effect on CIGNA's financial condition.
The eventual effect on CIGNA of the changing environment in which it
operates remains uncertain.
LITIGATION
CIGNA is continuously involved in numerous lawsuits arising, for the most
part, in the ordinary course of business, either as a liability insurer
defending third-party claims brought against its insureds, or as an insurer
defending coverage claims brought against it by its policyholders or other
insurers.
A number of state attorneys general and private plaintiffs filed lawsuits
against a number of insurance companies and others, including CIGNA, alleging
violations of federal and state antitrust laws. These cases are currently being
contested in court.
While the outcome of litigation involving CIGNA cannot be determined,
litigation (other than that related to asbestos-related, environmental
pollution and other long-term exposure claims, which is discussed below), net
of reserves and giving effect to reinsurance, is not expected to have a
material effect on CIGNA.
CIGNA is involved in lawsuits regarding policy coverage and judicial
interpretation of legal liability for asbestos-related, environmental pollution
and other long-term exposure claims. The lack of developed case law, as
evidenced by the coverage lawsuits, is one of the significant uncertainties
that affects CIGNA's ability to estimate future losses for these types of
claims. Litigation involving asbestos-related, environmental pollution and
other long-term exposure claims is discussed in Note 16.
49
<PAGE> 38
REPORT OF INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE
[PRICE WATERHOUSE LOGO]
THE BOARD OF DIRECTORS AND SHAREHOLDERS
CIGNA CORPORATION FEBRUARY 14, 1994
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of CIGNA
Corporation and its subsidiaries at December 31, 1993 and 1992, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
The Company implemented certain new accounting pronouncements as discussed in
Note 1 to the consolidated financial statements.
/S/ PRICE WATERHOUSE
- ----------------------
PRICE WATERHOUSE
Philadelphia, Pennsylvania
50
<PAGE> 39
QUARTERLY FINANCIAL DATA (Unaudited)
The following unaudited quarterly financial data are presented on a
consolidated basis for each of the two years ended December 31, 1993 and 1992.
Quarterly financial results necessarily rely heavily on estimates. This and
certain other factors, such as the seasonal nature of portions of the insurance
business, require caution in drawing specific conclusions from quarterly
consolidated results.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(In millions, except per share amounts) Three Months Ended
- -----------------------------------------------------------------------------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSOLIDATED RESULTS
1993 *
Total revenues $ 4,374 $ 4,563 $ 4,525 $ 4,940
Income (loss) before income taxes 40 122 (261) 264
Net income (loss) 46 88 (94) 194
Per share:
Net income (loss) 0.64 1.22 (1.31) 2.70
1992 **
Total revenues $ 4,648 $ 4,652 $ 4,491 $ 4,791
Income (loss) before income taxes and cumulative
effect of accounting changes 134 148 (142) 39
Income before cumulative effect of accounting changes 107 130 50 50
Net income 81 130 50 50
Per share:
Income before cumulative effect of accounting changes 1.49 1.81 .70 .70
Net income 1.13 1.81 .70 .70
STOCK AND DIVIDEND DATA
1993
Price range of common stock $ 68-57-1/4 $63-1/2-56-7/8 $65-7/8-56-1/2 $68-3/8-61-5/8
Dividends declared per common share .76 .76 .76 .76
1992
Price range of common stock $60-7/8-50-1/2 $57-3/4-47-1/4 $57-1/4-47-1/8 $59-7/8-49-3/4
Dividends declared per common share .76 .76 .76 .76
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The third quarter of 1993 reflects a $244 million after-tax charge for future
legal and associated expenses for reported claims related to
asbestos-related, environmental pollution and other long-term exposures, and
$107 million in after-tax restructuring charges. In addition, third quarter
1993 reflects a benefit of $48 million relating to the effect of the federal
income tax rate change on CIGNA's net deferred tax asset.
** The third quarter of 1992 reflects a net after-tax charge of $140 million
related to a review of CIGNA's London property and casualty reinsurance
exposures. Also in the third quarter of 1992, net income was increased by
$182 million, reflecting a reduction in income tax expense from federal
tax audits of CIGNA.
51
<PAGE> 40
FINANCIAL INFORMATION
If you would like a copy of the Form 10-K, to be filed by March 31, 1994
with the Securities and Exchange Commission, please contact:
CIGNA Corporation
Shareholder Services Department
Two Liberty Place
1601 Chestnut Street
P.O. Box 7716
Philadelphia, PA 19192-2378
(215) 761-3516
STOCK LISTING
CIGNA's common shares are listed on the New York, Pacific and Philadelphia
Stock exchanges. The ticker symbol is CI.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Listed below are subsidiaries of CIGNA Corporation as of December 31, 1993
with their jurisdictions of organization shown in parentheses. Those
subsidiaries not listed would not, in the aggregate, constitute a "significant
subsidiary" of CIGNA Corporation, as that term is defined in Rule 1-02(v) of
Regulation S-X.
<TABLE>
<C> <S> <C>
CIGNA Holdings, Inc. (Delaware)
I. CIGNA Investment Group, Inc. (Delaware)
A. CIGNA International Finance Inc. (Delaware)
(1) CIGNA International Investment Advisors, Ltd. (Delaware)
(a) CIGNA Fund Managers Limited (Bermuda)
(b) CIGNA International Investment Advisors Australia Limited (Australia)
(c) CIGNA International Investment Advisors K.K. (Japan)
B. CIGNA Investment Advisory Company, Inc. (Delaware)
C. CIGNA Investments, Inc. (Delaware)
(1) CIGNA Advisory Partners, Inc. (Delaware)
(2) CIGNA Financial Futures, Inc. (Delaware)
(3) CIGNA Funding Limited Partnership (Delaware) (87.625%)
(4) CIGNA Leveraged Capital Fund, Inc. (Delaware)
(5) CIGNA Mezzanine Partners III, Inc.
D. CIGNA Mezzanine Capital, Inc. (Delaware)
E. Philadelphia Investment Corporation of Delaware (Delaware)
II. Connecticut General Corporation (Connecticut)
A. CG Trust Company (Illinois)
B. CIGNA Associates, Inc. (Connecticut)
C. CIGNA Dental Health, Inc. (Florida)
(1) CIGNA Dental Health of California, Inc. (California)
(2) CIGNA Dental Health of Colorado, Inc. (Colorado)
(3) CIGNA Dental Health of Delaware, Inc. (Delaware)
(4) CIGNA Dental Health of Florida, Inc. (Florida)
(5) CIGNA Dental Health of Illinois, Inc. (Illinois)
(6) CIGNA Dental Health of Kansas, Inc. (Kansas)
(7) CIGNA Dental Health of Kentucky, Inc. (Kentucky)
(8) CIGNA Dental Health of Maryland, Inc. (Delaware)
(9) CIGNA Dental Health of New Jersey, Inc. (New Jersey)
(10) CIGNA Dental Health of New Mexico, Inc. (New Mexico)
(11) CIGNA Dental Health of North Carolina, Inc. (North Carolina)
(12) CIGNA Dental Health of Ohio, Inc. (Ohio)
(13) CIGNA Dental Health of Pennsylvania, Inc. (Pennsylvania)
(14) CIGNA Dental Health of Texas, Inc. (Texas)
D. CIGNA Financial Partners, Inc. (Connecticut)
E. CIGNA Health Corporation (Delaware)
(1) CIGNA HealthCare, Inc. (Delaware)
(a) CIGNA HealthCare Mid-Atlantic, Inc. (Maryland)
(b) CIGNA HealthCare of Arizona, Inc. (Arizona)
(c) CIGNA HealthCare of California, Inc. (California)
(i) Ross-Loos Healthplan of California, Inc. (California)
(d) CIGNA HealthCare of Colorado, Inc. (Colorado)
(e) CIGNA HealthCare of Connecticut, Inc. (Connecticut)
(f) CIGNA HealthCare of Delaware, Inc. (Delaware)
</TABLE>
<PAGE> 2
<TABLE>
<C> <S> <C>
(g) CIGNA HealthCare of Florida, Inc. (Florida)
(h) CIGNA HealthCare of Georgia, Inc. (Georgia)
(i) CIGNA HealthCare of Illinois, Inc. (Delaware) (99.6%)
(j) CIGNA HealthCare of Kansas/Missouri, Inc. (Kansas)
(k) CIGNA Healthplan of Louisiana, Inc. (Louisiana)
(l) CIGNA HealthCare of Massachusetts, Inc. (Massachusetts)
(m) CIGNA HealthCare of New Jersey, Inc. (New Jersey)
(n) CIGNA HealthCare of North Carolina, Inc. (North Carolina)
(o) CIGNA HealthCare of North Louisiana, Inc. (Louisiana)
(p) CIGNA HealthCare of Northern New Jersey, Inc. (New Jersey)
(q) CIGNA HealthCare of Ohio, Inc. (Ohio)
(r) CIGNA HealthCare of Oklahoma, Inc. (Oklahoma)
(s) CIGNA HealthCare of Pennsylvania, Inc. (Pennsylvania)
(t) CIGNA HealthCare of South Florida, Inc. (Florida)
(u) CIGNA HealthCare of St. Louis, Inc. (Missouri)
(v) CIGNA HealthCare of Tennessee, Inc. (Tennessee)
(w) CIGNA HealthCare of Texas, Inc. (Texas)
(x) CIGNA HealthCare of Utah, Inc. (Utah)
(y) CIGNA HealthCare of Virginia, Inc. (Virginia)
(z) CIGNA HealthCare of Washington, Inc. (Washington)
(aa) Lovelace Health Systems, Inc. (New Mexico)
(bb) Ross-Loos Hospital, Inc. (California)
(cc) Temple Insurance Company Limited (Bermuda)
(dd) Total Health Systems, Inc. (New York)
(i) CIGNA HealthCare of New York, Inc. (New York)
(ii) Total Health of New Jersey, Inc. (Delaware)
F. CIGNA RE Corporation (Delaware)
G. CIGNA Financial Advisors, Inc. (Connecticut)
H. Connecticut General Life Insurance Company (Connecticut)
(1) Capitol Outdoor Acquisition Co., Inc. (Delaware)
(2) CIGNA Life Insurance Company (Connecticut)
(3) First EQUICOR Life Insurance Company (California)
(4) ICO, INC. (Delaware)
(5) Quebec Street Investments, Inc. (Delaware)
I. Connecticut General Pension Services, Inc. (Connecticut)
J. INA Life Insurance Company of New York (New York)
K. International Rehabilitation Associates, Inc. (Delaware)
L. Life Insurance Company of North America (Pennsylvania)
(1) AIC Holdings, Inc. (California)
(a) Allegiance Insurance Company (California)
(2) CIGNA Direct Marketing Company, Inc. (Delaware)
(3) CIGNA Life Insurance Company of Canada (Canada)
(4) CIGNA Road & Travel Club, Inc. (Texas)
(5) INA Life Insurance Co., Ltd. (Japan) (90%)
M. MCC Behavioral Care, Inc. (Minnesota)
(1) MCC Managed Behavioral Care of California, Inc. (California)
N. Trilog, Inc. (Pennsylvania)
O. Tel-Drug, Inc. (South Dakota)
III. INA Corporation (Pennsylvania)
A. INA Financial Corporation (Delaware)
(1) Allied Insurance Company (California)
(2) CIGNA International Holdings, Ltd. (Delaware)
(a) Afia Finance Corporation (Delaware)
</TABLE>
<PAGE> 3
<TABLE>
<C> <S> <C>
(i) CIGNA Reinsurance New Zealand Limited (New Zealand)
(ii) Delaware Reinsurance Company (Delaware) (100% of Common Stock with
100% of Preferred Stock owned by other CIGNA subsidiary)
(b) CIGNA Brasil Empreendimentos Ltda. (Brazil)
(i) CIGNA Seguradora S.A. (Brazil) (85.8% with 13.792% owned by other
CIGNA subsidiaries)
(c) CIGNA Compania de Seguros (Chile) S.A. (Chile) (99.06%)
(d) CIGNA G.B. Holdings, Ltd. (Delaware)
(i) CIGNA Reinsurance Company (UK) Limited (United Kingdom)
(ii) Insurance Company of North America (U.K.) Limited (United Kingdom)
(e) CIGNA Insurance Australia Limited (Australia)
(i) CIGNA Life Insurance Australia Limited (Australia)
(f) CIGNA Insurance Company (Hellas) S.A. (Greece) (99.58% with balance owned by
other CIGNA subsidiary)
(g) CIGNA Insurance Company of Puerto Rico (Puerto Rico)
(h) CIGNA Insurance New Zealand Limited (New Zealand)
(i) CIGNA Life Insurance New Zealand Limited (New Zealand)
(i) CIGNA International Reinsurance Company Ltd. (Bermuda)
(i) CIGNA Insurance Company of Europe S.A.-N.V. (Belgium)
(A) CIGNA Life Insurance Company of Europe S.A.-N.V. (Belgium)
(B) CIGNA SICAV I (France) (99.97% with balance owned by other
CIGNA subsidiary)
(j) CIGNA Overseas Finance N.V. (Netherlands Antilles)
(k) CIGNA Worldwide, Incorporated (Delaware)
(l) Delpanama S.A. (Panama)
(i) CIGNA Compania de Seguros de Panama S.A. (Panama)
(m) Inversiones INA Limitiada (Chile) (98.805% with balance owned by other CIGNA
subsidiary)
(i) Administradora de Fondes de Pensiones Qualitas S.A. (Chile) (99.9%
with balance owned by other CIGNA subsidiary)
(ii) CIGNA Salud Isapre S.A. (Chile) (99.994% with balance owned by other
CIGNA subsidiary)
(iii) CIGNA Compania de Seguros de Vida (Chile) S.A. (Chile) (97.277%)
(n) LATINA Holdings, Ltd. (Delaware)
(i) CIGNA Seguros de Columbia S.A. (Columbia) (86.918% with 12.924%
owned by other CIGNA subsidiaries)
(ii) Colina Insurance Company Limited (Bahamas)
(iii) Empresa Guatemalteca CIGNA de Seguros, Sociedad Anonima (Guatemala)
(o) Seguros CIGNA, S.A. (Mexico) (49%)
(3) CIGNA Property and Casualty Insurance Company (Connecticut)
(a) AFIA (CIGNA) Corporation, Limited (Delaware)
(b) ALIC, Incorporated (Texas) (Management Company and Attorney-In-Fact)
(i) CIGNA Lloyds Insurance Company (A sponsored Lloyds association)
(Texas)
(c) Century Indemnity Company (Connecticut)
(d) Century Reinsurance Company (Delaware)
(e) CIGNA Fire Underwriters Insurance Company (Connecticut)
(f) CIGNA Insurance Company (California)
(i) Pacific Employers Insurance Company (California)
(A) CIGNA Insurance Company of Texas (Texas)
(B) Illinois Union Insurance Company (Illinois)
</TABLE>
<PAGE> 4
<TABLE>
<C> <S> <C>
(g) CIGNA Insurance Company of the Midwest (Indiana)
(h) CIGNA Real Estate, Inc. (Delaware)
(i) Congen Properties, Inc. (Delaware)
(i) Connecticut General Fire and Casualty Insurance Company (Connecticut)
(4) CIGNA Reinsurance Company (Delaware)
(a) Bankers Standard Insurance Company (Florida)
(i) Bankers Standard Fire and Marine Company (Texas)
(b) CIGNA Worldwide Insurance Company (Delaware)
(i) CIGNA Reinsurance Company S.A.-N.V. (Belgium)
(5) Cravens, Dargan & Company, Pacific Coast (Delaware)
(6) ESIS, Inc. (California)
(7) ESIS International, Inc. (Delaware)
(8) INAC Corp. (Delaware)
(9) INAC Corp. of California (California)
(10) Insurance Company of North America (Pennsylvania)
(a) AFIA (INA) Corporation, Limited (Delaware)
(i) AFIA (Unincorporated Association) (60% with balance owned by AFIA
(CIGNA) Corporation, Limited)
(b) Atlantic Employers Insurance Company (New Jersey)
(c) CIGNA Employers Insurance Company (Delaware)
(d) CIGNA Insurance Company of Ohio (Ohio)
(e) Coast to Coast Corporation (Texas)
(i) INA County Mutual Insurance Company (Managed Mutual Insurer) (Texas)
(f) INACAN Holdings Ltd. (Canada)
(i) CIGNA Insurance Company of Canada (Ontario)
(g) Indemnity Insurance Company of North America (New York)
(i) Alaska Pacific Assurance Company (Alaska)
(ii) California Union Insurance Company (California)
(iii) CIGNA Insurance Company of Illinois (Illinois)
(11) MarketDyne International, Inc. (Delaware)
(12) Montgomery and Collins, Inc. (California) (sold to non-affiliate in January 1994)
(a) CIGNA Excess and Surplus Insurance Services, Inc. (California) (As of
January 1994, a subsidiary of INA Financial Corporation (IV.A.))
(b) Railroad Insurance Brokers, Inc. (California) (As of January 1994, a
subsidiary of INA Financial Corporation (IV.A.))
(13) Recovery Services International, Inc. (Delaware)
(14) Trans Asian Insurance Services, Inc. (California)
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (No. 2-77343, No. 2-91972, No. 2-97899, No. 2-98673, No.
33-39269 and No. 33-65396) and Form S-8 (No. 2-76445, No. 2-76444, No. 33-44371
and No. 33-51791) of CIGNA Corporation, of our report dated February 14, 1994
appearing on Page 50 of the 1993 Annual Report to Shareholders of CIGNA
Corporation which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference in such Registration Statements of our
report on the Financial Statement Schedules, which appears on page FS-2 of this
Form 10-K.
/s/ PRICE WATERHOUSE
Philadelphia, Pennsylvania
March 25, 1994
<PAGE> 1
POWER OF ATTORNEY
NOW ALL MEN BY THESE PRESENTS, that the undersigned, a director and
Executive Officer of CIGNA Corporation, a Delaware corporation ("CIGNA"),
hereby makes, designates, constitutes and appoints THOMAS J. WAGNER, CAROL J.
WARD and ROBERT A. LUKENS, and each of them (with full power to act without
the other), as the undersigned's true and lawful attorneys-in-fact and agents,
with full power and authority to act in any and all capacities for and in the
name, place and stead of the undersigned (A) in connection with the filing with
the Securities and Exchange Commission pursuant to the Securities Act of 1933
or the Securities Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby
granted full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ WILSON H. TAYLOR
Wilson H. Taylor
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby
granted full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ ROBERT P. BAUMAN
Robert P. Bauman
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby
granted full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ EVELYN BEREZIN
Evelyn Berezin
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby
granted full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ ROBERT H. CAMPBELL
Robert H. Campbell
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby
granted full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ ALFRED C. DECRANE, JR.
Alfred C. DeCrane, Jr.
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby
granted full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ JAMES F. ENGLISH, JR.
James F. English, Jr.
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby
granted full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ FRANK S. JONES
Frank S. Jones
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby
granted full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ ROBERT D. KILPATRICK
Robert D. Kilpatrick
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby
granted full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ GERALD D. LAUBACH
Gerald D. Laubach
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby
granted full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ MARILYN W. LEWIS
Marilyn W. Lewis
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby
granted full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ PAUL F. OREFFICE
Paul F. Oreffice
<PAGE> 12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby granted
full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ CHARLES R. SHOEMATE
Charles R. Shoemate
<PAGE> 13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby granted
full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ LOUIS W. SULLIVAN, M.D.
Louis W. Sullivan, M.D.
<PAGE> 14
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby
granted full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ HICKS B. WALDRON
Hicks B. Waldron
<PAGE> 15
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
CIGNA Corporation, a Delaware corporation ("CIGNA"), hereby makes, designates,
constitutes and appoints THOMAS J. WAGNER, CAROL J. WARD and ROBERT A. LUKENS,
and each of them (with full power to act without the other), as the
undersigned's true and lawful attorneys-in-fact and agents, with full power and
authority to act in any and all capacities for and in the name, place and stead
of the undersigned (A) in connection with the filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934, both as amended, of:
(i) CIGNA's Annual Report on Form 10-K and all amendments thereto
(collectively, "CIGNA's Form 10-K");
(ii) any and all registration statements pertaining to employee benefit
or director compensation plans of CIGNA or its subsidiaries or pertaining
to the secondary offering of CIGNA securities by its officers and
directors, and all amendments thereto, including, without limitation,
amendments to CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791 and 33-44371), and its registration
statements on Form S-3 (Registration Numbers 2-91972 and 2-97899);
(iii) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-65396) relating to $900 million of debt securities,
Preferred Stock and Common Stock;
(iv) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 33-39269) relating to $300 million of debt securities;
(v) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-77343) pertaining to an offering of CIGNA Common
Stock; and
(vi) all amendments to CIGNA's registration statement on Form S-3
(Registration Number 2-98673) relating to put options; and
(B) in connection with the preparation, delivery and filing of any and all
registrations, amendments, qualifications or notifications under the applicable
securities laws of any and all states and other jurisdictions with respect to
securities of CIGNA, of whatever class or series, offered, sold, issued,
distributed, placed or resold by CIGNA, any of its subsidiaries, or any other
person or entity.
Such attorneys-in-fact and agents, or any of them, are also hereby
granted full power and authority, on behalf of and in the name, place and stead
of the undersigned, to execute and deliver all such registration statements,
registrations, amendments, qualifications and notifications, and CIGNA's Form
10-K, to execute and deliver any and all such other documents, and to take
further action as they, or any of them, deem appropriate. The powers and
authorities granted herein to such attorneys-in-fact and agents, and each of
them, also include the full right, power and authority to effect necessary or
appropriate substitutions or revocations. The undersigned hereby ratifies,
confirms, and adopts, as his own act and deed, all action lawfully taken by
such attorneys-in-fact and agents, or any of them, or by their respective
substitutes, pursuant to the powers and authorities herein granted. This Power
of Attorney expires by its terms and shall be of no further force and effect on
May 15, 1995.
IN WITNESS WHEREOF, the undersigned has executed this document as of
the 23rd day of February, 1994.
/s/ EZRA K. ZILKHA
Ezra K. Zilkha
<PAGE> 1
CIGNA Corporation
One Liberty Place
1650 Market Street
P. O. Box 7716
Philadelphia, PA 19192-1550
(215) 761-1000 LOGO
Certified to be a true and correct copy of the resolutions adopted by the Board
of Directors of CIGNA Corporation at a meeting held on February 23, 1994, a
quorum being present, and such resolutions are still in full force and effect
as of this date of certification, not having been amended, modified or
rescinded since the date of their adoption.
RESOLVED, That the Officers of the Corporation, and each of
them, are hereby authorized to sign CIGNA Corporation's Annual
Report on Form 10-K for the year ended December 31, 1993, and any
amendments thereto, (the "Form 10-K") in the name and on behalf
of and as attorneys for the Corporation and each of its Directors
and Officers.
RESOLVED, That each Officer and Director of the Corporation
who may be required to execute (whether on behalf of the Corporation
or as an Officer or Director thereof) the Form 10-K, is hereby
authorized to execute and deliver a power of attorney appointing
such person or persons named therein as true and lawful attorneys
and agents to execute in the name, place and stead (in any such
capacity) of any such Officer or Director said Form 10-K and to
file any such power of attorney together with the Form 10-K with
the Securities and Exchange Commission.
Date: March 25, 1994 /s/ CAROL J. WARD
--------------------
Carol J. Ward
Corporate Secretary
<PAGE> 1
EXHIBIT 28.1
CIGNA CORPORATION
PROPERTY AND CASUALTY STATUTORY RESERVES
RECONCILIATION OF SCHEDULE P TO TOTAL STATUTORY RESERVES
1993
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
---------------------
<S> <C>
Schedule P: Part 1, Column 34, Line 12................................. $ 6,274
Part 1, Column 35, Line 12................................ 1,219
--------
Total statutory reserves as reported in consolidated annual
statement balance sheet......................................... 7,493
Reconciliation to amounts reported in Form 10-K:
Foreign subsidiaries not included in consolidated domestic annual
statement............................................................. 2,029
Other................................................................... 68
--------
Total statutory reserves as reported in Form 10-K....................... $ 9,590
--------
--------
</TABLE>
