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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1995
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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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)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (215) 761-1000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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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.
</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 .
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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 1, 1996, was approximately $9.0 billion.
As of March 1, 1996, 76,458,246 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,
1995 (the "1995 Annual Report"). Part III of this Form 10-K incorporates by
reference information from the registrant's proxy statement dated March 19,
1996.
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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......................... 1
C. Employee Life and Health Benefits..................................... 2
D. Employee Retirement and Savings Benefits.............................. 6
E. Individual Financial Services......................................... 9
F. Property and Casualty................................................. 13
G. Investments and Investment Income..................................... 24
H. Regulation............................................................ 28
I. Ratings.............................................................. 30
J. Miscellaneous........................................................ 32
Item 2. Properties................................................................ 32
Item 3. Legal Proceedings......................................................... 32
Item 4. Submission of Matters to a Vote of Security Holders....................... 33
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters..... 34
Item 6. Selected Financial Data................................................... 34
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 34
Item 8. Financial Statements and Supplementary Data............................... 34
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure................................................................ 34
PART III
Item 10. Directors and Executive Officers of the Registrant........................ 34
A. Directors of the Registrant........................................... 34
B. Executive Officers of the Registrant.................................. 34
C. Compliance with Section 16(a) of the Securities Exchange Act.......... 34
Item 11. Executive Compensation.................................................... 34
Item 12. Security Ownership of Certain Beneficial Owners and Management............ 35
Item 13. Certain Relationships and Related Transactions............................ 35
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......... 35
Signatures............................................................................ 36
Index to Financial Statement Schedules................................................ FS-1
Index to Exhibits..................................................................... E-1
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PART I
Item 1. BUSINESS
A. Description of Business
With shareholders' equity of $7.2 billion, revenues of $19.0 billion and
assets of $95.9 billion as of December 31, 1995, 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 one of the
largest investor-owned health maintenance organizations ("HMO") in the United
States, based on the number of members. 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 two)
CIGNA HealthCare
CIGNA Group Insurance: Life, Accident, Disability
Employee Retirement and Savings Benefits Segment (beginning on page six)
CIGNA Retirement & Investment Services
Individual Financial Services Segment (beginning on page nine)
CIGNA Individual Insurance
CIGNA Reinsurance: Life, Accident, Health
Property and Casualty Segment (beginning on page 13)
CIGNA Property & Casualty
CIGNA International
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 28, and financial results for these businesses are reported in Other
Operations.
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 1994 and 1993
financial information to conform with the 1995 presentation. Industry rankings
and percentages set forth below are for the year ended December 31, 1994, 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, and identifiable assets
attributable to each of CIGNA's business segments and Other Operations are set
forth in Note 13 and those attributable solely to foreign operations are set
forth in Note 14 to CIGNA's 1995 Financial Statements.
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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 products and services 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,
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1995 1994 1993
------ ------ ------
(IN MILLIONS)
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Indemnity:
Medical................................................... $1,973 $1,854 $1,875
Life...................................................... 1,754 1,813 1,627
Long-term Disability...................................... 388 422 427
Dental.................................................... 384 374 324
Accidental Death and Dismemberment........................ 249 253 260
Short-term Disability..................................... 86 93 91
Other..................................................... 20 17 18
------ ------ ------
Total................................................... 4,854 4,826 4,622
Prepaid Health and Dental Care.............................. 3,281 3,018 2,816
------ ------ ------
Total Premiums and Fees..................................... $8,135 $7,844 $7,438
======= ======= =======
</TABLE>
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Amounts in table do not include "premium equivalents," which are described
below.
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, government-sponsored Medicare and Medicaid programs, and other
groups. Products are marketed in all 50 states, the District of Columbia and
Puerto Rico.
The indemnity products named in the above table are available on an
experience-rated basis as well as 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 available 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.
Alternative funding programs, primarily consisting of "minimum premium"
arrangements and administrative services only ("ASO") plans, constituted 54% of
business volume (premiums and fees plus premium equivalents) in 1995. Premium
equivalents generally represent paid claims and are additional premiums that
would have been earned under minimum premium and ASO contracts if they had been
written as traditional indemnity or health maintenance organization ("HMO")
programs. 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 also may 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 11 of the Management's Discussion and Analysis ("MD&A") section of CIGNA's
1995 Annual Report.
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CIGNA offers both group term life and group universal life insurance
products. Approximately 8,000 group life insurance policies covering
approximately 13.3 million lives were outstanding as of December 31, 1995. The
following table shows group life insurance in force and termination data.
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YEAR ENDED DECEMBER 31
-----------------------------------
1995 1994 1993
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(DOLLARS IN ROUNDED MILLIONS)
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In force, end of year.................................... $ 522,000 $ 523,000 $ 512,000
======== ======== ========
Cancellations (lapses and expirations)................... $ 51,000 $ 44,000 $ 53,000
======== ======== ========
</TABLE>
CIGNA markets long-term and short-term disability products 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 provides managed mental health and 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 also offers managed
pharmacy benefit programs through CIGNA's HMOs.
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") both with and without primary care gatekeepers and
traditional indemnity coverage as well as through integrated products, which may
include all four. Integrated products are available under alternative funding as
well as traditional insurance arrangements. These products may include contract
provisions under which CIGNA assumes the risk for costs exceeding specified
levels.
CIGNA's prepaid health care operations provide medical services through
HMOs. CIGNA's HMOs include staff models, in which physicians and other providers
are employees of the HMO, individual practice association ("IPA") models, in
which independent physicians and hospitals are under contract with CIGNA to
provide services, and mixed models, in which attributes of IPA and staff model
HMOs are combined. Staff model HMOs offer a greater opportunity for direct
influence over 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 influence medical costs. Staff models generally offer lower costs
to the consumer, whereas IPAs may offer broader provider choice.
CIGNA's indemnity business includes arrangements with doctors, hospitals
and other independent providers to form PPOs. Under a typical PPO arrangement,
CIGNA reimburses PPO participants at a higher percentage for the costs of
medical care obtained from contracted providers (who charge on a discounted rate
basis) than it does for care obtained from non-contracted providers. When a PPO
has a gatekeeper, the higher reimbursement level is available if a participant
first consults a contracted primary care physician before consulting a
contracted specialist.
As of December 31, 1995, CIGNA's HMOs and PPOs served all or part of 42
states, the District of Columbia and Puerto Rico. The table below shows the
number of HMO networks and members in total and
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for each HMO model as well as the number of gatekeeper PPO networks and members
for the periods presented. Members include participants under traditional and
alternative funding programs.
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AS OF DECEMBER 31,
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1995 1994 1993
-------------------- -------------------- --------------------
APPROX. APPROX. APPROX.
NO. OF NO. OF NO. OF NO. OF NO. OF NO. OF
NETWORKS MEMBERS NETWORKS MEMBERS NETWORKS MEMBERS
-------- --------- -------- --------- -------- ---------
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HMOs:
Staff Models............... 4 633,000 4 668,000 3 634,000
IPA Models................. 37 2,488,000 37 2,138,000 40 1,630,000
Mixed Models............... 5 522,000 5 505,000 5 424,000
-- -- --
--------- --------- ---------
Subtotal HMOs................ 46 3,643,000 46 3,311,000 48 2,688,000
== == ==
Gatekeeper PPOs.............. 29 237,000 25 190,000 15 107,000
== == ==
--------- --------- ---------
Total Members................ 3,880,000 3,501,000 2,795,000
========= ========= =========
</TABLE>
To maintain and enhance the quality of health care delivered in its HMOs,
CIGNA has initiated the development of standard performance measurements for
affiliated physicians, hospitals and other providers. CIGNA is in the process of
seeking accreditation of all of its HMOs by external accrediting agencies as
validation of its quality programs. To date, 27 of CIGNA's 46 HMOs have been
accredited.
The table below shows the number of PPO networks and participants for the
periods presented.
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AS OF DECEMBER 31,
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1995 1994 1993
----------------------- ----------------------- -----------------------
APPROX. APPROX. APPROX.
NO. OF NO. OF NO. OF NO. OF NO. OF NO. OF
NETWORKS PARTICIPANTS NETWORKS PARTICIPANTS NETWORKS PARTICIPANTS
-------- ------------ -------- ------------ -------- ------------
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PPOs (excluding Gatekeeper
PPOs)................... 79 1,027,000 74 914,000 67 742,000
======== ========== ======== ========== ======== ==========
</TABLE>
CIGNA also offers prepaid dental coverage, using networks of independent
providers in most states, serving approximately 2.3 million, 2.0 million and 1.7
million participants as of December 31, 1995, 1994 and 1993, respectively.
Distribution
The indemnity products of this segment are distributed primarily by
employed group sales representatives through national and other insurance
brokers and insurance consultants. Sales of prepaid health care products are
made to employers by CIGNA's sales representatives and through insurance
brokers. In 1995, a dedicated sales force for the Medicare risk product began
operating in five markets. Salaried 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, 1995, the field sales
force for the products of this segment consisted of approximately 530 sales
representatives in 112 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 prepaid health and dental products 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
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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 settle 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. Generally, for interest-crediting rates
set at the Company's discretion, 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 1995, the rates of interest
credited ranged from 4.2% to 8.5%.
Approximately one-third of the reserves comprise liabilities that will be
paid within one year, primarily for group life, medical and prepaid health
claims. The remainder primarily includes 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, the adequacy of fees charged for administration
and risk assumption and, in the case of prepaid health care products, effective
medical cost management. The profitability of other indemnity products depends
on the adequacy of premiums charged relative to claims and expenses.
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 businesses are highly
competitive. No one competitor or small number of competitors is dominant across
the country, although in certain locations some HMOs dominate the sales of
traditional prepaid products. 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 price;
quality of service; scope, cost-effectiveness and quality of provider networks;
product responsiveness to customers' needs; cost-containment services; and
effectiveness of marketing and sales. Being responsive to the needs of employee-
consumers as well as of employers is important. For certain products with
longer-term liabilities, financial strength of the insurer as indicated by
ratings issued by nationally recognized rating agencies is also a competitive
factor. For more information concerning insurance ratings, see "Ratings" on page
30.
The principal competitors of CIGNA's 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.
CIGNA is one of the largest investor-owned insurance company providers of
group life and health indemnity insurance, based on premiums and premium
equivalents, and one of the largest investor-owned HMOs, based on the number of
members. It is the leading provider of group accident insurance, and the second
largest provider of group long-term disability coverages, based on premiums.
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Health Care Reform
Federal and state proposals have been made (and, in some states, adopted)
to achieve some insurance reforms and to require managed care networks to admit
any willing providers and place other limitations on the ability of managed care
companies to form and operate efficient networks of doctors, hospitals and
pharmacies. Multiple layers of regulation would result if the states enacted
legislation different from federal standards. Because reform measures that may
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.
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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1995 1994 1993
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(IN MILLIONS)
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Premiums and Fees:
General Account:
Guaranteed................................................... $ 113 $ 63 $ 151
Experience-rated............................................. 96 91 99
------ ------ ------
209 154 250
Separate Accounts.............................................. 49 47 46
------ ------ ------
Total Premiums and Fees...................................... $ 258 $ 201 $ 296
======= ======= =======
Deposits:
General Account:
Guaranteed................................................... $ 359 $ 166 $ 102
Experience-rated............................................. 1,492 1,104 1,271
------ ------ ------
1,851 1,270 1,373
Separate Accounts.............................................. 1,576 1,638 1,164
Investment Advisory Accounts................................... 85 61 75
------ ------ ------
Total Deposits............................................... $3,512 $2,969 $2,612
======= ======= =======
</TABLE>
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Assets under management for this segment as of December 31 were as follows:
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1995 1994 1993
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(IN MILLIONS)
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General Account(1):
Guaranteed................................................ $ 4,345 $ 3,934 $ 4,259
Experience-rated.......................................... 16,815 16,380 17,281
-------- -------- --------
21,160 20,314 21,540
Separate Accounts........................................... 16,200 12,917 12,301
Investment Advisory Accounts................................ 823 651 628
-------- -------- --------
Total(1)................................................ $ 38,183 $ 33,882 $ 34,469
======== ======== ========
</TABLE>
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Assets under management include assets managed by third-party managers.
(1) General Account assets under management reflect unrealized appreciation
(depreciation) of $1.0 billion, ($233) million and $521 million as of
December 31, 1995, 1994 and 1993, respectively, as a result of 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 $19.3 billion, or 51%
of assets under management, for this segment as of December 31, 1995, compared
with $16.6 billion, or 49%, as of December 31, 1994. The balance of this
segment's assets under management relate to defined benefit plans, under which
annual retirement benefits are fixed or defined by a benefit formula.
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 small and middle market customers
with plan assets of up to $50 million. In recent years, however, this emphasis
has expanded to include sales to sponsors of larger plans that look to CIGNA to
provide a full-service package or look to more than one entity to provide
actuarial, administrative or investment services and products, or combinations
thereof. For defined contribution plans, principally 401(k) plans, CIGNA markets
products that offer investment management services and plan level and
participant recordkeeping, as well as employee communications, enrollment, plan
design, technological support and other consulting services. For defined benefit
plans, CIGNA offers investment, administrative and professional services,
including recordkeeping, plan documentation, and actuarial valuation and
consulting. Investment management services for CIGNA's defined contribution and
defined benefit products are provided by CIGNA and by third-party managers. 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, 1995,
guaranteed single premium annuities accounted for $3.0 billion and GICs
accounted for $1.4 billion of General Account assets under management for the
Employee Retirement and Savings Benefits segment, compared with $2.6 billion and
$1.3 billion as of December 31, 1994.
For 1995, the interest rate on reserves for guaranteed single premium
annuities ranged from 3.25% to 12.75%, with a weighted average of 8.71%. The
rate of interest credited in 1995 on CIGNA's GICs ranged from 5.58% to 9.89%,
with a weighted average rate of 8.31%. CIGNA's single premium annuities and GICs
generally do not permit withdrawal by the plan sponsor prior to maturity, except
that GICs permit
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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 or capital resources.
Experience-rated contracts that are supported by the General Account 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.
Effective January 1, 1996, credited interest rates for pooled
experience-rated defined contribution contracts are declared in advance for six
months and may be changed at the expiration of the six month period. Credited
interest rates on other experience-rated contracts supported by the General
Account 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 for
1995 ranged from 6.00% to 9.50%, with a weighted average rate of 7.09%.
The termination provisions of $4.6 billion, or 100%, of the Company's
liability for experience-rated defined benefit contracts supported by the
General Account that are subject to withdrawal, and the termination provisions
of $4.1 billion, or 40%, of the Company's liability for experience-rated defined
contribution contracts supported by the General Account, 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 determines 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 not been material
to the Company.
The termination provisions of $6.3 billion, or 60%, of the Company's
liability for experience-rated defined contribution contracts (all of which are
pooled) supported by the General Account contain a book value mechanism for
withdrawal 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. As of December 31, 1995,
approximately $11.5 billion, or 71%, of the assets in the Separate Accounts
support experience-rated contracts under which the risks and benefits of
investment performance generally accrue to the customers, compared to
approximately $8.4 billion, or 65% of assets as of December 31, 1994.
The remaining assets in the Separate Accounts are held under
experience-rated contracts that guarantee a minimum level of benefits. As of
December 31, 1995 and 1994, the amount of minimum benefit guarantees under these
contracts was $4.7 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. For additional
information, see Note 19 to CIGNA's 1995 Financial Statements.
CIGNA monitors contract termination experience on an ongoing basis. Of
those assets subject to withdrawal, persistency for 1995 and 1994 was 93%,
compared with 94% in 1993.
Distribution
CIGNA's retirement products and services are distributed primarily through
CG Life salaried retirement plan specialists, both directly and through career
agents, independent insurance agents and brokers, pension plan consultants,
investment advisors and other service providers. As of December 31, 1995, CG
Life had a
8
<PAGE> 11
field organization consisting of 59 retirement plan specialists and sales
associates and 91 client service representatives and administrative personnel
located in offices across 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 retirement plan marketplace is highly competitive. CIGNA's competitors
include mutual funds, other insurance companies, banks, investment advisors, and
certain service and professional organizations. No one competitor or small
number of competitors is dominant. Competition focuses on service, technology,
cost, variety of investment options, investment performance and insurer
financial strength as indicated by ratings issued by nationally recognized
agencies. For more information concerning insurance ratings, see "Ratings" on
page 30. Business growth, as measured by assets under management, is expected to
continue to be constrained, resulting from decisions by retirement plan sponsors
to diversify assets and fund management.
The largest single retirement plan manager holds less than a 5% market
share, as measured by assets under management. According to a survey published
in "Pensions & Investments," CIGNA ranked 4th among insurers, and 15th among
retirement plan 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.
They also assume reinsurance of certain risks under policies written by other
insurance companies.
The following table sets forth the net earned premiums and fees and
deposits for this segment.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1994 1993
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Premiums and Fees:
Life................................................. $ 584 $ 568 $ 513
Health............................................... 56 55 55
Reinsurance.......................................... 241 201 246
------ ------ ------
Total premiums and fees............................ $ 881 $ 824 $ 814
======= ======= =======
Deposits, primarily for universal life products and
annuities............................................ $3,200 $3,008 $2,506
======= ======= =======
</TABLE>
9
<PAGE> 12
The following table provides data on sales of new policies and additions to
existing policies, terminations and life insurance in force for this segment,
including assumed reinsurance, and reinsurance ceded to other companies.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
-------- -------- --------
(DOLLAR AMOUNTS IN MILLIONS EXCEPT
AVERAGE SIZE POLICY IN FORCE)
<S> <C> <C> <C>
In force, beginning of the year.................. $ 93,327 $ 81,273 $ 60,749
-------- -------- --------
Sales and Additions(1):
Permanent.................................... 18,186 15,248 23,542
Term......................................... 3,896 4,291 3,744
-------- -------- --------
Total.......................................... 22,082 19,539 27,286
-------- -------- --------
Less Terminations:
Surrenders and conversions................... 1,625 2,068 1,813
Lapses....................................... 2,961 3,352 2,433
Other........................................ 2,287 2,065 2,516
-------- -------- --------
Total.......................................... 6,873 7,485 6,762
-------- -------- --------
In force, end of the year:
Permanent...................................... 88,656 73,028 61,210
Term........................................... 19,880 20,299 20,063
-------- -------- --------
Total(2)..................................... $108,536 $ 93,327 $ 81,273
========= ========= =========
Reinsurance ceded included above................. $ 24,754 $ 15,664 $ 9,721
========= ========= =========
Number of policies in force:
Participating.................................. 149,639 113,382 79,042
Non-participating.............................. 392,507 393,818 403,335
-------- -------- --------
Total........................................ 542,146 507,200 482,377
========= ========= =========
Average size policy in force:
By type:
Participating.................................. $269,450 $256,491 $243,239
========= ========= =========
Non-participating.............................. $173,799 $163,136 $153,835
========= ========= =========
By division:
CIGNA Individual Insurance..................... $215,717 $195,636 $177,056
========= ========= =========
CIGNA Reinsurance: Life, Accident, Health...... $140,254 $142,978 $141,258
========= ========= =========
By segment:
Individual Financial Services.................. $200,200 $184,005 $168,485
========= ========= =========
</TABLE>
- ---------------
(1) For 1995, 1994 and 1993, $11 billion, $10 billion and $17 billion of sales
and additions, respectively, were participating, with the remainder
non-participating. For 1995, 1994 and 1993, sales and additions included
assumed reinsurance of $2.4 billion, $3.3 billion and $3.6 billion,
respectively.
(2) For 1995, 1994 and 1993, total life insurance in force for this segment
included assumed reinsurance of approximately $16.4 billion, $16.6 billion
and $16.6 billion, respectively.
Individual Products
CIGNA's individual insurance products include term and permanent life
insurance, annuities and disability insurance. 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
10
<PAGE> 13
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. For universal life and variable universal life, premiums and
benefits fluctuate with the design of the benefits being funded. Universal life
provides benefits that fluctuate with the amount of variable premiums paid,
mortality and expense charges made, and interest credited to the policy.
Variable universal life provides benefits that also fluctuate with the amount of
variable premiums paid and mortality and expense charges made and, in addition,
with the performance of underlying investments.
CIGNA offers both fixed and variable annuity products. Fixed annuities
accumulate value at a fixed rate of interest on the invested payments. Variable
annuities accumulate value at levels determined by the contractholder's
allocation of payments among a portfolio of mutual funds and fixed rate accounts
and the underlying investment performance of the selected funds (less applicable
expense and contract charges). Annuity sales totaled approximately $850 million
in 1995 and $660 million in 1994. CIGNA also markets a number of individual
investment products (including mutual funds) and fee-based financial planning
services.
Principal markets for life insurance products and services sold to
individuals are affluent executives, professionals and small business owners
(typically with income above $100,000 and net worth of $1.5 million or more).
Annuities are generally marketed to upper-middle to affluent customers of banks
and stock brokerage firms and clients of financial advisors.
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 market
and sales volume for COLI products tend to be volatile. In addition, future
premium and earnings growth of COLI business on which policy loans are
outstanding, including participating COLI universal life business, will be
affected by tax proposals now pending in Congress that, if enacted, would
eliminate the interest deduction for corporate-owned life insurance policy
loans. Because eventual passage of tax legislation, including the COLI
provision, is likely, the demand for this product essentially ceased in 1995.
While this could have a material adverse effect on the results of operations of
the Individual Financial Services segment, it is not expected to be material to
CIGNA's consolidated results of operations, liquidity or financial condition.
During 1995, 1994 and 1993, the face amount of new sales (as shown in the
preceding table) includes COLI universal life business issued on a participating
basis of approximately $11 billion, $10 billion and $17 billion, respectively.
Changes in permanent sales and in force, reinsurance ceded, and the number and
average size of participating policies are primarily attributable to COLI.
As of December 31, 1995 and 1994, approximately 57% and 63%, respectively,
of CIGNA's individual life insurance in force was non-participating permanent,
which includes interest-sensitive products such as universal life. This change
in business mix resulted from the sale of participating COLI mentioned above.
Interest credited on whole life products is equal to or above 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 1995
ranged from 5.0% to 8.3%.
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 and may be 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 1995, 1994 and 1993.
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
personal accident and workers' compensation catastrophe coverages. The principal
markets for these products are individual and group life, accident and health
insurers; special risk and workers' compensation units of property-casualty
insurers; companies that offer immediate and deferred annuities; health care
providers; managing general underwriters of healthcare; and self-insured
employers.
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, 1995, CG Life sold individual insurance products
primarily through approximately 650 full-time career agents and through
independent agents and brokers. COLI products are sold primarily through a
limited number of brokers. The volume of COLI business from each of the brokers
with whom CIGNA has a relationship tends to fluctuate over time. 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.
Reinsurance products are sold in the United States, Canada, Europe and
Latin America through a small sales force and through domestic and foreign
intermediaries.
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, administrative and
surrender charges assessed against the policyholder's fund balance. Interest
credited 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 interest
credited to the policyholder, less mortality and administrative 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 ceded 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 businesses are 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 the financial strength of the
insurer as indicated by ratings issued by nationally recognized agencies. For
more information concerning insurance ratings, see "Ratings" on page 30. 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, administrative
servicing capabilities and insurer financial strength, as indicated by ratings
issued by nationally recognized agencies.
Based on information published by A.M. Best, CG Life was the 21st largest
U.S. individual life insurer in terms of aggregate individual life insurance in
force and the 6th largest in terms of direct premiums.
Other Matters
CIGNA does not expect AIDS claims, discussed on page six, to have a
significant effect on the results of operations of this segment. Where
appropriate, and to the extent permissible under applicable law, CIGNA tests for
AIDS antibodies and considers AIDS information in underwriting coverages and
setting rates.
F. Property and Casualty
Principal Products and Markets
CIGNA's property and casualty operations provide insurance in the United
States and international markets. 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.
In the domestic market, which produced approximately 40% of the total
earned premiums and fees for this segment during 1995, principal product lines
include workers' compensation, commercial packages, casualty (including
commercial automobile and general liability), property, and marine and aviation.
See page 14 for the geographic distribution of premiums and fees for the
products of this segment.
In 1995, CIGNA restructured its domestic property and casualty businesses
into two separate operations. One operation manages ongoing business and the
other run-off policies and related claims, including those for asbestos-related
and environmental pollution exposures. The restructuring is designed to create
business structures that enhance management's focus on its specialist strategy,
positioning the ongoing business for future profitable growth, while at the same
time providing dedicated, specialized resources to manage each operation
separately and effectively. In connection with the restructuring, CIGNA
contributed $375 million of additional capital to the run-off operations and the
ongoing operations will contribute an additional $50 million by December 31,
2001. In addition, the ongoing operations assumed $125 million of liabilities of
the run-off operations, and will reinsure up to $800 million of claims of the
run-off operations in the unlikely event that the statutory capital and surplus
of the run-off operations falls below $25 million. By making these financial
commitments and placing substantially all exposures associated with the run-off
businesses in a legal entity separate from the ongoing operations, CIGNA
enhanced the claims paying rating for its ongoing operations.
In the ongoing domestic operations, CIGNA continued to implement its
specialist strategy, which has contributed to improved operating results. In the
specialty market, CIGNA is focusing on aviation,
13
<PAGE> 16
recreational and ocean marine, property coverage placed through mortgage
lenders, homeowners and other programs in which specialist agents and brokers
share underwriting and processing expertise with CIGNA. In the medium-sized risk
market, CIGNA is targeting individual risks, and increasing production of group
business, such as through affinity groups, associations and national broker
blocks of business. In addition, CIGNA is focusing on writings of inland marine
and workers' compensation business that involves standard risk transfer in
states with regulatory climates in which the Company believes it can operate
profitably. In the large-risk market, CIGNA continues to emphasize sales of
complex, loss-sensitive casualty coverages to customers choosing to increase
their risk retention; petroleum, technical and general property coverages to
large insureds; and claims, loss control and other risk management services.
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. Regulatory
authorities also require the participation of CIGNA's domestic subsidiaries in
various joint underwriting authorities, pools and other arrangements created to
provide insurance coverage to the residual market, including workers'
compensation pools.
International markets, which produced 60% of the total earned premiums and
fees for this segment during 1995, include Japan, the United Kingdom,
Continental Europe, the Americas and other Pacific. Principal international
product lines include commercial property and casualty, accident and health,
life and employee benefits, auto, marine and other specialty lines.
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 matched in support of its foreign
obligations. For information on the effect of foreign exchange exposure on
CIGNA, see Notes 2(Q) and 14 to CIGNA's 1995 Financial Statements.
The following table sets forth geographic distribution of GAAP net earned
premiums and fees for the products of this segment. Premiums and fees for
businesses in run-off are included in the table.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995 1994 1993
---------------- ---------------- ----------------
(DOLLAR AMOUNTS IN MILLIONS)
Domestic:
California.................................... $ 280 6% $ 372 7% $ 408 8%
New York...................................... 168 4 207 4 287 6
New Jersey.................................... 161 3 219 4 252 5
Texas......................................... 157 3 208 4 233 5
Pennsylvania.................................. 97 2 122 3 205 4
Florida....................................... 95 2 128 3 154 3
Illinois...................................... 76 2 100 2 115 2
Massachusetts................................. 75 2 99 2 122 2
All other..................................... 744 16 982 19 1,088 21
------ ---- ------ ---- ------ ----
Total Domestic.............................. $1,853 40% $2,437 48% $2,864 56%
------ ---- ------ ---- ------ ----
International:
Japan......................................... 1,146 25 989 20 810 16
United Kingdom................................ 504 11 468 9 412 8
Continental Europe............................ 395 8 417 8 463 9
Americas...................................... 329 7 288 6 254 5
Other Pacific................................. 306 7 276 6 229 4
All other..................................... 107 2 168 3 104 2
------ ---- ------ ---- ------ ----
Total International......................... $2,787 60% $2,606 52% $2,272 44%
------ ---- ------ ---- ------ ----
Total....................................... $4,640 100% $5,043 100% $5,136 100%
======= ==== ======= ==== ======= ====
</TABLE>
- ---------------
For 1995, 1994 and 1993, earned premiums and fees were substantially the same as
written premiums.
14
<PAGE> 17
Pricing and Underwriting Results
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 GAAP 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 taxes. Such items, when added to underwriting profits or losses,
produce net income or loss. For information concerning investment income, see
"Investments and Investment Income -- Property and Casualty Investments" on
pages 27 and 28.
15
<PAGE> 18
The following tables set forth GAAP net earned premiums and fees,
underwriting results, combined ratios and net investment income for the domestic
and international products of this segment (including those in run-off).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
---------------- ---------------- ----------------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Premiums and Fees/Percent of Total Premiums and Fees:
Domestic Lines:
Workers' compensation............................ $ 473 10 % $ 578 11 % $ 710 14 %
Commercial packages.............................. 292 6 456 9 611 12
Casualty......................................... 275 6 455 9 457 9
Property......................................... 334 7 338 7 338 7
Marine and aviation.............................. 238 5 195 4 181 3
Homeowners....................................... 78 2 86 2 102 2
Other(1)......................................... 123 3 206 4 223 4
------- ----- ------- ----- ------- -----
Total.......................................... 1,813 39 2,314 46 2,622 51
International Lines (excluding international
reinsurance):
Accident and health.............................. 626 14 528 10 461 9
Property......................................... 515 11 441 9 372 7
Casualty......................................... 252 5 231 4 203 4
Auto............................................. 244 6 233 5 203 4
Marine........................................... 151 3 152 3 152 3
Other............................................ 9 -- 5 -- 8 --
------- ----- ------- ----- ------- -----
Total.......................................... 1,797 39 1,590 31 1,399 27
Reinsurance (including international
reinsurance)..................................... 119 2 343 7 443 9
International life and employee benefits........... 911 20 796 16 672 13
------- ----- ------- ----- ------- -----
Total Premiums and Fees..................... $ 4,640 100 % $ 5,043 100 % $ 5,136 100 %
======== ====== ======== ====== ======== ======
Underwriting Gain (Loss)/Combined Ratios:
Domestic Lines:
Workers' compensation............................ $ (179) 137.8% $ (139) 123.9% $ (180) 125.3%
Commercial packages.............................. (82) 128.3 (196) 143.1 (255) 141.8
Casualty......................................... (107) 139.0 (120) 126.5 (265) 157.9
Property......................................... (16) 104.7 (51) 115.0 (108) 132.0
Marine and aviation.............................. -- 100.1 (16) 108.2 (30) 116.9
Homeowners....................................... (17) 121.3 (30) 135.2 (14) 113.9
Other(1)......................................... (22) 117.8 (92) 144.9 (69) 131.0
------- ------- -------
Total.......................................... (423) 123.3 (644) 127.8 (921) 135.1
International Lines (excluding international
reinsurance):
Accident and health.............................. 41 93.4 40 92.4 23 95.1
Property......................................... 73 85.8 1 99.9 (54) 114.5
Casualty......................................... 16 93.8 -- 99.9 (2) 101.0
Auto............................................. (6) 102.4 (12) 105.2 (26) 113.0
Marine........................................... -- 99.7 3 98.3 (8) 105.1
Other............................................ (17) 311.1 -- 94.8 1 85.5
------- ------- -------
Total.......................................... 107 94.0 32 98.0 (66) 104.8
Reinsurance (including international
reinsurance)..................................... (133) 211.1 (128) 137.2 (126) 128.2
------- ------- -------
Underwriting loss after policyholders'
dividends-operations............................. (449) 112.0 (740) 117.4 (1,113) 124.9
Asbestos and environmental losses(2)............... (1,210) 32.5 (275) 6.5 (565) 12.7
------- ------- -------
Underwriting Loss/Combined Ratio:
After Policyholders' Dividends.......... $(1,659) 144.5 $(1,015) 123.9 $(1,678) 137.6
======== ======== ========
Before Policyholders' Dividends......... $(1,603) 143.0 $ (925) 121.8 $(1,548) 134.7
======== ======== ========
Net investment income, pre-tax:
Domestic........................................... $ 478 $ 483 $ 496
International...................................... 251 207 186
Reinsurance........................................ 65 66 71
------- ------- -------
Total.......................................... $ 794 $ 756 $ 753
======== ======== ========
</TABLE>
- ---------------
(1) Includes premiums and fees of $78 million, $125 million and $129 million for
the domestic personal automobile line that is being run off. Underwriting
results for this line were breakeven in 1995, compared with losses of ($62)
million and ($64) million for 1994 and 1993, respectively. The combined
ratio for 1995, 1994 and 1993 was 100.0%, 149.7% and 149.9%, respectively.
(2) Combined ratio amount represents the effect on GAAP combined ratio.
Asbestos-related and environmental pollution losses for 1995 include a third
quarter net reserve strengthening of $1.1 billion.
16
<PAGE> 19
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 in some lines rather
than maintain business at inadequate prices, and its share of domestic markets
has declined. Internationally, growth in profitable lines has offset reductions
in unprofitable lines. Competition has intensified due to increased capacity in
the insurance market resulting from growing capital supporting the industry.
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. In early 1996, A.M. Best affirmed the ratings of A- for
the domestic ongoing operations and B+ for the domestic run-off operations.
These ratings reflect the restructuring of the domestic businesses into two
separate operations and the related financial commitments described on page 13
as well as the reserve strengthening for asbestos-related and environmental
pollution claims and reinsurance exposures described on pages 15 and 16 of the
MD&A section of CIGNA's 1995 Annual Report. For more information concerning
insurance ratings, see "Ratings" on page 30.
In the United States, 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 3,300 companies compete for this business in the United
States and no single company or group of affiliated companies is dominant. In
1995 and 1994, CIGNA's domestic property and casualty statutory net written
premiums amounted to approximately 0.7% and 0.9%, respectively, of the total
market.
CIGNA pursues a specialist strategy in both its domestic and international
property and casualty businesses and focuses on those market segments where it
can compete effectively based on service levels and product design, and achieve
an adequate level of profitability. Internationally, CIGNA competes directly
with foreign insurance companies as well as with other U.S.-based companies.
Based on information published by A.M. Best, CIGNA's domestic property and
casualty insurance subsidiaries rank 24th in annual net premiums written. CIGNA
is the eighth largest U.S. writer of commercial multi-peril coverages, 12th
largest of workers' compensation coverages and 19th largest of commercial auto
coverages. Based on revenues, CIGNA's international operations are the second
largest U.S.-based provider of international insurance products and services.
Distribution
In the United States, CIGNA markets its insurance products principally
through independent agents and brokers. In the medium-sized risk market, CIGNA
has reduced the number of agents through which it markets its products to focus
on those producers who historically have provided more profitable business, to
better pursue its specialist strategy and to reduce expenses associated with
writing the business. In addition, CIGNA has increased the use of brokers in an
effort to generate more business from medium-sized risks. In the large risk
market, CIGNA distributes its products primarily through national and regional
brokers.
In the international marketplace, property and casualty coverage is sold
primarily through brokers. A network of offices in about 45 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.
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, 1995 and 1994, at approximately 8% and 9%, respectively, was with
more than 100 syndicates affiliated with Lloyd's of London. Approximately 29% of
CIGNA's reinsurance recoverables as of December 31, 1995 relate to pools and
captives, under which CIGNA's assets are generally protected
17
<PAGE> 20
through future industry assessments or by some form of collateral. In addition,
18% relate to international direct and reinsurance operations (excluding
recoverables with Lloyd's that relate to international operations). Of the
remaining recoverables, which relate primarily to domestic operations, 86%
relate to individual reinsurers that carry a very good or higher financial
rating from an independent rating agency. A significant portion of the
international and remaining domestic recoverables are due from reinsurers that
meet CIGNA's internal security standards and selection criteria, as described in
the following paragraph. 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.
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. Reinsurance disputes have increased in recent years,
particularly on larger and more complex claims such as those related to
professional liability, asbestos and London reinsurance exposures. Reinsurance
disputes may increase in the future, and are likely to include disputes related
to environmental pollution.
As of December 31, 1995, approximately 88% of CIGNA's reinsurance
recoverable balance relates to unpaid reported claims and incurred but not
reported claims, and the remaining 12% relates to paid losses. The timing and
collectibility of reinsurance recoverables have not had, and are not expected to
have, a material adverse effect on CIGNA's liquidity.
CIGNA's allowance for unrecoverable reinsurance was $700 million and $435
million at December 31, 1995 and 1994, respectively. Losses from unrecoverable
reinsurance were $273 million, $42 million and $28 million for 1995, 1994 and
1993, respectively, including losses from unrecoverable reinsurance related to
asbestos and environmental pollution losses of $94 million and $13 million for
1995 and 1994, respectively. In addition, losses from unrecoverable reinsurance
in 1995 included, for other than amounts related to asbestos and environmental
pollution, $135 million resulting from the reserve review and strengthening
recorded in the third quarter. Additional losses from unrecoverable reinsurance
may materially affect CIGNA's future results, although the amounts and timing
cannot be reasonably estimated. For additional information on reinsurance,
including on CIGNA's property catastrophe reinsurance program, see pages 14
through 17 of the MD&A section and Notes 16 and 17 of CIGNA's 1995 Annual
Report.
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.
18
<PAGE> 21
"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
(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.
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.
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 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.
CIGNA changed its methodology for estimating asbestos-related and
environmental pollution reserves in the third quarter of 1995, as discussed on
pages 15 and 16 of the MD&A section of CIGNA's 1995 Annual Report. CIGNA's
reserves for asbestos-related and environmental pollution claims are a
reasonable estimate of its ultimate liability for these claims, based on
currently known facts, reasonable assumptions where the facts are not known,
current law and methodologies currently available.
Reserving for all property and casualty claims continues to be a complex
and uncertain process, requiring the use of informed estimates and judgments. As
additional experience and other data become available and are reviewed or, in
the case of asbestos-related and environmental pollution reserves, as new or
improved methodologies are developed or as current law changes, CIGNA's
estimates and judgments may be revised. Any such revisions could result in
future changes in estimates of losses and would be reflected in CIGNA's results
of operations for the period in which the estimates are changed. While the
effect of any such changes in estimates of losses could be material to future
results of operations, CIGNA does not expect such changes to have a material
effect on its liquidity or financial condition.
In management's judgment, information currently available has been
appropriately considered in estimating CIGNA's loss reserves.
19
<PAGE> 22
Prior Year Development
The adverse pre-tax effects, net of reinsurance, during 1995, 1994 and 1993
on CIGNA's results of operations from insured events of prior years (prior year
development) were $1.5 billion, $538 million and $789 million, respectively. Of
the prior year loss development during 1995, 81% was attributable to
asbestos-related and environmental pollution claims. Prior year development is
discussed on pages 15 and 16 of the MD&A section of CIGNA's 1995 Annual Report.
Reserve changes for asbestos-related claims before ("Gross") and after
("Net") the effects of reinsurance for the periods indicated were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993
--------------- ------------- -------------
GROSS NET GROSS NET GROSS NET
------ ------ ----- ----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Asbestos Bodily Injury Claims:
Beginning reserves............................ $ 500 $ 213 $ 564 $ 216 $ 486 $ 166
Plus incurred claims and claim adjustment
expenses.................................... 226 194 49 48 186 111
Less payments for claims and claim adjustment
expenses.................................... (135) (73) (113) (51) (108) (61)
---- ---- ---- ---- ---- ----
Ending reserves............................... $ 591 $ 334 $ 500 $ 213 $ 564 $ 216
==== ==== ==== ==== ==== ====
Asbestos-in-Building Claims:
Beginning reserves............................ $ 94 $ 68 $ 168 $ 97 $ 70 $ 47
Plus incurred claims and claim adjustment
expenses.................................... 72 61 15 12 117 60
Less payments for claims and claim adjustment
expenses.................................... (8) (6) (89) (41) (19) (10)
---- ---- ---- ---- ---- ----
Ending reserves............................... $ 158 $ 123 $ 94 $ 68 $ 168 $ 97
==== ==== ==== ==== ==== ====
</TABLE>
Total asbestos incurred claims and claim adjustment expenses for 1995
include the establishment of reserves of $255 million ($194 million, net of
reinsurance) related to CIGNA's comprehensive reserve review completed in the
third quarter of 1995. Incurred claims and claim adjustment expenses for 1993
include the establishment of reserves of $106 million ($72 million, net of
reinsurance) for future legal and associated expenses for reported claims.
Reserve changes for environmental pollution claims before ("Gross") and
after ("Net") the effects of reinsurance for the periods indicated were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993
--------------- ------------- -------------
GROSS NET GROSS NET GROSS NET
------ ------ ----- ----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Environmental Pollution Claims:
Beginning reserves............................ $ 707 $ 542 $ 593 $ 430 $ 252 $ 148
Plus incurred claims and claim adjustment
expenses.................................... 1,265 955 280 215 482 394
Less payments for claims and claim adjustment
expenses.................................... (307) (229) (166) (103) (141) (112)
---- ---- ---- ---- ---- ----
Ending reserves............................... $1,665 $1,268 $ 707 $ 542 $ 593 $ 430
==== ==== ==== ==== ==== ====
</TABLE>
Incurred claims and claim adjustment expenses for 1995 include the
establishment of reserves of $1.2 billion ($861 million, net of reinsurance)
related to CIGNA's comprehensive reserve review completed in the third quarter
of 1995. Incurred claims and claim adjustment expenses for 1993 include the
establishment of reserves of $335 million ($268 million, net of reinsurance) for
future legal and associated expenses for reported claims.
20
<PAGE> 23
Reserves for environmental pollution claims and related incurred expense
and payment activity include internal costs to manage such claims and disputes
with policyholders over insurance coverage issues as well as external
litigation-related costs for such disputes. Payments associated with disputed
coverage issues will decline in the future, and eventually end, as the disputes
or related issues are resolved. To present CIGNA's environmental pollution
reserves and related activity that more directly relates to indemnity costs and
costs to defend policyholders against environmental pollution claims, the
following table excludes internal costs and external litigation-related costs
for insurance coverage disputes.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993
--------------- ------------ ------------
GROSS NET GROSS NET GROSS NET
------ ------ ----- ---- ----- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Beginning reserves............................... $ 558 $ 397 $ 444 $285 $ 252 $148
Plus incurred claims and claim adjustment
expenses....................................... 1,144 836 207 142 295 211
Less payments for claims and claim adjustment
expenses....................................... (234) (158) (93) (30) (103) (74)
---- ---- ---- ---- ---- ----
Ending reserves.................................. $1,468 $1,075 $ 558 $397 $ 444 $285
==== ==== ==== ==== ==== ====
</TABLE>
Since the mid-1980s, when CIGNA established a separate unit to handle its
asbestos-related and environmental pollution claims, it has followed an
aggressive resolution strategy for these claims. When appropriate, CIGNA has
settled claims with its policyholders, often obtaining full policy releases.
While CIGNA believes that its ultimate asbestos-related and environmental
pollution exposure has been reduced by this strategy, it also has resulted in
accelerating the recognition of incurred and paid claims and claim adjustment
expenses. A significant portion of the payments shown in the above table for
1995 are due to substantial settlements made pursuant to CIGNA's aggressive
resolution strategy. Paid asbestos-related and environmental pollution claims
are expected to continue to be significant for the foreseeable future, but will
vary depending on the level of settlement activity.
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 cleanup costs regardless of
fault, time period and relative contribution of pollutants. The tax authority of
Superfund expired in 1995, and proposals to change the law's method of
allocating responsibility for, or funding, cleanup are pending before Congress.
Any such changes could affect the liabilities of policyholders and insurers. Due
to uncertainties associated with the timing and content of any future Superfund
legislation, CIGNA is not able to determine what effect, if any, such
legislation would have on its results of operations, liquidity or financial
condition.
A reconciliation of total beginning and ending reserve balances of the
Property and Casualty segment for unpaid claims and claim adjustment expenses
for the years ended December 31, 1995, 1994 and 1993 is provided in Note 17 to
CIGNA's 1995 Annual Report.
The table on page 22 presents the subsequent development of the estimated
year-end property and casualty reserve, net of reinsurance ("net reserve") for
the 10 years prior to 1995. 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 cumulative deficiency as shown in the table represents the aggregate
change in the reserve estimates from the original balance sheet dates through
1995; an increase in a loss estimate that related to a prior year occurrence
generates a deficiency in each intervening year. For example, a deficiency
recognized in 1994 relating to losses incurred in 1987 would be included in the
cumulative deficiency amount for the years 1987 through 1993. Yet, the
deficiency would be reflected in operating results in 1994 only.
21
<PAGE> 24
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.
Historically, asbestos-related and environmental pollution losses have had a
significant effect on the net cumulative deficiency.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------- ------- ------- ------- ------- -------
(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........ $7,299 $8,074 $8,832 $9,414 $9,789 $10,196 $10,272 $10,562 $10,660 $10,635 $11,159
====== ====== ====== ====== ====== ======= ======= ======= ======= ======= =======
Cumulative percentage of net
reserve paid through:
One year later................. 30.5% 30.9% 30.2% 31.1% 34.3% 33.8% 34.0% 28.9% 24.7% 22.5%
Two years later................ 51.2 50.0 49.5 52.7 54.3 53.9 53.6 45.9 40.4
Three years later.............. 66.8 65.2 65.7 67.7 69.4 68.6 66.8 58.7
Four years later............... 79.5 78.8 77.0 78.9 80.8 78.9 77.3
Five years later............... 90.4 88.4 84.7 88.0 88.6 86.8
Six years later................ 99.1 95.1 92.8 94.4 95.4
Seven years later.............. 105.4 102.9 98.5 100.4
Eight years later.............. 112.9 108.3 104.4
Nine years later............... 118.2 114.5
Ten years later................ 124.8
Net reserve (percentage)
re-estimated as of:
One year later................. 101.7% 103.3% 102.6% 103.0% 103.1% 103.4% 106.4% 107.5% 105.0% 114.1%
Two years later................ 108.8 106.2 105.0 105.8 106.9 107.4 115.4 113.5 119.7
Three years later.............. 111.8 110.0 107.9 109.7 109.6 116.9 122.5 128.2
Four years later............... 116.2 114.8 111.3 112.3 119.5 123.5 138.9
Five years later............... 122.4 118.8 114.0 121.9 125.7 140.1
Six years later................ 126.7 122.1 123.9 127.9 142.9
Seven years later.............. 130.9 132.5 129.6 144.5
Eight years later.............. 142.1 138.1 146.6
Nine years later............... 148.1 156.7
Ten years later................ 167.8
Net cumulative deficiency: $4,946 $4,575 $4,115 $4,192 $4,199 $ 4,092 $ 4,000 $ 2,982 $ 2,095 $ 1,498
Gross reserve--December 31........ $17,926 $17,764 $16,825 $17,023
Less: Reinsurance recoverable..... 7,364 7,104 6,190 5,864
------- ------- ------- -------
Net reserve--December 31.......... $10,562 $10,660 $10,635 $11,159
======= ======= ======= =======
Gross re-estimated reserve........ $21,484 $19,979 $18,468
Less: Re-estimated reinsurance
recoverable...................... 7,940 7,224 6,335
------- ------- -------
Net re-estimated reserve.......... $13,544 $12,755 $12,133
======= ======= =======
Gross cumulative deficiency....... $ 3,558 $ 2,215 $ 1,643
======= ======= =======
</TABLE>
For additional information about gross loss development, amounts ceded to
reinsurers and net loss development, see pages 14 through 17 of the MD&A section
of CIGNA's 1995 Annual Report. On a GAAP basis, which is before the effects of
reinsurance, CIGNA's 1995 year-end reserves totaled $17.0 billion. For GAAP
purposes, CIGNA's reserves are generally carried at the full value of the
estimated liabilities. 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 $9.7 billion.
22
<PAGE> 25
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>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Statutory reserve for unpaid claims and claim adjustment expenses,
net of reinsurance................................................ $ 9,704 $ 9,643 $ 9,700
Adjustments:
Statutory Reinsurance Recoverable................................. 5,384 5,764 6,584
Discounting of Gross Reserves(1).................................. 1,935 1,418 1,480
-------- -------- --------
GAAP reserve for unpaid claims and claim adjustment expenses........ 17,023 16,825 17,764
Less GAAP Reinsurance Recoverable................................... 5,864 6,190 7,104
-------- -------- --------
GAAP reserve for unpaid claims and claim adjustment expenses,
net of reinsurance................................................ $ 11,159 $ 10,635 $ 10,660
======== ======== ========
</TABLE>
- ---------------
(1) Primarily for workers' compensation reserves and, beginning in 1995, certain
asbestos-related and environmental pollution reserves. For SAP purposes,
these reserves are discounted at 6%.
NAIC and Other Property and Casualty Regulatory Matters
The National Association of Insurance Commissioners ("NAIC") has adopted
risk-based capital rules for domestic property and casualty companies. CIGNA's
ongoing domestic property and casualty subsidiaries were adequately capitalized
under the rules as of December 31, 1995. The risk-based capital ratios of the
subsidiaries in the run-off operation are at the mandatory control level, as
described on page 29. However, because the Insurance Commissioner of
Pennsylvania determined that these subsidiaries have sufficient assets to meet
their obligations, they are being allowed to run off their liabilities
consistent with the terms of an Order by the Commissioner, which include
periodic reporting obligations to the Pennsylvania Insurance Department.
Additional information is contained on page 29.
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 or loss costs, which are estimated future
losses to which an insurer must add a profit and expense load to arrive at a
rate, 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.
23
<PAGE> 26
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 1995 totaled $79.9 billion, comprising
CIGNA corporate and insurance-related investment assets ("investment assets") of
$57.7 billion and advisory portfolios of $22.2 billion. Advisory portfolios
included $18.2 billion in Separate Accounts of CIGNA's life insurance
subsidiaries. For additional information about the General Account and the
Separate Accounts, see "Employee Retirement and Savings Benefits--Principal
Products and Markets" beginning on page seven.
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. Fixed maturity investments include publicly traded
and private placement corporate bonds, government bonds, publicly traded and
private placement asset-backed securities and redeemable preferred stocks.
Asset-backed securities are primarily mortgage-backed securities and secondarily
other asset-backed securities. Mortgage-backed securities include collateralized
mortgage obligations ("CMOs"). CMO holdings are concentrated in securities with
limited prepayment, extension and default risk, such as planned amortization
class bonds.
The major portfolios under management in CIGNA's General Account 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 generally manages the
characteristics of its investment assets 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, 1995 comprised the
following: property and casualty 33%, fully guaranteed 12%, experience-rated
25%, interest-sensitive 16%, and other life and health 14%.
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 and public fixed maturity
investments.
Fully guaranteed products primarily include GICs, single premium annuity
products and settlement annuities. 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, 1995, the duration of assets and liabilities for
GICs, single premium annuities and settlement annuities was approximately 2
years, 9 years and 11 years, respectively.
CIGNA's experience-rated products primarily consist of defined benefit and
defined contribution pension products. Investments for these products are
selected to support the yield and liquidity needs of the products and are
principally fixed income investments. Interest-sensitive products primarily
include universal life insurance and COLI. Investment assets supporting these
products are primarily fixed income investments and policy loans. Fixed income
investments 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, competition for investments (especially in
private asset classes), economic conditions, interest rates and asset allocation
decisions. For example, cash available from turnover of existing assets was
reinvested at
24
<PAGE> 27
lower interest rates in 1995, resulting in reduced investment income, whereas
proceeds from common stock sales in 1995 generated realized capital gains, and
reinvestment of these proceeds in fixed income assets increased investment
income.
As noted above, CIGNA generally manages the characteristics of its
investment assets, such as liquidity, currency, yield and duration, to reflect
the underlying characteristics of related insurance and contractholder
liabilities, which vary among CIGNA's principal product lines. In connection
with its investment strategy, CIGNA uses derivative instruments through hedging
applications to manage market risk. Derivative instruments are not used for
speculative purposes. For additional information concerning CIGNA's use of
derivatives, see Note 4(F) to the 1995 Financial Statements that are included in
its 1995 Annual Report.
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, including policyholder share, as of
December 31, 1995 constituted approximately 53% of the Employee Benefits and
Individual Financial portfolios and approximately 93% of the Property and
Casualty portfolios, respectively. As of that date, approximately 30% 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 fixed maturities 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, see page 19 of the MD&A section of
CIGNA's 1995 Annual Report.
CIGNA's mortgage loan investments, including policyholder share,
constituted approximately 25% of the Employee Benefits and Individual Financial
portfolios and less than 1% of the Property and Casualty portfolios as of
December 31, 1995. As of that date, approximately 58% 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 and borrower. 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.
CIGNA manages properties obtained through foreclosure of mortgage loans
("foreclosure properties") until such properties are sold. The Company's general
policy is to rehabilitate the foreclosed properties, re-lease them and sell
them, which generally takes two to four years. 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.
See pages 18 through 23 of the MD&A section of CIGNA's 1995 Annual Report
and Notes 2, 4, 5 and 20 to CIGNA's 1995 Financial Statements for additional
information about CIGNA's investments.
25
<PAGE> 28
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 1995 1994 1993
- ------------------------------------------------------------------------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities
Bonds:
Finance.............................................................. $ 3,726 $ 3,171 $ 3,627
Consumer products.................................................... 3,102 2,996 2,995
Manufacturing........................................................ 2,747 2,302 2,313
Energy............................................................... 2,470 2,041 1,853
Public utilities..................................................... 1,941 1,654 1,742
Transportation....................................................... 1,046 1,011 1,005
U.S. government and government agencies and authorities.............. 407 284 268
States, municipalities and political subdivisions.................... 404 327 368
Foreign governments(1)............................................... 164 208 183
Other................................................................ 401 334 397
------- ------- -------
Total bonds..................................................... 16,408 14,328 14,751
Asset-backed securities................................................ 5,925 4,827 4,931
Redeemable preferred stocks............................................ 15 33 26
------- ------- -------
Total fixed maturities.......................................... 22,348 19,188 19,708
------- ------- -------
Equity securities
Common stocks:
Industrial and miscellaneous......................................... 238 1,118 1,113
Public utilities..................................................... 23 122 162
Banks, trust and insurance companies................................. 21 115 121
------- ------- -------
Total common stocks............................................. 282 1,355 1,396
Non-redeemable preferred stocks........................................ 11 55 81
------- ------- -------
Total equity securities......................................... 293 1,410 1,477
------- ------- -------
Mortgage loans
Commercial:
Retail facilities.................................................... 4,423 3,744 3,483
Office buildings..................................................... 3,685 3,387 3,652
Apartments........................................................... 1,281 1,022 923
Hotels............................................................... 692 662 711
Industrial........................................................... 399 403 379
Other................................................................ 98 109 109
------- ------- -------
Total commercial................................................ 10,578 9,327 9,257
Agricultural........................................................... 69 88 118
------- ------- -------
Total mortgages................................................. 10,647 9,415 9,375
------- ------- -------
Policy loans............................................................. 6,925 5,237 3,623
Real estate.............................................................. 1,138 1,481 1,539
Other long-term investments.............................................. 202 137 108
Short-term investments................................................... 380 306 401
------- ------- -------
Total investments............................................... $41,933 $37,174 $36,231
======== ======== ========
</TABLE>
- ---------------
See Note 2(D) of Notes to Financial Statements of CIGNA's 1995 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.
26
<PAGE> 29
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
NET INVESTMENT INCOME 1995 1994 1993
- ------------------------------------------------------------------------- ------- ------- -------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities......................................................... $1,700 $1,649 $1,610
Equity securities........................................................ 34 55 56
Mortgage loans........................................................... 894 839 948
Policy loans............................................................. 499 365 253
Real estate.............................................................. 272 284 244
Other investments........................................................ 123 63 69
------- ------- -------
Total........................................................... 3,522 3,255 3,180
Less investment expenses................................................. 258 277 248
------- ------- -------
Net investment income, pre-tax........................................... $3,264 $2,978 $2,932
======== ======== ========
Net investment yield(1).................................................. 8.66 % 8.44 % 8.80 %
======== ======== ========
</TABLE>
- ---------------
(1) The net investment yield is equal to (a) net investment income multiplied by
two, divided by (b) the sum, at the beginning and end of the year, of cash,
invested assets (at cost or amortized cost less impairments) 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 1995 1994 1993
- ------------------------------------------------------------------------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities
Bonds:
Foreign governments(1)............................................... $ 2,343 $ 1,757 $ 1,472
Finance.............................................................. 1,655 1,700 1,588
States, municipalities and political subdivisions.................... 1,373 1,266 1,525
Public utilities..................................................... 906 682 586
Energy............................................................... 835 547 806
U.S. government and government agencies and authorities.............. 687 802 1,025
Consumer products.................................................... 679 381 360
Manufacturing........................................................ 627 353 363
Transportation....................................................... 310 139 61
Other................................................................ 240 644 618
------- ------- -------
Total bonds........................................................ 9,655 8,271 8,404
Asset-backed securities................................................ 1,921 1,716 1,580
Redeemable preferred stocks............................................ 4 11 24
------- ------- -------
Total fixed maturities............................................. 11,580 9,998 10,008
------- ------- -------
Equity securities
Common stocks:
Industrial and miscellaneous......................................... 271 333 293
Banks, trust and insurance companies................................. 53 45 57
Public utilities..................................................... 13 3 9
------- ------- -------
Total common stocks................................................ 337 381 359
Non-redeemable preferred stocks........................................ 16 8 7
------- ------- -------
Total equity securities............................................ 353 389 366
------- ------- -------
Other long-term investments, principally mortgages....................... 320 693 643
Short-term investments................................................... 209 342 461
------- ------- -------
Total investments.................................................. $12,462 $11,422 $11,478
======== ======== ========
</TABLE>
- ------------
See Note 2(D) of Notes to Financial Statements of CIGNA's 1995 Annual Report for
a discussion of the method of valuation of investments.
(1) Comprises fixed maturities of sovereign foreign governments.
27
<PAGE> 30
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
NET INVESTMENT INCOME 1995 1994 1993
- ------------------------------------------------------------------------- ----- ----- -----
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C>
Interest:
Taxable.............................................................. $ 750 $ 680 $ 643
Tax-exempt........................................................... 70 77 101
----- ----- -----
Total........................................................... 820 757 744
Dividends from stocks.................................................... 11 12 25
Other.................................................................... 32 46 34
----- ----- -----
Total investment income.................................................. 863 815 803
Less investment expenses................................................. 69 59 50
----- ----- -----
Net investment income, pre-tax........................................... $ 794 $ 756 $ 753
===== ===== =====
Net investment yield(1).................................................. 6.93% 6.92% 7.24%
===== ===== =====
</TABLE>
- ---------------
(1) The net investment yield is equal to (a) net investment income multiplied by
two, divided by (b) the sum, at the beginning and end of the year, of cash,
invested assets (at cost or amortized cost less impairments) and investment
income due and accrued, less borrowed money, less net investment income.
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
Investment assets for CIGNA's Other Operations include fixed maturities,
mortgage loans, real estate 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, CIGNA's 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 $238 million for 1995, $212 million for 1994 and $217
million for 1993.
In addition, CIGNA has non-strategic equity investments in operating
businesses, primarily 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
periodic 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
28
<PAGE> 31
particular state with respect to the categories of business involved, and may be
offset against premium taxes payable in some states. See Note 19 to CIGNA's 1995
Financial Statements.
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
many states have adopted. In addition, risk-based capital rules have been
adopted for life insurance and property and casualty insurance companies 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 adjusted surplus to its
risk-based capital, the insurer could be subject to various regulatory actions
ranging from increased scrutiny to conservatorship.
Four levels of regulatory attention may be triggered if the ratio of
adjusted surplus to risk-based capital (the "RBC ratio") is insufficient. If a
property and casualty ("P&C") insurance company's RBC ratio is between 67.5% and
90% (75% and 100% for life insurance ("Life") companies), the "company action
level," the company must submit a plan to the regulator detailing corrective
action it proposes to undertake. If a P&C company's RBC ratio is between 45% and
67.5% (50% and 75% for Life companies), the "regulatory action level," the
company must also submit a plan, but a regulator may also issue a corrective
order requiring the insurer to comply within a specified period. If a P&C
company's RBC ratio is between 31.5% and 45% (35% and 50% for Life companies),
the "authorized control level," the regulatory response is the same as at the
"regulatory action level," but in addition, the regulator may take action to
rehabilitate or liquidate the insurer. If the RBC ratio for a P&C company is
less than 31.5% (35% for Life companies), the "mandatory control level," the
regulator must rehabilitate or liquidate the insurer. An insurance commissioner
may allow a property and casualty company at the mandatory control level that is
writing no business and is running off its existing business to continue its
run-off. As of December 31, 1995, CIGNA's life insurance and ongoing domestic
property and casualty insurance subsidiaries were adequately capitalized under
such rules, and the run-off subsidiaries are being allowed to run off their
liabilities as described on page 23.
Also, the NAIC is addressing risk-based capital guidelines for HMOs. CIGNA
does not expect such guidelines to have a material adverse effect on its future
results of operations, liquidity or financial condition.
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 practices, including the adequacy of disclosure regarding products
and their future performance, may result in increased regulations in this area.
In 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.
Federal and state proposals to reform health care are expected to continue
in 1996. Such proposals are discussed on page six.
CIGNA's HMOs 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,
29
<PAGE> 32
contracts and rates. Regulation of these entities also may 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. Many of CIGNA's HMOs are also federally qualified and subject to
regulation as to benefits, solvency and rates under the federal HMO Act. CIGNA's
mental health and substance abuse clinics are licensed by the states in which
they operate for quality of treatment.
Regulatory concerns with insurance risk selection have increased
significantly in recent years. For example, some states have imposed
restrictions on the use of underwriting criteria related to AIDS. Also, various
interpretations under the Americans with Disabilities Act may affect the
provision of insurance benefits under certain types of policies.
Domestic property and casualty insurers are required to participate in
assigned risk plans, joint underwriting authorities, pools 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 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,
COLI, health care reform and federal oversight of insurer solvency, current and
proposed federal measures that may significantly affect the insurance business
include: pension and other employee benefit regulation; tax legislation; Social
Security legislation; financial services regulation; amendment to the antitrust
exemption provided for the business of insurance by the McCarran-Ferguson Act;
and repeal of the Glass-Steagall Act.
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. Ratings
CIGNA and certain of its domestic insurance subsidiaries are rated by
nationally recognized rating agencies. While the significance of individual
ratings varies from agency to agency, companies assigned ratings at the top end
of the range 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 range have the weakest capacity.
Insurance ratings represent the opinions of the rating agencies on the
financial strength of the company and its capacity to meet the obligations of
insurance policies. Insurance rating scales of the principal agencies
30
<PAGE> 33
that rate the Company's insurance subsidiaries are characterized as follows:
A.M. Best, A++ to F ("Superior" to "In Liquidation"); Moody's, Aaa to C
("Exceptional" to "Lowest"); Standard & Poor's ("S&P"), AAA to R ("Superior" to
"Regulatory Action"); and Duff & Phelps, AAA to DD ("Highest" to "Order of
Liquidation").
As of March 18, 1996, the insurance rating for CG Life obtained from S&P
was AA ("Excellent," 3rd of 18) and from Duff & Phelps was AAA ("Highest," 1st
of 18), and the insurance ratings obtained from A.M. Best and Moody's were as
follows:
<TABLE>
<CAPTION>
INSURANCE RATINGS(1)
------------------------------------------------------------------------
LIFE
-----------------------------------
LIFE
INSURANCE PROPERTY & CASUALTY
COMPANY ---------------------------------
OF NORTH ONGOING RUN-OFF
CG LIFE AMERICA OPERATIONS(2) OPERATIONS(3)
---------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
A.M. Best.................. A+ A+ A- B+
("Superior," ("Superior," ("Excellent," ("Very Good,"
2nd of 15) 2nd of 15) 4th of 15) 6th of 15)(4)
Moody's.................... A1 not Baa1 Ba1
("Good," rated ("Adequate," ("Questionable,"
5th of 19) 8th of 19)(5) 11th of 19)(5)
</TABLE>
- ---------------
(1) Includes the rating assigned, the agency's characterization of the rating
and the position of the rating in the applicable agency's rating scale
(e.g., CG Life's rating by A.M. Best Company, Inc. ("A.M. Best") is the 2nd
highest rating awarded in its scale of 15).
(2) The rated Ongoing Operations consist of CIGNA's domestic ongoing property
and casualty insurance subsidiaries. For further information, see "Property
and Casualty" on page 13.
(3) The rated Run-off Operations consist of domestic insurance subsidiaries that
manage run-off policies and related claims, including those for
asbestos-related and environmental pollution exposures. For further
information, see "Property and Casualty" on page 13.
(4) Although this is the sixth highest rating in the A.M. Best rating scale, it
is the second highest rating available for run-off operations.
(5) Moody's rates the principal insurance companies within the Ongoing
Operations and the Run-off Operations, whereas A.M. Best rates each such
operation collectively.
Debt ratings are assessments of the likelihood that the Company will make
timely payments of principal and interest. The rating scales of the principal
agencies that rate CIGNA's senior debt are characterized as follows: Moody's,
Aaa to C ("Best" to "Lowest"); S&P, AAA to D ("Extremely Strong" to "Default");
and Duff & Phelps, AAA to DD ("Highest" to "Default"). The commercial paper
rating scales for Moody's, S&P and Duff & Phelps are as follows: Moody's,
Prime-1 to Not Prime ("Superior" to "Not Prime"); S&P, A-1+ to D ("Extremely
Strong" to "Default"); and Duff & Phelps, D-1+ to D-5 ("Highest" to "Default").
As of March 18, 1996, the debt ratings obtained from the following agencies
were as follows:
<TABLE>
<CAPTION>
DEBT RATINGS(1)
CIGNA CORPORATION
---------------------------------------
COMMERCIAL
SENIOR DEBT PAPER
---------------- -------------------
<S> <C> <C>
Moody's............................................ Baa1 Prime-2
("Medium- ("Strong,"
grade," 2nd of 4)
8th of 19)
Standard & Poor's.................................. BBB+ A-2
("Adequate," ("Satisfactory,"
8th of 22) 3rd of 7)
Duff & Phelps...................................... A D-1
("Adequate," ("Very high,"
6th of 18) 2nd of 7)
</TABLE>
- ---------------
(1) Includes the rating assigned, the agency's characterization of the rating
and the position of the rating in the applicable agency's rating scale.
The ratings are reviewed routinely by the rating agencies and may be
changed at their discretion.
31
<PAGE> 34
J. 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 1995. CIGNA and its principal subsidiaries are not
dependent on business from one or a few brokers or agents. 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 44,700, 48,600 and 50,600 employees as of December
31, 1995, 1994 and 1993, 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 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 countries. For additional
information concerning leases and property, see Notes 2(H) and 15 to CIGNA's
1995 Consolidated Financial Statements of CIGNA's 1995 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 business, either as a liability insurer
defending third-party claims brought against its insureds or an insurer
defending coverage claims brought against it by its policyholders or other
insurers. One such area of litigation involves policy coverage and judicial
interpretation of legal liability for asbestos-related and environmental
pollution claims.
While the outcome of all litigation involving CIGNA, including
insurance-related litigation, cannot be determined, litigation (including that
related to asbestos and environmental pollution claims) is not expected to
result in losses that differ from recorded reserves by amounts that would be
material to results of operations, liquidity or financial condition. Also,
reinsurance recoveries related to claims in litigation, net of allowance for
uncollectible reinsurance, are not expected to result in recoveries that differ
from recorded recoverables by amounts that would be material to results of
operations, liquidity or financial condition.
32
<PAGE> 35
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made below to CG Life, which is an indirect subsidiary 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.
H. EDWARD HANWAY, 44, President of CIGNA HealthCare beginning February 1996;
President of CIGNA International from March 1994 until February 1996; and
President of CIGNA International: Property & Casualty from February 1989 until
March 1994.
GERALD A. ISOM, 57, President of CIGNA Property and Casualty since 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.
THOMAS C. JONES, 49, President of CIGNA Individual Insurance since February
1995; President of CG Life since March 1995; President of CIGNA Reinsurance
Property & Casualty from March 1994 until February 1995; Executive Vice
President, Chief Administrative Officer and member of the Boards of Directors of
NAC Re Corporation and NAC Reinsurance Corporation from November 1985 until
January 1994; and Chief Operating Officer of NAC Re Corporation and NAC
Reinsurance Corporation from June 1993 and September 1990, respectively, until
January 1994. NAC Re Corporation is the parent corporation of NAC Reinsurance
Corporation, a major provider of property and casualty reinsurance products.
JOHN K. LEONARD, 47, President of CIGNA Group Insurance: Life, Accident,
Disability since March 1992; and Senior Vice President of CIGNA from March 1989
until March 1992, with responsibility for Corporate Marketing and Strategy.
DONALD M. LEVINSON, 50, Executive Vice President of CIGNA since March 1988, with
responsibility for Human Resources and Services.
FRANCINE M. NEWMAN, 51, President of CIGNA Reinsurance: Life, Accident, Health
since July 1984.
BYRON D. OLIVER, 53, President of CIGNA Retirement & Investment Services since
February 1988.
ARTHUR C. REEDS, III, 51, 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.
B. KINGSLEY SCHUBERT, 50, President of CIGNA International beginning February
1996; Senior Vice President of CIGNA International (Asia-Pacific) from March
1995 until February 1996; President of CIGNA Insurance Company in Japan from
June 1992 until February 1996; Senior Vice President of American International
Underwriters Corporation from September 1991 until April 1992; and Chief
Operating Officer of AIU Insurance Company, American Home Assurance Company and
ALICO from March 1986 until September 1991. American International Underwriters
Corporation, AIU Insurance Company, American Home Assurance Company and ALICO
are subsidiaries of American International Group, Inc., a major provider of
insurance products.
JAMES G. STEWART, 53, Executive Vice President and Chief Financial Officer of
CIGNA since 1983.
WILSON H. TAYLOR, 52, Chairman of CIGNA since November 1989; and Chief Executive
Officer of CIGNA since November 1988 and President of CIGNA since May 1988.
THOMAS J. WAGNER, 56, 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.
33
<PAGE> 36
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information under the caption "Quarterly Financial Data--Stock and
Dividend Data" on page 47 and under the caption "Stock Listing" on the inside
back cover of CIGNA's 1995 Annual Report is incorporated by reference, as is the
information from Note 8 to CIGNA's Consolidated Financial Statements and the
number of shareholders of record as of December 31, 1995 under the caption
"Highlights" on page one of CIGNA's 1995 Annual Report.
Item 6. SELECTED FINANCIAL DATA
The five-year financial information under the caption "Highlights" on page
one of CIGNA's 1995 Annual Report is incorporated by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information on pages eight through 23 of CIGNA's 1995 Annual Report is
incorporated by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CIGNA's Consolidated Financial Statements on pages 24 through 45 and the
report of its independent accountants on page 46 of CIGNA's 1995 Annual Report
are incorporated by reference, as is the unaudited information set forth under
the caption "Quarterly Financial Data--Consolidated Results" on page 47.
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 five and six of CIGNA's proxy
statement dated March 19, 1996 are incorporated by reference.
B. Executive Officers of the Registrant
See PART I above.
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 19 of CIGNA's proxy statement dated March 19,
1996 is incorporated by reference.
Item 11. EXECUTIVE COMPENSATION
The information under the captions "Executive Compensation" on pages 11
through 15 and "Compensation of Directors" on pages eight and nine of CIGNA's
proxy statement dated March 19, 1996 is incorporated by reference.
34
<PAGE> 37
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 two and three and "Ownership
of CIGNA Corporation Common Stock by Certain Beneficial Owners" on page four of
CIGNA's proxy statement dated March 19, 1996, 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 nine of
CIGNA's proxy statement dated March 19, 1996 is incorporated by reference.
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 1995 Annual
Report:
Consolidated Statements of Income and Retained Earnings for the
years ended December 31, 1995, 1994 and 1993--page 24.
Consolidated Balance Sheets as of December 31, 1995 and 1994--page
25.
Consolidated Statements of Cash Flows for the years ended December
31, 1995, 1994 and 1993--page 26.
Notes to Financial Statements--pages 27 through 45.
Report of Independent Accountants, Price Waterhouse LLP--page 46.
(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, 1995, the
registrant filed (1) a Report on Form 8-K dated October 2, 1995, regarding an
increase in net reserves for asbestos-related and environmental pollution claims
and other exposures and the restructuring of the domestic property and casualty
companies, and (2) a Report on Form 8-K dated October 31, 1995 containing a copy
of a news release reporting its third quarter 1995 results.
35
<PAGE> 38
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 28, 1996
<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 28, 1996.
<TABLE>
<S> <C>
PRINCIPAL EXECUTIVE OFFICER: DIRECTORS:*
Robert P. Bauman
Robert H. Campbell
Wilson H. Taylor* Alfred C. DeCrane, Jr.
Chairman, Chief Executive Officer James F. English, Jr.
and a Director Bernard M. Fox
Frank S. Jones
Gerald D. Laubach
Marilyn W. Lewis
Paul F. Oreffice
Charles R. Shoemate
Louis W. Sullivan, M.D.
PRINCIPAL ACCOUNTING OFFICER: Carol Cox Wait
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>
36
<PAGE> 39
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, 1995.......................... FS-3
II Condensed Financial Information of CIGNA Corporation
(Registrant)............................................. FS-4
III Supplementary Insurance Information........................ FS-8
IV Reinsurance................................................ FS-10
V Valuation and Qualifying Accounts and Reserves............. FS-11
VI Supplemental Information Concerning Property-Casualty
Insurance Operations..................................... FS-12
</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 1995 Annual Report.
FS-1
<PAGE> 40
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 13, 1996 appearing on page 46 of the 1995 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.
/S/ PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
February 13, 1996
FS-2
<PAGE> 41
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE I
SUMMARY OF INVESTMENTS-- OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1995
(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....................................... $ 1,307 $ 1,650 $ 1,650
States, municipalities and political subdivisions... 1,594 1,816 1,816
Foreign governments................................. 2,354 2,508 2,508
Public utilities.................................... 2,829 3,097 3,097
Convertibles and bonds with warrants attached....... 39 41 41
All other corporate bonds........................... 17,310 18,855 18,855
Asset-backed securities................................ 7,813 8,254 8,254
Redeemable preferred stocks............................ 29 20 20
------- ------- ---------------
Total fixed maturities............................ 33,275 36,241 36,241
------- ------- ---------------
Equity securities
Common stocks:
Industrial, miscellaneous and all other............. 445 521 521
Banks, trust and insurance companies................ 64 74 74
Public utilities.................................... 34 36 36
Non-redeemable preferred stocks........................ 22 30 30
------- ------- ---------------
Total equity securities........................... 565 661 661
Mortgage loans on real estate............................ 11,010 11,010
Policy loans............................................. 7,107 7,107
Real estate investments (including $685 million of real
estate acquired in satisfaction of debt)............... 1,283 1,283
Other long-term investments.............................. 295 295
Short-term investments................................... 1,113 1,113
------- ---------------
Total investments................................. $54,648 $57,710
======= ==============
</TABLE>
FS-3
<PAGE> 42
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION
(REGISTRANT)
STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER
31,
-----------------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Intercompany income...................................... $ 2 $ 2 $ 3
----- ----- -----
Total revenues......................................... 2 2 3
----- ----- -----
Operating expenses:
Interest............................................... 109 111 105
Intercompany interest.................................. 29 18 14
Other.................................................. 5 3 1
----- ----- -----
Total operating expenses............................ 143 132 120
----- ----- -----
Loss before income taxes................................. (141) (130) (117)
Income tax benefit....................................... (34) (34) (33)
----- ----- -----
Loss of parent company................................... (107) (96) (84)
Equity in income of subsidiaries......................... 318 650 318
----- ----- -----
Net income............................................... $ 211 $ 554 $ 234
====== ====== ======
</TABLE>
See Notes to Condensed Financial Statements on FS-7.
FS-4
<PAGE> 43
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION
(REGISTRANT)
BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1995 1994
------ ------
<S> <C> <C>
Assets:
Cash and cash equivalents........................................... $ 4 $ 1
Investments in subsidiaries......................................... 9,069 8,187
Other assets........................................................ 184 202
Goodwill............................................................ 70 82
------ ------
Total............................................................ $9,327 $8,472
====== ======
Liabilities:
Intercompany........................................................ $ 179 $ 650
Short-term debt..................................................... 410 267
Long-term debt...................................................... 892 1,211
Other liabilities................................................... 689 533
------ ------
Total liabilities................................................ 2,170 2,661
------ ------
Shareholders' Equity:
Common stock (shares issued, 87 and 83)............................. 87 83
Additional paid-in capital.......................................... 2,536 2,248
Net unrealized appreciation (depreciation) -- fixed maturities...... 1,025 (122)
Net unrealized appreciation -- equity securities.................... 73 141
Net translation of foreign currencies............................... (27) (27)
Retained earnings................................................... 4,041 4,052
Less treasury stock, at cost........................................ (578) (564)
------ ------
Total shareholders' equity....................................... 7,157 5,811
------ ------
Total............................................................ $9,327 $8,472
====== ======
</TABLE>
See Notes to Condensed Financial Statements on FS-7.
FS-5
<PAGE> 44
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION
(REGISTRANT)
STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income......................................................... $ 211 $ 554 $ 234
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Equity in income of subsidiaries.............................. (318) (650) (318)
Dividends received from subsidiaries.......................... 545 523 308
Other liabilities............................................. 159 (162) 210
Other, net.................................................... 27 (87) (28)
----- ----- -----
Net cash provided by operating activities................... 624 178 406
----- ----- -----
Cash Flows from Investing Activities:
Capital contributions to subsidiaries.............................. (16) (158) (480)
Other, net......................................................... (6) -- 1
----- ----- -----
Net cash used in investing activities....................... (22) (158) (479)
----- ----- -----
Cash Flows from Financing Activities:
Change in intercompany debt........................................ (471) 164 37
Net change in commercial paper..................................... (13) (38) (48)
Issuance of long-term debt......................................... 86 112 327
Repayment of debt.................................................. -- (44) (36)
Issuance of common stock........................................... 21 5 6
Dividends paid..................................................... (222) (219) (219)
----- ----- -----
Net cash provided by (used in) financing activities......... (599) (20) 67
----- ----- -----
Net (decrease) increase in cash and cash equivalents............... 3 -- (6)
Cash and cash equivalents, beginning of year....................... 1 1 7
----- ----- -----
Cash and cash equivalents, end of year............................. $ 4 $ 1 $ 1
====== ====== ======
</TABLE>
See Notes to Condensed Financial Statements on FS-7.
FS-6
<PAGE> 45
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION
(REGISTRANT)
NOTES TO CONDENSED FINANCIAL STATEMENTS
The accompanying condensed financial statements should be read in
conjunction with the Consolidated Financial Statements and the accompanying
notes thereto in the Annual Report.
Note 1-- In 1993, CIGNA implemented Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." SFAS No. 115 required that debt and equity securities be
classified into different categories and carried at fair value if they
are not classified as held-to-maturity. During the fourth quarter of
1995, the Financial Accounting Standards Board issued a guide to
implementation of SFAS No. 115, which permits a one-time opportunity to
reclassify securities subject to SFAS No. 115. Consequently, CIGNA
reclassified all held-to-maturity securities of its subsidiaries to
available-for-sale as of December 31, 1995. The non-cash
reclassification of these securities resulted in an increase of
approximately $300 million, net of policyholder-related amounts and
deferred income taxes, in net unrealized appreciation included in
Shareholders' Equity as of December 31, 1995.
Note 2-- Long-term debt, net of current maturities, consists of CIGNA's 8.16%
Notes due 2000; 8 3/4% Notes due 2001; 7.17% Notes due 2002; 7.4%
Notes due 2003; 6 3/8% Notes due 2006; 8 1/4% Notes due 2007; 7.65%
Notes due 2023; 8.3% Notes due 2023; and Medium-term Notes with
interest rates ranging from 5 3/4% to 9 3/4%, and original maturity
dates from approximately five to ten years. As of December 31, 1995
and 1994, the weighted average interest rate on Medium-term Notes was
8.5% and 8.6%, respectively.
Maturities of long-term debt for each of the next five years are as
follows: 1996--$157 million; 1997--$39 million; 1998--$82 million;
1999--$10 million; 2000--$53 million.
During 1995, CIGNA's 8.2% Convertible Subordinated Debentures due in
2010 were converted through non-cash transactions into approximately
3.6 million shares of CIGNA common stock.
In 1995, CIGNA issued $25 million of unsecured 8.16% Notes due in
2000; $25 million of unsecured 7.17% Notes due in 2002; and $36
million of Medium-term Notes.
In 1994, CIGNA issued $100 million of unsecured 6 3/8% Notes due in
2006 and $12 million of Medium-term notes.
As of December 31, 1995, CIGNA had approximately $800 million
remaining under an effective shelf registration statement filed with
the Securities and Exchange Commission that may be issued as debt,
equity securities or both, depending upon market conditions and
CIGNA's capital requirements.
Interest paid on short and long-term debt amounted to $113 million,
$109 million and $95 million, for 1995, 1994 and 1993, 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 $163 million, $477 million and $75 million
during 1995, 1994 and 1993, respectively.
FS-7
<PAGE> 46
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE III
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, 1995:
Property and Casualty:
Domestic..................................... $ 187 $ 172 $12,481
International................................ 204 2,027 2,566
Other, primarily Reinsurance................. -- -- 2,076
----------- -------------- ---------
Total Property and Casualty................ 391 2,199 17,123
Employee Life and Health Benefits............... 29 4,410 1,914
Employee Retirement and Savings Benefits........ 76 20,233 --
Individual Financial Services................... 613 12,565 266
All Other....................................... -- 2,655 --
----------- -------------- ---------
Total...................................... $ 1,109 $ 42,062 $19,303
=========== =============== ==========
Year Ended December 31, 1994:
Property and Casualty:
Domestic..................................... $ 218 $ 179 $12,373
International................................ 185 1,654 2,401
Other, primarily Reinsurance................. 10 -- 2,134
----------- -------------- ---------
Total Property and Casualty................ 413 1,833 16,908
Employee Life and Health Benefits............... 28 3,909 2,125
Employee Retirement and Savings Benefits........ 71 19,493 --
Individual Financial Services................... 616 10,080 213
All Other....................................... -- 2,138 --
----------- -------------- ---------
Total...................................... $ 1,128 $ 37,453 $19,246
=========== =============== ==========
Year Ended December 31, 1993:
Property and Casualty:
Domestic..................................... $ 269 $ 129 $13,107
International................................ 167 1,162 2,350
Other, primarily Reinsurance................. 10 -- 2,370
----------- -------------- ---------
Total Property and Casualty................ 446 1,291 17,827
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 $ 35,183 $20,224
=========== =============== ==========
</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> 47
<TABLE>
<CAPTION>
BENEFITS,
PREMIUMS NET LOSSES AND POLICY OTHER
UNEARNED AND INVESTMENT SETTLEMENT ACQUISITION OPERATING PREMIUMS
PREMIUMS FEES(1) INCOME(2) EXPENSES(1) EXPENSES EXPENSES WRITTEN
-------- -------- ----------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 993 $ 1,813 $ 478 $ 2,679 $ 461 $ 525 $1,720
939 2,708 251 1,835 560 420 1,803
64 119 65 248 26 41 64
-------- -------- ----------- ----------- ----------- --------- --------
1,996 4,640 794 4,762 1,047 986 3,587
150 8,135 574 6,105 9 2,193 --
-- 258 1,722 1,522 18 159 --
30 881 968 1,268 107 314 --
-- -- 238 198 -- 16 --
-------- -------- ----------- ----------- ----------- --------- --------
$2,176 $13,914 $ 4,296 $13,855 $ 1,181 $ 3,668 $3,587
========== ========== ============ =========== =========== ========= ==========
$1,179 $ 2,314 $ 483 $ 2,441 $ 469 $ 484 $2,103
1,023 2,386 207 1,613 500 421 1,618
122 343 66 360 98 61 351
-------- -------- ----------- ----------- ----------- --------- --------
2,324 5,043 756 4,414 1,067 966 4,072
218 7,844 515 5,766 11 2,044 --
-- 201 1,722 1,469 17 162 --
33 824 741 1,065 70 292 --
-- -- 212 212 1 31 --
-------- -------- ----------- ----------- ----------- --------- --------
$2,575 $13,912 $ 3,946 $12,926 $ 1,166 $ 3,495 $4,072
========== ========== ============ =========== =========== ========= ==========
$1,403 $ 2,622 $ 496 $ 3,110 $ 531 $ 632 $2,482
965 2,071 186 1,446 465 448 1,444
112 443 71 477 117 64 412
-------- -------- ----------- ----------- ----------- --------- --------
2,480 5,136 753 5,033 1,113 1,144 4,338
188 7,438 503 5,543 13 1,985 --
-- 296 1,846 1,721 14 153 --
35 814 583 921 68 294 --
8 28 217 201 2 32 28
-------- -------- ----------- ----------- ----------- --------- --------
$2,711 $13,712 $ 3,902 $13,419 $ 1,210 $ 3,608 $4,366
========== ========== ============ =========== =========== ========= ==========
</TABLE>
FS-9
<PAGE> 48
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE IV
REINSURANCE
(DOLLAR AMOUNTS 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, 1995:
Life insurance in force............... $506,313 $44,683 $158,414 $620,044 25.5%
======== ======== ========= ======== =========
Premiums and fees:
Life insurance and annuities....... $ 2,978 $ 171 $ 591 $ 3,398 17.4%
Accident and health insurance...... 7,030 336 719 7,413 9.7
Property and casualty insurance.... 4,115 1,745 733 3,103 23.6
-------- --------- ---------- --------
Total......................... $ 14,123 $ 2,252 $ 2,043 $ 13,914 14.7%
======== ======== ========= ======== =========
Year Ended December 31, 1994:
Life insurance in force............... $496,373 $33,891 $152,334 $614,816 24.8%
======== ======== ========= ======== =========
Premiums and fees:
Life insurance and annuities....... $ 3,107 $ 341 $ 526 $ 3,292 16.0%
Accident and health insurance...... 6,566 310 646 6,902 9.3
Property and casualty insurance.... 4,591 1,894 1,021 3,718 27.5
-------- --------- ---------- --------
Total......................... $ 14,264 $ 2,545 $ 2,193 $ 13,912 15.8%
======== ======== ========= ======== =========
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%
======== ======== ========= ======== =========
</TABLE>
FS-10
<PAGE> 49
CIGNA CORPORATION
SCHEDULE V
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>
1995:
INVESTMENT ASSET VALUATION RESERVES:
Mortgage loans...................... $179 $ 3 $10 $(104) $ 88
Real estate......................... 104 5 10 (10) 109
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Premiums, accounts and notes
receivable........................ 139 36 -- (46) 129
Reinsurance recoverables............ 435 273 -- (8) 700
DEFERRED TAX ASSET VALUATION
ALLOWANCE........................... 47 1 -- -- 48
1994:
INVESTMENT ASSET VALUATION RESERVES:
Fixed maturities.................... $ 11 $ -- $-- $ (11) $ --
Mortgage loans...................... 216 8 24 (69) 179
Real estate......................... 98 6 6 (6) 104
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Premiums, accounts and notes
receivable........................ 120 62 -- (43) 139
Reinsurance recoverables............ 405 42 -- (12) 435
DEFERRED TAX ASSET VALUATION
ALLOWANCE........................... 53 (6) -- -- 47
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
</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.
FS-11
<PAGE> 50
CIGNA CORPORATION AND SUBSIDIARIES
SCHEDULE VI
SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY-CASUALTY INSURANCE OPERATIONS
(IN MILLIONS)
[CAPTION]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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, 1995:
Consolidated property-casualty
entities............................. $ 386 $17,023 $19 $1,632
Year Ended December 31, 1994:
Consolidated property-casualty
entities............................. $ 406 $16,825 $20 $1,869
Year Ended December 31, 1993:
Consolidated property-casualty
entities............................. $ 437 $17,764 $22 $1,994
</TABLE>
- ---------------
(1) Discounts were computed using an annual interest rate of 9%.
(2) Amounts presented are shown net of the effects of reinsurance.
FS-12
<PAGE> 51
[CAPTION]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
COLUMN F COLUMN G COLUMN H COLUMN I COLUMN J COLUMN K
- -------------------------------------------------------------------------------------------------
CLAIMS AND CLAIM AMORTIZATION
ADJUSTMENT EXPENSES OF DEFERRED PAID CLAIMS
NET INCURRED RELATED TO: POLICY AND CLAIM
EARNED INVESTMENT CURRENT PRIOR ACQUI- ADJUSTMENT PREMIUMS
PREMIUMS(2) INCOME YEAR(2) YEAR(2) SITION COSTS EXPENSES(2) WRITTEN
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,729 $674 $2,386 $1,498 $ 950 $ 3,360 $3,587
$ 4,247 $657 $3,093 $ 538 $1,054 $ 3,656 $4,072
$ 4,464 $674 $3,526 $ 789 $1,115 $ 4,217 $4,338
</TABLE>
FS-13
<PAGE> 52
CIGNA CORPORATION
One Liberty Place
Philadelphia, PA 19192-1550
<PAGE> 53
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
CIGNA CORPORATION
-------------------------
EXHIBITS
TO THE
ANNUAL REPORT
ON
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
-------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 54
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
- ------ --------------------------------------- ---------------------------------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation Filed as Exhibit 3.1 to the
of the registrant as last amended registrant's Form 10-K for the year
October 2, 1990 ended December 31, 1993 and
incorporated herein by reference.
3.2 By-Laws of the registrant as last Filed herewith.
amended and restated January 24, 1996
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 10.27 are filed as exhibits pursuant to Item 14(c) of Form 10-K.
10.1 Deferred Compensation Plan for Filed herewith.
Directors of CIGNA Corporation, as
amended and restated as of January 1,
1996
10.2 Retirement and Consulting Plan for Filed as Exhibit 10.12 to the
Directors of CIGNA Corporation, as registrant's Form 10-K for the year
amended and restated as of May 29, 1991 ended December 31, 1993 and
incorporated herein by reference.
10.3 Restricted Stock Plan for Non-Employee Filed as Exhibit 10.15 to the
Directors of CIGNA Corporation registrant's Form 10-K for the year
effective as of September 30, 1989 ended December 31, 1993 and
incorporated herein by reference.
10.4 Description of First Amendment to the Filed as Exhibit 10.16 to the
Restricted Stock Plan for Non-Employee registrant's Form 10-K for the year
Directors of CIGNA Corporation ended December 31, 1993 and
incorporated herein by reference.
10.5 Description of Stock Compensation Plan Filed as Exhibit 10.3 to the
for Non-Employee Directors of CIGNA registrant's Form 10-K for the quarter
Corporation, as amended and restated ended September 30, 1995 and
effective July 1, 1995 incorporated herein by reference.
</TABLE>
E-1
<PAGE> 55
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
- ------ --------------------------------------- ---------------------------------------
<C> <S> <C>
10.6 CIGNA Corporation Stock Plan effective Filed as Exhibit 10.1 to the
as of May 1, 1991 registrant's Form 10-K for the year
ended December 31, 1993 and
incorporated herein by reference.
10.7 Amendment No. 1 dated as of July 28, Filed as Exhibit 10.2 to the
1993 to the CIGNA Corporation Stock registrant's Form 10-K for the year
Plan ended December 31, 1993 and
incorporated herein by reference.
10.8 Amendment No. 2 dated as of February Filed as Exhibit 10.3 to the
24, 1994 to the CIGNA Corporation Stock registrant's Form 10-K for the year
Plan ended December 31, 1993 and
incorporated herein by reference.
10.9 CIGNA Corporation Executive Stock Filed as Exhibit 10.4 to the
Incentive Plan, as Amended and Restated registrant's Form 10-K for the year
as of March 23, 1988 ended December 31, 1993 and
incorporated herein by reference.
10.10 Amendment No. 1 dated as of September Filed as Exhibit 10.5 to the
28, 1988 to the CIGNA Corporation registrant's Form 10-K for the year
Executive Stock Incentive Plan ended December 31, 1993 and
incorporated herein by reference.
10.11 Amendment No. 2 dated as of March 27, Filed as Exhibit 10.6 to the
1991 to the CIGNA Corporation Executive registrant's Form 10-K for the year
Stock Incentive Plan ended December 31, 1993 and
incorporated herein by reference.
10.12 CIGNA Long-Term Incentive Plan Filed as Appendix A to the registrant's
definitive proxy statement on Schedule
14A dated March 20, 1995 and
incorporated herein by reference.
10.13 CIGNA Corporation Strategic Performance Filed as Exhibit 10.8 to the
Plan, as amended and restated March 25, registrant's Form 10-K for the year
1992 ended December 31, 1993 and
incorporated herein by reference.
10.14 Description of January 25, 1995 Filed as Exhibit 10.1 to the
Amendment to the CIGNA Corporation registrant's Form 10-Q for the quarter
Strategic Performance Plan ended March 31, 1995 and incorporated
herein by reference.
10.15 Deferred Compensation Plan of CIGNA Filed herewith.
Corporation and Participating
Subsidiaries, as amended and restated
as of January 1, 1996
10.16 CIGNA Supplemental Pension Plan, as Filed as Exhibit 10.1 to the
amended and restated as of July 28, registrant's Form 10-Q for the quarter
1993 ended June 30, 1994 and incorporated
herein by reference.
</TABLE>
E-2
<PAGE> 56
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
- ------ --------------------------------------- ---------------------------------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
10.17 Description of July 26, 1995 Amendment Filed as Exhibit 10.1 to the
to CIGNA Supplemental Pension Plan registrant's Form 10-Q for the quarter
ended September 30, 1995 and
incorporated herein by reference.
10.18 CIGNA Corporation Severance Benefits Filed as Exhibit 10.2 to the
Plan for Members of the Executive registrant's Form 10-Q for the quarter
Group, as amended and restated as of ended June 30, 1994 and incorporated
July 27, 1994 herein by reference.
10.19 Description of January 25, 1995 Filed as Exhibit 10.2 to the
Amendment to the CIGNA Corporation registrant's Form 10-Q for the quarter
Severance Benefits Plan for Members of ended March 31, 1995 and incorporated
the Executive Group herein by reference.
10.20 Description of July 26, 1995 Amendment Filed as Exhibit 10.2 to the
to the CIGNA Corporation Severance registrant's Form 10-Q for the quarter
Benefits Plan for Members of the ended September 30, 1995 and
Executive Group incorporated herein by reference.
10.21 Description of CIGNA Corporation Filed as Exhibit 10.9 to the
Financial Services Program registrant's Form 10-K for the year
ended December 31, 1993 and
incorporated herein by reference.
10.22 Description of the CIGNA Corporation Filed as Exhibit 10.7 to the
Key Management Annual Incentive Bonus registrant's Form 10-K for the year
Plan ended December 31, 1993 and
incorporated herein by reference.
10.23 Agreement dated February 9, 1993 Filed as Exhibit 10.14 to the
between Mr. Isom and the registrant registrant's Form 10-K for the year
ended December 31, 1993 and
incorporated herein by reference.
10.24 Agreement dated May 24, 1995, between Exhibit omitted and filed separately
Mr. Isom and the registrant with the Securities and Exchange
Commission. Confidential treatment
requested.
10.25 Form of Special Retention Agreement Filed as Exhibit 10.3 to the
with Messrs. Taylor and Stewart registrant's Form 10-Q for the quarter
ended March 31, 1995 and incorporated
herein by reference.
10.26 Special Retention Agreement with Mr. Filed herewith.
Levinson
10.27 Form of Special Deferral Agreement with Filed as Exhibit 10.4 to the
certain executive officers registrant's Form 10-Q for the quarter
ended March 31, 1995 and incorporated
herein by reference.
11 Computation of Primary and Fully Filed herewith.
Diluted Earnings Per Share
</TABLE>
E-3
<PAGE> 57
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
- ------ --------------------------------------- ---------------------------------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
12 Computation of Ratios of Earnings to Filed herewith.
Fixed Charges
13 Portions of registrant's 1995 Annual Filed herewith.
Report to Shareholders (Entire Annual
Report bound in printed versions of
Form 10-K.)
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.
27 Financial Data Schedule (Included only Filed herewith.
in the electronic format of Form 10-K.)
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 1995 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.
E-4
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
CIGNA
CORPORATION
A Delaware Corporation
Incorporated November 3, 1981
As Amended and Restated
January 24, 1996
<PAGE> 2
INDEX TO BY-LAWS
<TABLE>
<CAPTION>
ARTICLE I OFFICES Page
----
<S> <C> <C> <C>
Section 1. Registered Office 1
Section 2. Other Offices 1
ARTICLE II MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings 1
Section 2. Annual Meeting 1
Section 3. Special Meetings 2
Section 4. Notice of Meetings 2
Section 5. List of Shareholders 3
Section 6. Quorum, Adjournments 4
Section 7. Organization 4
Section 8. Order of and Rules for
Conducting Business 5
Section 9. Voting 5
Section 10. Inspectors of Election 7
Section 11. Nomination of Directors 9
Section 12. Notice of Shareholder
Business 10
ARTICLE III BOARD OF DIRECTORS
Section 1. General Powers 12
Section 2. Number, Qualifications,
Election and Term of
Office 13
Section 3. Place of Meetings 14
Section 4. Annual Meeting 14
Section 5. Regular Meetings 14
Section 6. Special Meetings 15
Section 7. Notice of Meetings 15
Section 8. Quorum and Manner of
Acting 16
Section 9. Organization 16
Section 10. Resignations 17
Section 11. Vacancies 17
Section 12. Removal of Directors 17
Section 13. Compensation 18
Section 14. Committees 18
Section 15. Action by Consent 20
Section 16. Telephonic Meeting 21
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE IV OFFICERS Page
----
<S> <C> <C> <C>
Section 1. Number and
Qualifications 21
Section 2. Resignations 22
Section 3. Removal 22
Section 4. Chairman of the Board 22
Section 5. President 23
Section 6. Vice Presidents 23
Section 7. Treasurer 23
Section 8. Corporate Secretary 24
Section 9. Assistant Treasurer 25
Section 10. Assistant Corporate
Secretary 26
Section 11. Designation 26
Section 12. Agents and Employees 26
Section 13. Officers' Bonds or Other
Security 27
Section 14. Compensation 27
Section 15. Terms 27
ARTICLE V STOCK CERTIFICATES AND THEIR TRANSFER
Section 1. Stock Certificates 27
Section 2. Facsimile Signatures 28
Section 3. Lost Certificates 29
Section 4. Transfers of Stock 29
Section 5. Transfer Agents and
Registrars 30
Section 6. Regulations 30
Section 7. Fixing the Record Date 30
Section 8. Registered Shareholders 31
ARTICLE VI INDEMNIFICATION
Section 1. General 31
Section 2. Derivative Actions 32
Section 3. Indemnification in Certain
Cases 33
Section 4. Procedure 33
Section 5. Advances for Expenses 34
Section 6. Exclusion of Mandatory
Indemnification and
Advances in
Certain Cases 34
Section 7. Rights Not Exclusive 35
Section 8. Insurance 35
Section 9. Definition of
Corporation 36
Section 10. Definition of Other
Terms 36
Section 11. Right of Indemnitee to
Bring Suit in Certain
Circumstances 37
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE VII GENERAL PROVISIONS Page
----
<S> <C> <C> <C>
Section 1. Dividends 40
Section 2. Reserves 40
Section 3. Seal 41
Section 4. Fiscal Year 41
Section 5. Contributions 41
Section 6. Borrowing, etc. 41
Section 7. Deposits 41
Section 8. Execution of Contracts,
Deeds, etc. 42
Section 9. Voting of Stock in Other
Corporations 42
Section 10. Form of Records 42
Section 11. Repurchase of Stock 43
ARTICLE VIII AMENDMENTS 43
ARTICLE IX DEFINITIONS 44
</TABLE>
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<PAGE> 5
BY-LAWS OF
CIGNA CORPORATION
(A Delaware Corporation)
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of the
Corporation within the State of Delaware shall be in the City of Wilmington,
County of New Castle.
SECTION 2. Other Offices. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors shall from time to time determine or the business of the
Corporation may require.
ARTICLE II
Meetings of Shareholders
SECTION 1. Place of Meetings. All meetings of the shareholders for
the election of directors or for any other purpose shall be held at any such
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting.
SECTION 2. Annual Meeting. The annual meeting of shareholders,
commencing with the year 1984, shall be held at 9:30 A.M. on the fourth
Wednesday in April of each year, if not a legal holiday, and if a legal
holiday, then on the next succeeding day
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<PAGE> 6
not a legal holiday, at 9:30 A.M., or on such other date and time as shall be
designated from time to time by the Board of Directors and stated in the
notice of the meeting. At such annual meeting, the shareholders shall elect,
by a plurality vote, a Board of Directors and transact such other business as
may properly be brought before the meeting.
SECTION 3. Special Meetings. Special meetings of shareholders, unless
otherwise prescribed by statute, may be called at any time by the Board of
Directors or the Chairman of the Board.
SECTION 4. Notice of Meetings. Except as otherwise expressly required
by statute, written notice of each annual and special meeting of shareholders
stating the place, date and time of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
given to each shareholder of record entitled to vote thereat not less than ten
nor more than sixty days before the date of the meeting. Business transacted
at any special meeting of shareholders shall be limited to the purposes stated
in the notice. Notice shall be given personally or by mail and, if by mail,
shall be sent in a postage prepaid envelope, addressed to the shareholder at
his address as it appears on the records of the Corporation. Such notice by
mail shall be deemed given at the time when the same shall be deposited in the
United States mail, postage prepaid. Notice of any meeting shall not be
required to be given to any person who attends such
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<PAGE> 7
meeting, except when such person attends the meeting in person or by proxy for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened, or who, either before or after the meeting, shall submit a signed
written waiver of notice, in person or by proxy. Neither the business to be
transacted at, nor the purpose of, an annual or special meeting of shareholders
need be specified in any written waiver of notice.
SECTION 5. List of Shareholders. The Corporate Secretary of the
Corporation, or such other person who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of each shareholder. Such list shall be open
to the examination of any shareholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city, town or village where the meeting
is to be held, which place shall be specified in the notice of meeting, or, if
not specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any shareholder who is present.
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<PAGE> 8
SECTION 6. Quorum, Adjournments. The holders of at least two-fifths
of the issued and outstanding stock of the Corporation entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of shareholders, except as
otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented by proxy at any
meeting of shareholders, the shareholders entitled to vote thereat, present in
person or represented by proxy, shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present or represented by proxy. At such adjourned meeting
at which a quorum shall be present or represented by proxy, any business may be
transacted which might have been transacted at the meeting as originally
called. If the adjournment is for more than thirty days, or, if after
adjournment a new record date is set, a notice of the adjourned meeting shall
be given to each shareholder of record entitled to vote at the meeting.
SECTION 7. Organization. At each meeting of shareholders, the
Chairman of the Board, or, in his absence, a chairman designated by the Board
of Directors, or in the absence of such designation a chairman chosen at the
meeting, shall act as chairman of the meeting. The Corporate Secretary or, in
his absence or inability to act, the person whom the chairman of the meeting
shall appoint secretary of the meeting shall act as
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<PAGE> 9
secretary of the meeting and keep the minutes thereof.
SECTION 8. Order of and Rules for Conducting Business. The order of
and the rules for conducting business at all meetings of the shareholders shall
be as determined by the chairman of the meeting.
SECTION 9. Voting. Except as otherwise provided by statute, the
Certificate of Incorporation, or any resolution or resolutions adopted by the
Board of Directors pursuant to the authority vested in it by the Certificate of
Incorporation, each shareholder of the Corporation shall be entitled at each
meeting of shareholders to one vote for each share of capital stock of the
Corporation standing in his name on the record of shareholders of the
Corporation:
(a) on the date fixed pursuant to the provisions of
Section 7 of Article V of these By-Laws as the record date for the
determination of the shareholders who shall be entitled to notice of
and to vote at such meeting; or
(b) if no such record date shall have been fixed, then at
the close of business on the day next preceding the day on which
notice thereof shall be given, or, if notice is waived by all
shareholders, at the close of business on the day next preceding the
day on which the meeting is held.
Each shareholder entitled to vote at any meeting of
shareholders may vote in person or may authorize another person or
-5-
<PAGE> 10
persons to act for him by a proxy authorized by an instrument in writing or by
a transmission permitted by law delivered to the Inspectors of Election, but no
such proxy shall be voted after three years from its date, unless the proxy
provides for a longer period. Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission created pursuant to this
paragraph may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power.
A shareholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by delivering an instrument in writing or a
transmission permitted by law revoking the proxy or constituting another valid
proxy bearing a later date to the Inspectors. Any such proxy shall be
delivered to the Inspectors, or such other person so designated to receive
proxies, at or prior to the time designated in the order of business for so
delivering such proxies. When a quorum is present at any meeting, the vote of
the shareholders who are present in person or represented by proxy and who hold
a majority of the voting power of the issued and outstanding stock of the
-6-
<PAGE> 11
Corporation represented at such meeting and entitled to vote thereon, shall
decide any question brought before such meeting, unless the question is one
upon which by express provision of statute or of the Certificate of
Incorporation or of these By-Laws, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Unless required by statute, or determined by the chairman of the meeting to be
advisable, the vote on any question need not be by ballot. On a vote by
ballot, each ballot shall be signed by the shareholder voting, or by his proxy,
if there be such proxy, and shall state the number of shares voted.
SECTION 10. Inspectors of Election. The Board of Directors or the
Chairman of the Board of the Corporation shall, in advance of any meeting of
shareholders, appoint one or more Inspectors of Election to act at the meeting
or at any adjournment and make a written report thereof, and may designate one
or more persons as alternate Inspectors to replace any Inspectors who fail to
act. If no Inspector or alternate is able to act at a meeting of shareholders,
the chairman of the meeting shall appoint one or more Inspectors to act at the
meeting. Each Inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of Inspector at
such meeting with strict impartiality and according to his best ability. The
Inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the
-7-
<PAGE> 12
meeting and the validity of proxies and ballots, receive and count all votes
and ballots, determine all challenges and questions arising in connection with
the right to vote, retain for a reasonable period a record of the disposition
of any challenges made to any determination by the Inspectors, and certify
their determination of the number of shares represented at the meeting, and
their count of all votes and ballots and report the same to the chairman of the
meeting, and do such acts as are proper to conduct the election or vote with
fairness to all shareholders. The Inspectors may appoint or retain other
persons or entities to assist the Inspectors in the performance of the duties
of the Inspectors. The date and time of the opening and the closing of the
polls for each matter upon which the shareholders will vote at a meeting shall
be announced at the meeting. No ballot, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the Inspectors after the
closing of the polls unless the Court of Chancery upon application by a
shareholder shall determine otherwise. On request of the chairman of the
meeting, the Inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of any
fact found by them. No director or candidate for the office of director shall
act as an Inspector of an election of directors. Inspectors need not be
shareholders.
-8-
<PAGE> 13
Section 11. Nomination of Directors. Nominations of persons for
election to the Board of Directors of the Corporation may be made at a meeting
of shareholders (a) by or at the direction of the Board of Directors or (b) by
any shareholder of the Corporation who is a shareholder of record at the time
of giving of notice provided for in this Section, who shall be entitled to vote
for the election of directors at the meeting and who complies with the notice
procedures set forth in this Section. Such nominations, other than those made
by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Corporate Secretary of the Corporation. To be
timely, a shareholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to be
timely must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting or such
public disclosure was made. Such shareholder's notice shall set forth (a) as
to each person whom the shareholder proposes to nominate for election or
reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of
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<PAGE> 14
1934, as amended (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); and (b)
as to the shareholder giving notice (i) the name and address, as they appear on
the Corporation's stock ledger, of such shareholder and (ii) the class and
number of shares of the Corporation which are beneficially owned by such
shareholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the
Corporate Secretary of the Corporation that information required to be set
forth in a shareholder's notice of nomination which pertains to the nominee.
No person shall be eligible for election at any meeting of shareholders as a
director of the Corporation unless nominated in accordance with the procedures
set forth in this Section. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by the By-Laws, and if he should so
determine, he shall so declare to the meeting and the defective nominations
shall be disregarded. Notwithstanding the foregoing provisions of this
Section, a shareholder shall also comply with all applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this Section 11.
SECTION 12. Notice of Shareholder Business. At the annual meeting of
shareholders, only such business shall be conducted as
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<PAGE> 15
shall have been properly brought before the meeting. To be properly brought
before an annual meeting business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a shareholder of the Corporation who is a shareholder of record
at the time of giving of notice provided for in this Section and who shall be
entitled to vote at the meeting. For business to be properly brought before an
annual meeting by a shareholder, the shareholder must have given timely notice
thereof in writing to the Corporate Secretary of the Corporation. To be
timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation, not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to be
timely must be so received not later than the close of business on the 10th day
following the date on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. A shareholder's notice to the
Corporate Secretary shall set forth as to each matter the shareholder proposes
to bring before the annual meeting (a) a brief description of the business
desired to be brought before the annual
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<PAGE> 16
meeting, (b) as to the shareholder giving such notice (i) the name and address,
as they appear on the Corporation's stock ledger, of such shareholder and (ii)
the class and number of shares of the Corporation which are beneficially owned
by such shareholder, and (c) any material interest of the shareholder in such
business. Notwithstanding anything in the By-Laws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 12. The chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this Section 12, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted. At any special meeting of shareholders, only such business
shall be conducted as shall have been brought before the meeting by or at the
direction of the Board of Directors.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. The Board of Directors may exercise all such authority and powers
of the Corporation and do all such lawful acts and things as are not by statute
or the Certificate of Incorporation directed or required to be exercised or
done by the
-12-
<PAGE> 17
shareholders.
SECTION 2. Number, Qualifications, Election and Term of Office. The
Board of Directors shall consist of not less than 12 nor more than 25
directors. The number of directors may be fixed, from time to time, by the
affirmative vote of a majority of the entire Board of Directors. Any decrease
in the number of directors shall be effective at the time of the next
succeeding annual meeting of shareholders unless there shall be vacancies in
the Board of Directors, in which case such decrease may become effective at any
time prior to the next succeeding annual meeting to the extent of the number of
such vacancies. Directors need not be shareholders. The directors (other than
members of the initial Board of Directors) shall be divided into three classes
which shall be divided as evenly as practicable with respect to the number of
members of each class; the term of office of those of the first class to expire
at the annual meeting commencing in April, 1983; of the second class one year
thereafter; of the third class two years thereafter; and at each annual
election held after such classification and election, directors shall be chosen
by class for a term of three years, or for such shorter term as the
shareholders may specify to complete the unexpired term of a predecessor, or to
preserve the division of the directors into classes as provided herein. Each
director shall hold office until his successor shall have been elected and
qualified, or until his death, or until he shall have resigned, or have been
removed, as hereinafter provided
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<PAGE> 18
in these By-Laws.
SECTION 3. Place of Meetings. Meetings of the Board of Directors
shall be held at such place or places, within or without the State of Delaware,
as the Board of Directors may from time to time determine or as shall be
specified in the notice of any such meeting.
SECTION 4. Annual Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of shareholders.
Notice of such meeting need not be given provided it is held on the same day
and at the same place where such annual meeting shall be held. In the event
such annual meeting is not so held, the annual meeting of the Board of
Directors may be held at such other time or place (within or without the State
of Delaware) as shall be specified in a notice thereof given as hereinafter
provided in Section 7 of this Article III.
SECTION 5. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such time and place as the Board of Directors may
fix. If any day fixed for a regular meeting shall be a legal holiday at the
place where the meeting is to be held, then the meeting which would otherwise
be held on that day shall be held at the same hour on the next succeeding
business day. Notice of
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<PAGE> 19
regular meetings of the Board of Directors need not be given except as
otherwise required by statute or these By-Laws.
SECTION 6. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, or by one-third of the
members of the Board of Directors of the Corporation.
SECTION 7. Notice of Meetings. Notice of each special meeting of the
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Corporate Secretary as hereinafter provided in
this Section 7. Any such notice shall state the place, date and time of the
meeting. Except as otherwise required by these By-Laws, such notice need not
state the purposes of such meeting. Notice of each such meeting shall be
mailed, postage prepaid, to each director, addressed to him at his residence or
usual place of business, by first-class mail, at least two days before the day
on which such meeting is to be held, or shall be sent addressed to him at such
place by telegraph, cable, telex, telecopier or other similar means, or be
delivered to him personally or be given to him by telephone or other similar
means, at least twelve hours before the time at which such meeting is to be
held. Notice of any such meeting need not be given to any director who shall,
either before or after the meeting, submit a signed waiver of notice or who
shall attend such meeting, except when he shall attend for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business
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<PAGE> 20
because the meeting is not lawfully called or convened.
SECTION 8. Quorum and Manner of Acting. A majority of the entire
Board of Directors shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, and, except as otherwise expressly
required by statute or the Certificate of Incorporation or these By-Laws, the
act of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors. In the absence of a quorum
at any meeting of the Board of Directors, a majority of the directors present
thereat may adjourn such meeting to another time and place. Notice of the time
and place of any such adjourned meeting shall be given to all of the directors
unless such time and place were announced at the meeting at which the
adjournment was taken, in which case such notice shall only be given to the
directors who were not present thereat. At any adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called. The directors shall act only
as a Board and the individual directors shall have no power as such.
SECTION 9. Organization. At each meeting of the Board of Directors,
the Chairman of the Board, or, in the absence of the Chairman of the Board,
another director chosen by a majority of the directors present shall act as
chairman of the meeting and preside thereat. The Corporate Secretary or, in
his absence, any person appointed by the chairman of the meeting shall act as
secretary of
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the meeting and keep the minutes thereof.
SECTION 10. Resignations. Any director of the Corporation may resign
at any time by giving written notice of his resignation to the Corporation.
Any such resignation shall take effect at the time specified therein or, if the
time when it shall become effective shall not be specified therein, immediately
upon its receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 11. Vacancies. Any vacancy in the Board of Directors,
whether arising from death, disqualification, resignation, removal for cause,
an increase in the number of directors or any other cause, may be filled by the
vote of a majority of the directors then in office, though less than a quorum,
or by the sole remaining director. Each director so elected shall hold office
until his successor shall have been elected and qualified.
SECTION 12. Removal of Directors. Any director may be removed, only
for cause, at any time, by the holders of a majority
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of the voting power of the issued and outstanding capital stock of the
Corporation entitled to vote at an election of directors.
SECTION 13. Compensation. The Board of Directors shall have
authority to fix the compensation, including fees and reimbursement of
expenses, of directors, including the Chairman of the Board, for services to
the Corporation in any capacity.
SECTION 14. Committees.
(a) The Board shall create an Executive Committee, which
shall consist of no less than two nor more than seven members of the Board and
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be fixed to all papers which may
require it, including, without limitation, the power and authority to declare a
dividend or to authorize the issuance of stock except the Executive Committee
shall not have the power or authority to amend the Certificate of Incorporation
(except that the Executive Committee, or such other committee created pursuant
to Section 14 of this Article, may, to the extent authorized in the resolution
or resolutions providing for the issuance of shares of stock adopted by the
Board of Directors as provided in Section 151 (a) of the General Corporation
Law of the State of Delaware, fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or exchange of such shares
for,
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shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation), adopt an agreement of
merger or consolidation, recommend to the shareholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommend to the shareholders a dissolution, amend the By-Laws of the
Corporation, or designate one or more additional Committees of the Board.
(b) The Board shall create an Audit Committee and a People
Resources Committee, each of which shall consist of three (3) or more members
of the Board of Directors of the Corporation, none of whom shall be employees
of the Corporation or its subsidiaries.
(c) The Board may also, by resolution passed by a majority of the
entire Board of Directors, create such other committees, with such authority
and duties, as the Board may from time to time deem advisable.
(d) The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In addition, in the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not the
member or members constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any such absent
or disqualified member.
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Each such committee, to the extent provided in the resolution creating
it, shall have and may exercise all the powers and authority of the Board of
Directors and may authorize the seal of the Corporation to be affixed to all
papers which require it but shall have no greater powers than those given the
Executive Committee by these By-Laws and as restricted by statute or the
Certificate of Incorporation. Each such committee shall serve at the pleasure
of the Board of Directors and have such name as may be determined from time to
time by resolution adopted by the Board of Directors. Each committee shall
keep regular minutes of its meetings and report the same to the Board of
Directors.
SECTION 15. Action by Consent. Unless restricted by the Certificate
of Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all
members of the Board of Directors or such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board of Directors or such committee, as the
case may be.
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SECTION 16. Telephonic Meeting. Unless restricted by the Certificate
of Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation by such means shall constitute presence in person at
a meeting.
ARTICLE IV
Officers
SECTION 1. Number and Qualifications. The officers of the Corporation
shall be elected by the Board of Directors and shall include the Chairman of
the Board, the President, and one or more Vice Presidents. If the Board of
Directors wishes, it may also elect other officers as may be necessary or
desirable for the business of the Corporation; or the Board may authorize the
Chairman of the Board to appoint one or more classes of officers with such
titles (including the titles of Vice President, Corporate Secretary and
Treasurer), powers, duties and compensation as may be approved by the
appointing officer. Any two or more offices may be held by the same person,
and no officer except the Chairman of the Board need be a director. Each
officer shall hold office until his successor shall have been duly elected or
appointed and shall have qualified, or until his death, or until he shall have
resigned or have been removed, as hereinafter provided in these By-Laws.
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SECTION 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of such resignation to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the
time when it shall become effective shall not be specified therein, immediately
upon receipt. Unless otherwise specified therein, the acceptance of any such
resignation shall not be necessary to make it effective.
SECTION 3. Removal. Any officer of the Corporation may be removed,
either with or without cause, at any time, by the Board of Directors at any
meeting thereof. Any appointed officer of the Corporation may also be removed,
either with or without cause, at any time, by the Chairman of the Board.
SECTION 4. Chairman of the Board. The Chairman of the Board shall be
a member of the Board of Directors, and shall preside at all meetings of the
shareholders, of the Board of Directors, and of the Executive Committee at
which he shall be present. He shall be the Chief Executive Officer of the
Corporation and shall have general supervision over the business and operations
of the Corporation, subject, however, to the control of the Board of Directors.
He may serve as a member of any committee of the Board except as may otherwise
be determined by the Board or provided in these By-Laws, provided, however,
that in his capacity as Chief Executive Officer he shall have the right to
attend all meetings of any committee and to participate in its discussions. He
shall perform all duties incident to the Offices of Chairman of the Board
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and Chief Executive Officer, and such other duties as may from time to time be
assigned to him by the Board of Directors.
SECTION 5. President. The President shall perform all duties incident
to the Office of President, and such other duties as may from time to time be
assigned to him by the Chairman of the Board or the Board of Directors. In the
absence or disability of the Chairman of the Board, the President shall perform
all other duties of the Chairman of the Board, except presiding at meetings of
shareholders and Board of Directors, subject to the control of the Board of
Directors; and when so acting, shall have all the powers of, and be subject to
all the restrictions upon the Chairman of the Board.
SECTION 6. Vice Presidents. Each Vice President shall perform such
duties as from time to time may be assigned to him by the Board of Directors,
the Chairman of the Board, the President, or such other officer as may be
designated by one of the foregoing. In the absence or disability of the
Chairman of the Board, and the President, one of the Vice Presidents, in the
order determined by the Board of Directors, shall perform all duties of the
Chairman of the Board except presiding at meetings of shareholders and Board of
Directors, and, when so acting, shall have the powers of and be subject to the
restrictions placed upon the Chairman of the Board in respect of the
performance of such duties.
SECTION 7. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for,
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all the funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of
the Corporation in such depositories as may be designated by the Board
of Directors or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable to
the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
(f) render to the Board of Directors, whenever the Board of
Directors may require, an account of the financial condition of the
Corporation; and
(g) in general, perform all duties incident to the office of
Treasurer and such other duties as from time to time may be assigned
to him by the Board of Directors, or the Chairman of the Board, the
President, or such other officer as may be designated by one of the
foregoing.
SECTION 8. Corporate Secretary. The Corporate Secretary shall:
(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board of Directors,
the committees of the Board of Directors and the shareholders;
(b) see that all notices are duly given in accordance
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with the provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all certificates for
shares of the Corporation (unless the seal of the Corporation on such
certificates shall be a facsimile, as hereinafter provided) and affix
and attest the seal to all other documents to be executed on behalf of
the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are
properly kept and filed; and
(e) in general, perform all duties incident to the office of
Corporate Secretary and such other duties as from time to time may be
assigned to him by the Board of Directors, the Chairman of the Board,
the President, or such other officer as may be designated by one of
the foregoing.
SECTION 9. The Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their seniority), shall, in the absence of the Treasurer or in the
event of the inability or refusal of the Treasurer to act, perform the duties
and exercise the powers of the Treasurer and shall perform such other duties as
from time to time may be assigned by the Board of Directors, the Chairman of
the Board, the President, the Treasurer, or such other
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officer as may be designated by one of the foregoing.
SECTION 10. The Assistant Corporate Secretary. The Assistant
Corporate Secretary, or if there be more than one, the Assistant Corporate
Secretaries in the order determined by the Board of Directors (or if there be
no such determination, then in the order of their seniority), shall, in the
absence of the Corporate Secretary or in the event of the inability or refusal
of the Corporate Secretary to act, perform the duties and exercise the powers
of the Corporate Secretary and shall perform such other duties as from time to
time may be assigned by the Board of Directors, the Chairman of the Board, the
President, the Corporate Secretary, or such other officer as may be designated
by one of the foregoing.
SECTION 11. Designation. The Board of Directors may, by resolution,
designate one or more officers to be any of the following: Chief Operating
Officer, Chief Financial Officer, General Counsel, or Chief Accounting Officer.
SECTION 12. Agents and Employees. If authorized by the Board of
Directors, the Chairman of the Board, the President, or any officer or employee
of the Corporation may appoint or employ such agents and employees as shall be
requisite for the proper conduct of the business of the Corporation, and may
fix their compensation and the conditions of their employment, subject to
removal by the appointing or employing person.
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SECTION 13. Officers' Bonds or Other Security. If required by the
Board of Directors, any officer of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety as the Board of Directors may require.
SECTION 14. Compensation. The compensation of all officers of the
Corporation for their services as such officers shall be fixed from time to
time by the Board of Directors unless by resolution of the Board that authority
is delegated to a committee of the Board, Chairman of the Board, the President,
or any other officer of the Corporation. An officer of the Corporation shall
not be prevented from receiving compensation by reason of the fact that he is
also a director of the Corporation.
SECTION 15. Terms. Unless otherwise specified by the Board of
Directors in any particular election or appointment, each officer shall hold
office, and be removable, at the pleasure of the Board.
ARTICLE V
Stock Certificates and Their Transfer
SECTION 1. Stock Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, Chairman of the Board or the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Corporate
Secretary or an Assistant Corporate Secretary of the Corporation, certifying
the number of shares owned
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by him in the Corporation. If the Corporation shall be authorized to issue
more than one class of stock or more than one series of any class, the
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restriction of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section 202 of the General Corporation
Law of the State of Delaware, in lieu of the foregoing requirements, there may
be set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, a statement that the
Corporation will furnish without charge to each shareholder who so requests the
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
SECTION 2. Facsimile Signatures. Any or all of the signatures on a
certificate may be a facsimile except in the case of the signature of the
registrar which shall be manually affixed to all certificates. In case any
officer or transfer agent who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer or transfer
agent before such certificate is issued, it may be issued by the
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Corporation with the same effect as if such person was such officer or transfer
agent at the date of issue.
SECTION 3. Lost Certificates. The Corporation may issue a new
certificate or certificates in the place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen, or
destroyed. When authorizing such issue of a new certificate or certificates,
the Corporation may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen, or destroyed
certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct sufficient to indemnify it
against any claim that may be made against the Corporation on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
SECTION 4. Transfers of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority or
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its records; provided, however, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of transfer if, when the
certificates are
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presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
SECTION 5. Transfer Agents and Registrars. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars.
SECTION 6. Regulations. The Board of Directors may make such
additional rules and regulations, not inconsistent with these By-Laws, as it
may deem expedient concerning the issue, transfer and registration of
certificates for shares of stock of the Corporation.
SECTION 7. Fixing the Record Date. In order that the Corporation may
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of shareholders of record entitled to notice of
or to vote at a meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
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SECTION 8. Registered Shareholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its records as the
owner of shares of stock to receive dividends and to vote as such owner, shall
be entitled to hold liable for calls and assessments a person registered on its
records as the owner of shares of stock, and shall not be bound to recognize
any equitable or other claim to or interest in such share or shares of stock on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VI
Indemnification
SECTION 1. General. The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that such person (i) is or was a director,
officer, or employee of the Corporation, (ii) or is or was a director, officer
or employee of the Corporation or any of its subsidiaries serving at the
request of the Corporation as a director, officer, employee, agent, trustee or
partner of another corporation, partnership, joint venture, trust or other
enterprise, against expenses
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(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
such person reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that the conduct was unlawful.
SECTION 2. Derivative Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, or employee of the Corporation, or is or
was a director, officer or employee of the Corporation or any of its
subsidiaries serving at the request of the Corporation as a director, officer,
employee, agent, trustee or partner of another corporation, partnership, joint
venture, trust or other enterprise against
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expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Corporation and except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
SECTION 3. Indemnification in Certain Cases. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in Sections 1 and 2 of this Article VI, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
SECTION 4. Procedure. Any indemnification under Sections 1 and 2 of
this Article VI (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a
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determination that indemnification of the director, officer or employee is
proper in the circumstances because such person has met the applicable standard
of conduct set forth in such Sections 1 and 2. Such determination shall be
made (a) by a majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (b) if there
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (c) by the shareholders.
SECTION 5. Advances for Expenses. Expenses (including attorneys'
fees) incurred in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director, officer or employee
to repay such amount if it shall be ultimately determined that such person is
not entitled to be indemnified by the Corporation as authorized in this Article
VI.
SECTION 6. Exclusion of Mandatory Indemnification and Advances in
Certain Cases. Notwithstanding any other provision of this Article VI, the
Corporation shall not be obligated to indemnify any person under Sections 1, 2
or 3 of Article VI or to advance expenses under Section 5 thereof to any person
who has initiated any proceeding or part thereof, unless the initiation of such
proceeding or part thereof was authorized or ratified by the Board of
Directors.
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SECTION 7. Rights Not Exclusive. The indemnification and advancement
of expenses provided by this Article VI shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any law, by-law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in the official
capacity of such person and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee and shall inure to the benefit of the heirs, executors and
administrators of such a person. Any repeal, modification or amendment of this
Article VI shall not adversely affect any rights or obligations then existing
between the Corporation and any then incumbent or former director, officer, or
employee with respect to any facts then or theretofore existing or any action,
suit, or proceeding theretofore or thereafter brought based in whole or in part
upon such facts.
SECTION 8. Insurance. The Corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, agent, trustee or
partner of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of the status of such person
as such, whether or not the Corporation would have the
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power to indemnify such person against such liability under the provisions of
this Article VI.
SECTION 9. Definition of Corporation. For the purposes of this
Article VI, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees and agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the
provisions of this Article VI with respect to the resulting or surviving
corporation as such person would if such person had served with respect to such
constituent corporation if its separate existence had continued. "The
Corporation" shall also include Connecticut General Corporation and INA
Corporation for the period ending at the time that such corporations became
subsidiaries of CIGNA Corporation.
SECTION 10. Definition of Other Terms. For purposes of this Article
VI, references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes or penalties assessed on
a person with respect to any
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employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or
agent of the Corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VI.
SECTION 11. Right of Indemnitee to Bring Suit in Certain
Circumstances. Any person entitled to indemnification under this Article VI is
referred to in this section as an "indemnitee." If after the occurrence of a
Change of Control (as defined in this section) a claim under Sections 1, 2, 3
or 5 of this Article VI is not paid in full by the Corporation within sixty
days after a written claim has been received by the Corporation, except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty days, the indemnitee may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the
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indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. Neither the failure of the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or
its stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee
to enforce a right to indemnification or to an advancement of expenses
hereunder, or by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the burden of proving that the indemnitee is
not entitled to be indemnified, or to such advancement of expenses, under this
Section
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or otherwise shall be on the Corporation.
"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 (the
"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 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 the Corporation at the shareholders' meeting immediately
preceding such determination; or, (2) more than 25 percent of the voting power
of common shares outstanding of the Corporation; or,
(b) As a result of a merger or consolidation to which the
Corporation is a party, either: (1) the Corporation is not the surviving
corporation; or, (2) Directors of the 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
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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.
ARTICLE VII
General Provisions
SECTION 1. Dividends. Subject to the provisions of statute and the
Certificate of Incorporation, dividends upon the shares of capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting. Dividends may be paid in cash, in property or in shares of stock of
the Corporation, unless otherwise provided by statute or the Certificate of
Incorporation.
SECTION 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may
modify or abolish any such reserves in the manner in which it was
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created.
SECTION 3. Seal. The seal of the Corporation shall be in such form as
shall be approved by the Board of Directors.
SECTION 4. Fiscal Year. The fiscal year of the Corporation shall be
fixed, and once fixed, may thereafter be changed, by resolution of the Board of
Directors.
SECTION 5. Contributions. The Board of Directors shall have the
authority from time to time to make such contributions as the Board in its
discretion shall determine, for public and charitable purposes.
SECTION 6. Borrowing, etc. No officer, agent or employee of the
Corporation shall have any power or authority to borrow money on its behalf, to
pledge its credit, or to mortgage or pledge its real or personal property,
except within the scope and to the extent of the authority delegated by
resolution of the Board of Directors. Authority may be given by the Board for
any of the above purposes and may be general or limited to specific instances.
SECTION 7. Deposits. All funds of the Corporation shall be deposited
from time to time to the credit of the Corporation in such banks, trust
companies, or other depositories as the Board of Directors may approve or
designate, and all such funds shall be withdrawn only upon checks, drafts,
notes or other orders for payment signed by such one or more officers,
employees or other persons as the Board shall from time to time determine.
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SECTION 8. Execution of Contracts, Deeds, etc. The Board of Directors
may authorize any officer or officers, agent or agents, in the name and on
behalf of the Corporation to enter into or execute and deliver any and all
deeds, bonds, mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific instances.
SECTION 9. Voting of Stock in Other Corporations. If authorized by
the Board of Directors, any officer of the Corporation may appoint an attorney
or attorneys (who may be or include such officer), in the name and on behalf of
the Corporation, to cast the votes which the Corporation may be entitled to
cast as a shareholder or otherwise in any other corporation any of whose shares
or other securities are held by or for the Corporation, at meetings of the
holders of the shares or other securities of such other corporation, or in
connection with the ownership of such shares or other securities, to consent in
writing to any action by such other corporation, and may instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent, and may execute or cause to be executed in the name and on behalf of
the Corporation and under its seal such written proxies or other instruments as
such proxy may deem necessary or proper in the circumstances.
SECTION 10. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account, and minute books, may be kept on,
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or be in the form of punch cards, magnetic tape, photographs, microphotographs,
or any other information storage device, provided that the records so kept can
be converted into clearly legible form within a reasonable time. The
Corporation shall so convert any records so kept upon the request of any person
entitled to inspect the same.
SECTION 11. Repurchase of Stock. Without the approval of the holders
of a majority of the issued and outstanding stock of the Corporation entitled
to vote at any meeting of shareholders, the Corporation shall not knowingly
purchase, either directly or indirectly, any of the Corporation's Common Stock
at a price materially in excess of its market price from any person, unless (i)
such purchase is pursuant to the same offer and terms as made on a pro-rata
basis to all holders of such shares, (ii) such purchase is made by the
Corporation from an employee benefit or similar plan now or hereafter
maintained by the Corporation or its subsidiaries or affiliates, or (iii) such
purchase is made from a holder of less than one hundred shares.
ARTICLE VIII
Amendments
These By-Laws may be amended or repealed or new By-Laws may be adopted
(a) by action of the holders of at least eighty percent (80%) of the voting
power of all outstanding voting stock of the Corporation entitled to vote
generally at any annual or special
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meeting of shareholders or (b) by action of the Board of Directors at a regular
or special meeting thereof. Any By-Law or By-Laws made by the Board of
Directors may be amended or repealed by action of the shareholders by the vote
required by (a) above at any annual or special meeting of shareholders.
ARTICLE IX
Definitions
The term "Certificate of Incorporation," as used herein, includes not
only the original Certificate of Incorporation filed to create the Corporation
but also all other certificates, agreements of merger or consolidation, plans
of reorganization, or other instruments, howsoever designated, which are filed
pursuant to the Delaware General Corporation Law, and which have the effect of
amending or supplementing in some respect this Corporation's original
Certificate of Incorporation.
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EXHIBIT 10.1
DEFERRED COMPENSATION PLAN FOR DIRECTORS OF CIGNA CORPORATION
(Amended Effective January 1, 1996)
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: (l)
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: (l) 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.
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
<PAGE> 2
established under the Plan for each Participant, as described in Section 3.1.
l.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, 1996, 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.
1.12 "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.
(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.
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(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: (l) 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 15 (fifteen) 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 fifteenth year
following Termination of Service.
(d) If there is not in effect as of Participant's
Termination of Service a valid Payment Election, the Participant's
Account shall be paid annually over a period of 15 (fifteen) years.
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
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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.
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:
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(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 quarter.
(C) any such modification shall be effective
in the second calendar month following receipt of the request by the Plan
Administrator.
(D) such modifications will be in accordance
with rules and procedures adopted 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 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.
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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.
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
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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.
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.
(c) A Participant who is not entitled to payment of his
Deferred Compensation Account under any other provision of Article IV may make
a written request to the Administrator for an accelerated payment of his entire
Deferred Compensation Account balance -- except that portion invested in
hypothetical Common Stock. If the Administrator receives such a request, he
shall make a final valuation of the unrestricted portion of the Participant's
Deferred Compensation Account and pay ninety per cent (90%) of the Deferred
Compensation Account balance to the Participant. The participant shall forfeit
the remaining ten per cent (10%) of his Deferred Compensation Account balance
to the Corporation. Payments under this Section 4.3(c) apply only to that
portion of a Participant's Account, including hypothetical investment results,
attributable to compensation deferred after 1995.
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<PAGE> 8
4.4 Payments of a Deceased Participant's Account
(a) If a Participant dies before his
entire Account has been paid to him, the Administrator shall pay the Account
balance in a single lump sum payment to the person(s) or trust(s) designated in
writing by the Participant as his beneficiary(ies) under the Plan. The
Administrator is authorized to establish rules and procedures for designations
of beneficiaries and shall have the sole discretion to make determinations
regarding the existence and identity of beneficiaries and the validity of
beneficiary designations.
(b) Notwithstanding Section 4.4(a), the
Administrator shall pay the Account balance, as soon as administratively
feasible, in a single lump sum payment to the Participant's estate if:
(1) The Participant dies without having
a valid beneficiary designation in effect;
(2) The Participant's designated
beneficiary has predeceased him;
(3) The Participant's designated
beneficiary cannot be found after what the Administrator determines,
in his sole discretion, has been a reasonably diligent search; or
(4) The Administrator determines, in his
sole discretion, that a payment in such form is in the best interest
of the Corporation.
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.
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.
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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.
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.
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EXHIBIT 10.15
DEFERRED COMPENSATION PLAN OF CIGNA CORPORATION
AND PARTICIPATING SUBSIDIARIES
(Amended and Restated as of January 1, 1996)
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.
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.
<PAGE> 2
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.
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.
1.17 "Stock Plan" shall mean a plan or program which provides for
payment of compensation in the form of shares of CIGNA Common Stock.
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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 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 that 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 15
years.
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(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 fifteenth (15th) year following
Termination of Employment.
(d) If there is not in effect as of a Participant's
Termination of Employment a valid Payment Election, the Participant's Account
shall be paid annually over a period of 15 years.
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 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.
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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
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. A Participant who has a choice of more than one such hypothetical
investment vehicle may, as frequently as once each quarter, modify his election
of hypothetical investment through a written request to the Administrator.
Such modifications will be in accordance with rules and procedures adopted by
the Corporate Committee.
(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
applicable Stock 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.
(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.
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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 applicable Stock 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 in 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.
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
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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.
(a) If a Participant dies before his entire Account has been
paid to him, the Administrator shall pay the Account balance in a single lump
sum payment to the person(s) or trust(s) designated in writing by the
Participant as his beneficiary(ies) under the Plan. The Administrator is
authorized to establish rules and procedures for designation of beneficiaries
and shall have the sole discretion to make determinations regarding the
existence and identity of beneficiaries and the validity of beneficiary
designations.
(b) Notwithstanding Section 4.4(a), the Administrator shall
pay the Account balance, as soon as administratively feasible, in a single lump
sum payment to the Participant's estate if:
(1) The Participant dies without having a valid
beneficiary designation in effect;
(2) The Participant's designated beneficiary has
predeceased him;
(3) The Participant's designated beneficiary cannot be
found after what the Administrator determines, in his sole discretion, has been
a reasonably diligent search; or
(4) The Administrator determines, in his sole discretion,
that a payment in such form is in the best interest of one or more Participating
Companies.
4.5 Accelerated Payment.
A Participant who is not entitled to a payment of his Account under
any other provision of Article IV may make a written request of the Plan
Administrator for an accelerated payment of his entire Account balance. If the
Plan Administrator receives such a request, he shall make a final valuation of
the Participant's Account and pay ninety per cent (90%) of the Account balance
to the Participant. The Participant shall forfeit the remaining ten per cent
(10%) of his Account balance to the applicable Participating Company. Payments
under this Section 4.5 shall apply only to that portion of a Participant's
Account, including hypothetical investment results, attributable to
compensation deferred after 1995.
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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.
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
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.
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<PAGE> 9
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.
CIGNA Corporation herewith causes this Amended and Restated Plan to be
executed on the 19th day of December, 1995, by its duly authorized officer.
CIGNA CORPORATION
Attest:
By: _______________________
_______________________ Donald M. Levinson
Carol J. Ward Executive Vice President
Corporate Secretary
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EXHIBIT 10.26
SPECIAL RETENTION AGREEMENT
This Agreement is dated March 27, 1996, and is between Donald M.
Levinson, who resides at 2107 Delancey Street, Philadelphia, Pennsylvania
(referred to as "Executive") and CIGNA Corporation, 1650 Market Street,
Philadelphia, Pennsylvania 19192, a Delaware corporation (referred to as
"CIGNA").
Executive and CIGNA, intending to be legally bound and in
consideration of the promises in this Agreement, mutually agree as follows:
1. RETENTION CONDITIONS. CIGNA shall provide Executive (or Executive's
surviving spouse) with the benefits and payments described in paragraphs 2 or 3
below if Executive:
(a) Complies with the provisions of paragraphs 4, 5 and 6 below;
and
(b) Remains continuously employed by CIGNA or one of its
subsidiaries, affiliates or successors (collectively, the
"Company") until the Executive's Vesting Date.
(c) For purposes of this Agreement, Executive's "Vesting Date"
shall be the first of the following dates:
(1) The Executive's 55th birthday;
(2) The date Executive dies;
(3) The date Executive's employment with the Company
terminates on account of his total and permanent
disability;
(4) The date Executive's employment with the Company
terminates, if the termination is at the Company's
initiative and is not a termination for Cause, as
defined in the CIGNA Corporation Severance Benefits
Plan for Members of the Executive Group (the
"Executive Severance Plan"); or
(5) The date Executive's employment with the Company
otherwise terminates, but only if:
(A) The People Resources Committee of CIGNA's
Board of Directors (the "Committee")
determines that, despite the Executive's
termination, his right to the benefits and
payments under this Agreement should vest; or
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(B) The termination is a Termination Upon a
Change of Control as described in
subparagraph 1.10(ii) of the Executive
Severance Plan.
2. SUPPLEMENTAL RETIREMENT BENEFITS.
(a) If Executive meets the conditions in paragraph 1, CIGNA shall
pay Executive a supplemental retirement benefit equal to the
amount by which (1) exceeds (2), with:
(1) equal to the benefits Executive would be entitled to
receive under the CIGNA Pension Plan and the CIGNA
Supplemental Pension Plan (the "Pension Plans") if:
(A) the Pension Plans permitted the accrual of
benefits up to a maximum of 35, instead of
30, Years of Credited Service (as that term
is defined in the CIGNA Pension Plan);
(B) Executive had 30 Years of Credited Service on
his 55th birthday; and
(C) the Pension Plans treated as Eligible
Earnings (as defined in the CIGNA Pension
Plan) any compensation payable to Executive
but mandatorily deferred by the Committee in
order to avoid nondeductibility under Section
162(m) of the Internal Revenue Code, to the
extent that such compensation would have been
Eligible Earnings under the CIGNA
Supplemental Pension Plan had it been
deferred under the Deferred Compensation Plan
of CIGNA Corporation and Participating
Subsidiaries; and
(2) equal to the benefits Executive will actually be
entitled to receive under the Pension Plans.
(b) For purposes of determining Executive's Years of Credited
Service under subparagraphs 2(a)(1), 2(d) and 2(e):
(1) the Executive shall be deemed to have accrued 2% of
his Final Average Eligible Earnings (as defined in
the CIGNA Pension Plan) for each Year of Credited
Service before reaching age 55; and
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<PAGE> 3
(2) the accrual of Credited Service from and after
Executive's 55th birthday, shall be based on the U.S.
Department of Labor's elapsed time rules, and
Executive shall accrue one month of Credited Service
for each month that he remains continuously employed
by the Company.
(c) Any supplemental retirement benefit payable to Executive under
this paragraph 2 shall be paid at the same time and in the
same manner as benefit payments to Executive under the CIGNA
Supplemental Pension Plan.
(d) In the event of a termination of Executive's employment under
subparagraph 1(c)(4), the amount computed under subparagraph
2(a)(1) will be based upon the assumption that Executive had
accrued 35 Years of Credited Service as of his termination of
employment date.
(e) In the event of a termination of Executive's employment under
subparagraphs 1(c)(2), (3) or (5), the amount computed under
subparagraph 2(a)(1) will be based upon these assumptions:
(1) Executive had 30 Years of Credited Service on his
55th birthday;
(2) Executive accrued additional Credited Service under
subparagraph 2(b) after his 55th birthday; and
(3) If Executive's termination of employment occurs
before he reaches age 55, then Executive will be
deemed to have 30 Years of Credited Service on his
termination of employment date.
3. SUPPLEMENTAL SURVIVING SPOUSE BENEFITS.
(a) If Executive (1) meets the conditions set forth in
subparagraphs 1(a) and (b); (2) dies while employed by the
Company; and (3) is survived by a spouse to whom he has been
married for at least the 12-month period ending on his date of
death (his "Spouse"), then CIGNA shall pay his Spouse a
supplemental surviving spouse benefit as described in
subparagraphs 3(b) or (c) below. Any supplemental surviving
spouse benefit payable to Executive's Spouse under this
paragraph 3 shall be paid at the same time and in the same
manner as any benefit payments to the Spouse under the CIGNA
Supplemental Pension Plan.
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<PAGE> 4
(b) If Executive dies before his 55th birthday, then CIGNA shall
pay his Spouse a supplemental surviving spouse benefit equal
to the amount, if any, by which (1) exceeds (2), with:
(1) equal to the pre-retirement surviving spouse benefits
his Spouse would receive under the Pension Plans if
Executive had accrued 30 Years of Credited Service on
the date of his death (in accordance with
subparagraph 2(f)(3)); and
(2) equal to the pre-retirement surviving spouse benefits
his Spouse will actually be entitled to receive under
the Pension Plans.
(c) If Executive dies on or after his 55th birthday and has not
made an election to receive his CIGNA Supplemental Pension
Plan benefits in the optional, annuity form, then CIGNA shall
pay his Spouse a supplemental surviving spouse benefit equal
to the amount, if any, by which (1) exceeds (2), with:
(1) equal to the benefits Executive would receive under
the Pension Plans and paragraph 2 of this Agreement
if (A) Executive had retired from the Company on the
day before he died and (B) his retirement date had
been a Vesting Date; and
(2) equal to the benefits the Spouse will actually be
entitled to receive under the Pension Plans.
4. NON-DISCLOSURE.
(a) Executive shall not at any time during or after the term of
his employment with the Company (other than in the good faith
performance of the duties and responsibilities of his position
with the Company) reveal or make known to any person (other
than the Company) or use for his own benefit (or for the
benefit of any other person or entity unrelated to the
Company) any Company Information made known (whether or not
with the knowledge and permission of the Company) to Executive
by reason of his employment by the Company; provided however,
that after such knowledge, information and materials have
become public knowledge, Executive shall have no further
obligation under this paragraph 4 with respect to same so long
as Executive was in no manner responsible, directly or
indirectly, for permitting such information to become public
knowledge without the consent of the Company.
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<PAGE> 5
(b) For purposes of subparagraph 4(a) the term "Company
Information" shall mean any knowledge, information or
materials about the Company's products, services, know-how,
customers, business plans, or confidential information about
financial, marketing, pricing, compensation and other
proprietary matters relating to the Company, whether or not
subject to trademark, copyright, trade secret or other
protection, whether or not developed, devised or otherwise
created in whole or in part by the efforts of Executive, and
whether or not a matter of public knowledge (unless as a
result of authorized disclosure).
(c) Executive shall retain all Company Information which he may
acquire or develop during the term of his employment with the
Company in trust for the sole benefit of the Company.
5. COVENANT TO REPORT. All written materials, records and documents made
by Executive or coming into his possession during the term of his employment
with the Company and concerning the business or affairs of the Company or any
of its affiliates shall be and remain the property of the Company and, upon the
termination of Executive's employment with the Company or upon the request of
the Company, Executive shall promptly deliver the same to the Company.
Executive agrees to render to the Company such reports of the activities
undertaken by Executive or conducted under Executive's direction pursuant
hereto during the term of his employment as the Company may request.
6. COVENANT NOT TO COMPETE.
(a) Executive agrees that, during the term of his employment with
the Company and, if he meets the conditions in subparagraphs
1(c)(1), (3), (4) or (5), for a period of twenty-four (24)
months following the termination of his employment with the
Company, he will not, within any part of the United States
where the Company is doing business or has, within the twelve
(12) month period before the termination of his employment,
been actively planning to do business:
(1) engage directly or indirectly, in any capacity
(including but not limited to owner, sole proprietor,
partner, shareholder (unless his holding is for
investment purposes only and is limited to less than
1% of the total combined voting power of all shares),
employee, agent,
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<PAGE> 6
consultant, officer or director) in any business
which competes with the Company;
(2) solicit or attempt to solicit any customers of the
Company on behalf of such competing businesses,
without prior written consent of the President of the
Company; or
(3) employ, engage for hire, solicit the employment or
engagement for hire, or otherwise attempt to employ
or engage for hire, by or on behalf of any such
competing businesses, without the prior written
consent of the Company, any person who within the
prior twelve (12) month period has been an officer or
employee of the Company, unless such officer or
employee has been terminated by the Company.
(b) The provisions of subparagraph 6(a) will be of no force or
effect in the event of Executive's Termination upon a Change
of Control, as defined in the CIGNA Corporation Severance
Benefits Plan for Members of the Executive Group.
7. JUDICIAL REMEDIES.
(a) Executive acknowledges that the Company or its affiliates will
have no adequate remedy at law if Executive violates the terms
of paragraphs 4, 5 and 6. In such event, the Company shall
have the right, in addition to any other rights it may have,
to obtain in any court of competent jurisdiction injunctive
relief to restrain any breach or threatened breach of specific
performance of this Agreement.
(b) If the scope of the restrictions on the Executive under
paragraph 6 are found by a court of competent jurisdiction to
be unreasonably broad and unenforceable, it is the intent of
the parties that the court not void the restrictions but
reformulate them so they are reasonable and enforceable, while
adhering as closely as possible to the original scope of the
restrictions.
8. RECOVERY. If the Executive violates any of the provisions of
paragraphs 4, 5 or 6:
(a) CIGNA shall have no obligation to pay Executive (or
Executive's surviving spouse) any amounts described in
paragraphs 2 or 3 of the Agreement; and
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(b) If Executive has already received any payments under paragraph
2, Executive agrees that the amount of such payments shall be
repaid to CIGNA as follows:
(1) CIGNA shall immediately offset such amounts from any
payments which may be owing to the Executive; and
(2) If such offset is insufficient, Executive agrees to
repay any remaining amounts to CIGNA within thirty
(30) days of receipt of CIGNA's written demand for
such repayment. If CIGNA must commence any
arbitration or other legal action to enforce
Executive's obligations under this subparagraph 8(b),
Executive further agrees to pay CIGNA its costs and
attorneys' fees in such action.
9. LIMITED SCOPE. This Agreement is not a contract of employment for any
specified term, and nothing herein is intended to, nor shall be construed as,
changing the nature of Executive's employment from an at-will relationship.
This Agreement is limited to the terms and conditions set forth herein and does
not otherwise address Executive's compensation or benefits, the duties and
responsibilities of his position, or any of the Company's other rights as
employer.
10. The Agreement is made and entered into in the Commonwealth of
Pennsylvania, and at all times and for all purposes shall be interpreted,
enforced and governed under its laws.
11. Without in any way affecting the terms of paragraph 7 above, it is
agreed that any controversy or claim arising out of or relating to this
Agreement shall be settled exclusively by arbitration in Philadelphia,
Pennsylvania, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof.
12. References in this Agreement to the Executive Severance Plan shall
mean such plan as amended through March 1, 1996, and shall not mean any
subsequent versions of such plan, or any successor plan, unless the Executive
agrees in writing that such subsequent version or successor shall be
applicable.
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13. CIGNA's rights and obligations under this Agreement will inure to the
benefit of and be binding upon CIGNA's successors and assigns.
14. The Company's obligations under this Agreement shall be unfunded and
unsecured and shall be paid when due out of the general assets of the Company.
However, the Company's obligations may be funded through the CIGNA Corporation
Benefits Protection Trust or other "rabbi trust" arrangement which is a grantor
trust the assets of which are not subject to the claims of creditors of the
Company, except in the case of bankruptcy or insolvency of the Company.
15. This Agreement contains the entire agreement between Executive and
CIGNA with respect to the matters addressed herein and fully replaces and
supersedes any and all prior agreements or understandings between them related
to such matters. Any amendment to this Agreement must be in writing and signed
by both CIGNA and Executive.
IN WITNESS WHEREOF, the persons named below have signed this Agreement
and Release on the dates shown below.
CIGNA Corporation
3-27-96 /s/ W. H. Taylor
- -------------------------- ----------------------------
By Wilson H. Taylor
Date President and
Chief Executive Officer
3-27-96 /s/ D. M. Levinson
- -------------------------- ----------------------------
Date Donald M. Levinson
8
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EXHIBIT 11
CIGNA CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net income available to common shares.................. $ 211 $ 554 $ 234
========== ========== ==========
Common shares.......................................... 73,405,432 72,218,299 71,933,241
Common share equivalents applicable to stock options... 313,492 98,548 88,710
---------- ---------- ----------
Total................................................ 73,718,924 72,316,847 72,021,951
========== ========== ==========
PRIMARY................................................ $ 2.86 $ 7.66 $ 3.25
========== ========== ==========
FULLY DILUTED EARNINGS PER SHARE
Net income............................................. $ 211 $ 554 $ 234
Adjusted for:
Interest expense (net of tax) on convertible
subordinated debentures........................... -- 13 *
---------- ---------- ----------
Net income available to common shares.................. $ 211 $ 567 $ 234
========== ========== ==========
Common shares.......................................... 73,405,432 72,218,299 71,933,241
Common share equivalents applicable to stock options... 380,956 115,185 97,177
Assumed conversion of convertible subordinated
debentures........................................... -- 3,625,956 *
---------- ---------- ----------
Total................................................ 73,786,388 75,959,440 72,030,418
========== ========== ==========
FULLY DILUTED.......................................... $ 2.86 $ 7.47 $ 3.25
========== ========== ==========
</TABLE>
- ---------------
* Anti-dilutive; therefore, amounts have been excluded.
<PAGE> 1
EXHIBIT 12
CIGNA CORPORATION
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Income from continuing operations before income
tax............................................. $ 251 $ 805 $ 165 $ 179 $ 584
------ ------ ------ ------ ------
Fixed charges included in income:
Interest expense................................ 120 121 124 100 106
Interest portion of rental expense.............. 99 102 114 113 123
------ ------ ------ ------ ------
Total fixed charges included in income..... 219 223 238 213 229
------ ------ ------ ------ ------
Income available for fixed charges................ $ 470 $1,028 $ 403 $ 392 $ 813
------ ------ ------ ------ ------
Ratio of earnings to fixed charges................ 2.1 4.6 1.7 1.8 3.6
====== ====== ====== ====== ======
</TABLE>
<PAGE> 1
Exhibit 13
Portions of Registrant's
1995 Annual Report to Shareholders
<PAGE> 2
EXHIBIT 13
HIGHLIGHTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share amounts) 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Premiums and fees $ 13,914 $ 13,912 $ 13,712 $ 13,924 $ 14,295
Net investment income and other revenues 4,808 4,438 4,408 4,493 4,373
Realized investment gains 233 42 282 165 82
- -----------------------------------------------------------------------------------------------------------------------
Total $ 18,955 $ 18,392 $ 18,402 $ 18,582 $ 18,750
- ----------------------------------------------------===================================================================
NET INCOME (LOSS):
Employee Life and Health Benefits $ 597 $ 548 $ 589 $ 337 $ 329
Employee Retirement and Savings Benefits 194 190 159 191 167
Individual Financial Services 151 136 110 49 76
Property and Casualty (673) (235) (530) (195) (7)
Other Operations (58) (85) (94) (71) (116)
- -----------------------------------------------------------------------------------------------------------------------
Total $ 211 $ 554 $ 234 $ 311 $ 449
- ----------------------------------------------------===================================================================
Per share:
Net income $ 2.86 $ 7.66 $ 3.25 $ 4.34 $ 6.28
Common dividends declared $ 3.04 $ 3.04 $ 3.04 $ 3.04 $ 3.04
Total assets $ 95,903 $ 86,102 $ 84,975 $ 78,034 $ 74,573
Long-term debt $ 1,066 $ 1,389 $ 1,235 $ 929 $ 848
Shareholders' equity $ 7,157 $ 5,811 $ 6,575 $ 5,744 $ 5,863
Per share $ 93.76 $ 80.46 $ 91.30 $ 80.09 $ 81.93
Common shares outstanding (thousands) 76,332 72,225 72,015 71,720 71,563
Shareholders of record 15,131 16,408 17,491 18,581 19,380
Employees 44,707 48,603 50,624 52,255 55,961
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Net income for 1992 includes a net charge of $26 million, or $.36 per share,
for the net cumulative effect of accounting changes for income taxes, as well
as postemployment and postretirement benefits other than pensions. Net income
for 1991 includes a charge of $4 million, or $.06 per share, for an
extraordinary loss from early extinguishment of debt.
See Notes to the Financial Statements, including Note 2 for information
regarding the effect of adopting accounting pronouncements.
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(In millions)
- ------------------------------------------------------------------------------------------
FINANCIAL SUMMARY 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Premiums and fees $ 13,914 $ 13,912 $ 13,712
Net investment income 4,296 3,946 3,902
Other revenues 512 492 506
Realized investment gains 233 42 282
-------- ------- --------
Total revenues 18,955 18,392 18,402
Benefits and expenses 18,704 17,587 18,237
-------- ------- --------
Income before taxes 251 805 165
Income taxes (benefits) 40 251 (69)
-------- ------- --------
Net income $ 211 $ 554 $ 234
- ----------------------------------------------------======================================
Realized investment gains,
net of taxes $ 178 $ 28 $ 224
- ----------------------------------------------------======================================
</TABLE>
CIGNA's consolidated net income decreased 62% in 1995, compared with 1994.
Results for 1995 included third quarter charges of $774 million after-tax
($1.2 billion pre-tax) in the Property and Casualty segment, primarily for
asbestos-related and environmental pollution exposures, and a $75 million
after-tax ($115 million pre-tax) charge associated with cost reduction
initiatives in the Property and Casualty and Employee Life and Health Benefits
segments. Excluding these charges and after-tax realized investment gains,
income for 1995 was $882 million.
Results for 1994 included a third quarter charge of $27 million after-tax,
primarily related to property and casualty reinsurance. Excluding this charge
and after-tax realized investment gains, results were $553 million.
Earnings for 1995, compared with 1994, excluding the items previously
noted, increased 59%, primarily reflecting improved results in the Property and
Casualty segment.
After-tax realized investment gains for 1995 increased significantly,
compared with 1994, reflecting higher gains on sales of equity securities,
resulting from a restructuring of a portion of CIGNA's investment portfolio
into fixed income securities.
Net income for 1994 increased significantly compared with 1993. Results
for 1993 included a $244 million after-tax charge for legal and associated
expenses for reported claims related to asbestos, environmental pollution and
other long-term exposures and $107 million in after-tax cost reduction charges.
In addition, CIGNA's results for 1993 reflected a benefit of $48 million,
resulting from the effect on CIGNA's net deferred tax asset of an increase in
the federal income tax rate. Excluding these items and after-tax realized
investment gains, income for 1994 of $553 million increased significantly from
$313 million for 1993, due primarily to improved results in the Property and
Casualty and Employee Life and Health Benefits segments.
After-tax realized investment gains for 1994 decreased, compared with
1993, primarily due to lower gains on sales of equity securities and fixed
maturities and a higher effective tax rate in 1994 than in 1993. Partially
offsetting these factors were decreases in new loss reserves, primarily for
mortgage loan and real estate investments, and higher gains on sales of real
estate.
Consolidated revenues, excluding realized investment gains, were $18.7
billion, $18.4 billion and $18.1 billion for 1995, 1994 and 1993, respectively.
The 1995 increase reflects higher net investment income, due primarily to
growth in interest-sensitive products and the favorable effects of the
portfolio restructuring discussed above. The 1994 increase primarily reflects
higher premiums and fees for the Employee Life and Health Benefits segment due
to growth in HMO and life premiums, partially offset by lower Property and
Casualty premiums and fees, due to intense price competition.
Earnings are expected to improve in 1996, excluding the effects of
realized investment results and the third quarter 1995 charges, previously
discussed. However, such improvement could be adversely affected by the factors
noted in the cautionary statement on page 23.
OTHER MATTERS
During the third quarter of 1995, CIGNA announced its plan to restructure
its domestic property and casualty businesses into two separate operations. The
plan was approved by regulators in February 1996, and is effective as of
December 31, 1995. One operation will manage ongoing business (ongoing
operations) and the other will manage run-off policies and related claims,
including those for asbestos-related and environmental pollution exposures
(run-off operations). The plan is designed to create business structures that
enhance management's focus on its specialist strategy and to position the
ongoing business for future profitable growth, while at the same time providing
dedicated, specialized resources to manage each operation separately and
effectively. In addition, by placing substantially all exposures associated
with the run-off businesses in a legal entity separate from the ongoing
operations, CIGNA enhanced the claims paying rating for its ongoing operations.
- ------------------------------------------------------------------------------
8
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
As part of its overall restructuring plan, CIGNA contributed $375 million
of additional capital to the run-off operations. This contribution, which is
reflected in the run-off operations' statutory surplus as of December 31, 1995,
was funded in 1996 through internal sources. Also, the ongoing operations will
contribute an additional $50 million to the run-off operations by December 31,
2001. In addition, the ongoing operations assumed $125 million of
liabilities, primarily related to employee benefits of the run-off operations,
and will reinsure up to $800 million of claims of the run-off operations in the
unlikely event that the statutory capital and surplus of the run-off operations
falls below $25 million.
As a result of this restructuring, the domestic run-off operations had
statutory capital and surplus of approximately $245 million, pro forma
investment assets of approximately $4.3 billion and insurance liabilities of
approximately $4.2 billion, as of December 31, 1995.
CIGNA continues to conduct strategic and financial reviews of its
businesses in order to deploy its capital most effectively. Such reviews could
result in future actions; however, no determinations have been made at this
time.
During 1995, CIGNA implemented cost reduction initiatives in the Domestic
Property and Casualty operations and the Employee Life and Health Benefits
segment, which resulted in charges of $85 million ($55 million after-tax) and
$30 million ($20 million after-tax), respectively. The cost reduction
initiatives, when fully implemented, are estimated to result in annual
after-tax savings of approximately $55 million and $40 million, respectively,
primarily based on the elimination of certain payroll and payroll-related costs
and, to a lesser extent, lease costs. The savings in the near term for the
Employee Life and Health Benefits segment are expected to be partially offset
by increased investments in business growth and service initiatives. In
addition, in 1993, CIGNA implemented cost reduction initiatives in the Property
and Casualty segment, which resulted in a charge of approximately $150 million
($97 million after-tax). CIGNA estimates that this cost reduction initiative
has resulted in annual after-tax savings of approximately $50 million,
primarily based on the elimination of certain payroll and payroll-related costs
and, to a lesser extent, lease costs. See Note 18 to the Financial Statements
for additional information.
In connection with federal tax audits for the years 1982 through 1990, an
issue is being contested by CIGNA that could result in assessments totaling
approximately $200 million. Although the outcome is uncertain, management
believes that CIGNA should prevail. See Note 9 to the Financial Statements for
additional information.
CIGNA's businesses are subject to a changing social, economic, legal,
legislative and regulatory environment that could affect them. Some of the
changes include initiatives to: revise the system of funding cleanup of
environmental damages; reform the federal tax system; reinterpret insurance
contracts long after the policies were written to provide coverage
unanticipated by CIGNA; restrict insurance pricing and the application of
underwriting standards; reform health care; and expand regulation. Some of the
more significant issues are discussed below.
Legislation is expected to be considered by Congress that is likely to
limit, and eventually substantially eliminate, the tax deductibility of policy
loan interest for corporate-owned life insurance. The outcome of such
legislation is uncertain and, although it could have a material adverse effect
on results of operations for the Individual Financial Services segment, it is
not expected to be material to CIGNA's consolidated results of operations,
liquidity or financial condition.
Proposed legislation for Superfund reform remains under consideration by
Congress. Any changes in Superfund relating to 1) allocating responsibility, 2)
funding cleanup costs or 3) establishing cleanup standards could affect the
liabilities of potentially responsible parties and insurers. Due to
uncertainties associated with the timing and content of any future Superfund
legislation, the effect on CIGNA's results of operations, liquidity or
financial condition cannot be reasonably estimated at this time.
CIGNA expects proposals for federal and state legislation seeking some
health care insurance reforms and limitations on formation and operation of
efficient health care networks. Due to uncertainties associated with the timing
and content of any health care legislation, the effect on CIGNA's future
results of operations, liquidity or financial condition cannot be reasonably
estimated at this time.
As of December 31, 1995, CIGNA's life insurance and property and casualty
insurance subsidiaries that were not exempt from the National Association of
Insurance Commissioners' (NAIC) risk-based capital rules were adequately
capitalized under such rules. The NAIC is currently addressing risk-based
capital guidelines for health maintenance organizations (HMOs). CIGNA does not
expect such guidelines to have a material adverse effect on its future results
of operations, liquidity or financial condition.
- ------------------------------------------------------------------------------
9
<PAGE> 5
During 1996, A.M. Best Company, Inc. (Best) reviewed CIGNA's restructured
domestic property and casualty operations and rated the ongoing operations A-
(Excellent) and rated the run-off operations B+ (Very Good), the second-highest
rating available for run-off companies. In addition, during 1996, Moody's
Investors Service rated the principal insurance companies of the ongoing
operations Baa1 (Adequate) and rated the principal insurance companies of the
run-off operations Ba1 (Questionable). During 1995, Standard & Poor's upgraded
the outlook for CIGNA's corporate debt ratings from negative to stable.
The eventual effect on CIGNA of the changing environment in which it
operates remains uncertain. For additional information, see Note 19 to the
Financial Statements.
ACCOUNTING PRONOUNCEMENTS
In 1993, CIGNA implemented Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." During the fourth quarter of 1995, the Financial Accounting
Standards Board (FASB) issued a guide to implementation of SFAS No. 115, which
permits a one-time opportunity to reclassify securities subject to SFAS No.
115. Consequently, CIGNA reclassified all held-to-maturity securities to
available-for-sale as of December 31, 1995. The non-cash reclassification of
these securities, which had an aggregate amortized cost of $11.8 billion and
fair value of $12.8 billion, resulted in an increase of approximately $300
million, net of policyholder-related amounts and deferred income taxes, in net
unrealized appreciation included in Shareholders' Equity as of December 31,
1995.
See Note 2(B) to the Financial Statements for a detailed discussion of
certain accounting pronouncements and their effect on CIGNA.
EMPLOYEE LIFE AND HEALTH BENEFITS
<TABLE>
<CAPTION>
(In millions)
- ------------------------------------------------------------------------------------------
FINANCIAL SUMMARY 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Premiums and fees $ 8,135 $ 7,844 $ 7,438
Net investment income 574 515 503
Other revenues 336 272 286
Realized investment gains 122 19 165
------- ------- -------
Total revenues 9,167 8,650 8,392
Benefits and expenses 8,307 7,821 7,541
------- ------- -------
Income before taxes 860 829 851
Income taxes 263 281 262
------- ------- -------
Net income $ 597 $ 548 $ 589
- -----------------------------------------------------=====================================
Realized investment gains,
net of taxes $ 104 $ 17 $ 126
- -----------------------------------------------------=====================================
</TABLE>
Net income for the Employee Life and Health Benefits segment increased 9%
in 1995, compared with a decrease of 7% in 1994. Results for 1995 included an
after-tax charge of $20 million related to cost reduction initiatives. See
Other Matters for additional information.
Excluding the cost reduction charge and after-tax realized investment
gains, income for 1995 was $513 million, compared with $531 million for 1994
and $463 million for 1993.
After-tax earnings for 1995 in the segment's indemnity operations,
excluding the cost reduction charge of $9 million and realized investment
results, were $311 million, a decrease of $16 million, compared with 1994. The
1995 decrease reflects competitive pressures on rates and adverse claim
experience resulting from higher medical costs in the group medical operations,
as well as higher claims in the group life operations. These factors were
partially offset by an improvement of $9 million in earnings for long-term
disability (LTD) business.
The segment's HMO operations' after-tax earnings, excluding the cost
reduction charge of $11 million and realized investment results, were $202
million for 1995, a decrease of $2 million, compared with 1994. This decrease
reflects the effects of lower margins resulting from higher than expected
medical care costs and higher operating expenses associated with business
growth and investments in service initiatives. Partially offsetting these
factors were the effects of membership growth, as well as the favorable effects
of $30 million for 1995 resulting from the net change of reserve reviews
between respective years.
Earnings for 1994 reflect improvements of $62 million and $6 million in
the segment's HMO and indemnity operations, respectively, compared with 1993.
The HMO improvement reflects approximately $42 million attributable to
membership growth, with the balance primarily attributable to rate increases
- ------------------------------------------------------------------------------
10
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
and favorable medical cost experience. The increase in indemnity earnings
reflects an $8 million improvement in group universal life business, primarily
due to sales. The increase also reflects, to a lesser extent, favorable claim
experience and rate increases for other lines. Partially offsetting the
indemnity improvements was a decline in LTD earnings due to unfavorable claim
experience.
Premiums and fees increased 4% in 1995 and 5% in 1994. The 1995
improvement reflects higher premiums and fees for HMOs of $263 million,
primarily due to membership growth. Group indemnity premiums increased $28
million, reflecting higher medical premiums due to new sales and rate
increases, partially offset by declines in life and LTD premiums. The 1994
improvement reflects increased premiums and fees for HMOs of $115 million,
primarily reflecting membership growth and rate increases, and an increase of
$291 million in group indemnity business (life, $186 million; medical, $66
million; all other, $39 million), primarily reflecting sales and rate
increases. Growth in premiums is expected to continue to be constrained by
competitive pressures in both the medical indemnity and HMO markets.
Total HMO membership increased 11% in 1995, compared with a 25% increase
in 1994. Approximately 73% of membership growth for 1995 has been in HMO
alternative funding programs under which the customer assumes all or a portion
of the responsibility for funding claims. Such programs generally have lower
margins than traditional HMO plans.
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 $17.8 billion in 1995, compared with $17.5
billion in both 1994 and 1993. The 1995 increase, compared to 1994, reflects
the factors noted above for premiums and fees, and growth in HMO alternative
funding programs, partially offset by declines in medical premium equivalents
reflecting cancellations and conversions to HMOs. Premium equivalents, as a
percentage of total adjusted premiums and fees, were 54% in 1995, 55% in 1994
and 57% in 1993. ASO plans accounted for 45%, 46% and 45% of total adjusted
premiums and fees in 1995, 1994 and 1993, respectively.
The adjusted premium mix in 1995 was approximately 45% medical insurance,
32% prepaid health and dental care, 10% life insurance, 8% dental insurance, 3%
long-term disability insurance and 2% other insurance 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) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Insured plans $ 3,720 $ 3,706 $ 3,465
Alternative funding programs 9,748 9,725 9,917
- ------------------------------------------------------------------------------------------
Total $ 13,468 $ 13,431 $ 13,382
- ----------------------------------------------------======================================
</TABLE>
In early January 1996, CIGNA completed the sale of certain assets of its
Los Angeles staff model HMO, while retaining access to the provider network
which will continue to serve membership in this area. The effects of the sale
are not expected to be material to CIGNA's results of operations.
Earnings for this segment for 1996 are expected to be constrained in both
the Indemnity and HMO operations as a result of competitive rate pressures and,
for Indemnity, continued conversions to HMOs.
EMPLOYEE RETIREMENT AND SAVINGS BENEFITS
<TABLE>
<CAPTION>
(In millions)
- ------------------------------------------------------------------------------------------
FINANCIAL SUMMARY 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Premiums and fees $ 258 $ 201 $ 296
Net investment income 1,722 1,722 1,846
Realized investment gains (losses) 3 12 (31)
------- ------- -------
Total revenues 1,983 1,935 2,111
Benefits and expenses 1,699 1,648 1,888
------- ------- -------
Income before taxes 284 287 223
Income taxes 90 97 64
------- ------- -------
Net income $ 194 $ 190 $ 159
- -----------------------------------------------------=====================================
Realized investment gains (losses),
net of taxes $ 2 $ 6 $ (23)
- -----------------------------------------------------=====================================
</TABLE>
Net income for the Employee Retirement and Savings Benefits segment
increased 2% in 1995, compared with an increase of 19% in 1994. Included in
the results for 1994 was an unfavorable tax adjustment resulting from IRS
audits of $3 million (including a $1 million charge related to realized
investment results), compared with favorable tax adjustments of $3 million
(including a $3 million charge related to realized investment results) in 1993.
- ------------------------------------------------------------------------------
11
<PAGE> 7
Excluding after-tax realized investment results and the tax adjustments,
income for 1995 was $192 million, compared with $186 million for 1994 and $176
million in 1993. The 1995 increase principally reflects the favorable effects
on earnings from asset growth. The 1994 increase primarily reflects improved
interest margins on defined contribution business.
Premiums and fees increased 28% in 1995 and decreased 32% in 1994. The
change in both years reflects the variability of annuity sales. Net investment
income for 1995 was level with 1994, while 1994 decreased 7% compared with
1993. The 1994 decrease reflects the effects of lower yields and customers'
redirection of investments to separate accounts.
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) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Balance -- January 1 $ 33,882 $ 34,469
Premiums and deposits 3,624 3,032
Investment results 2,860 2,320
Increase (decrease) in fair value of assets 3,237 (1,250)
Customer withdrawals (2,092) (2,037)
Benefit payments and other (3,328) (2,652)
- ---------------------------------------------------------------------------
Balance -- December 31 $ 38,183 $ 33,882
- ----------------------------------------------------=======================
</TABLE>
Premiums and deposits increased 20% in 1995, compared with 1994,
reflecting higher sales. Approximately 60% and 56% of the premiums and deposits
for 1995 and 1994, respectively, were from new customers. The increase in
investment results for 1995, compared with 1994, reflects higher realized gains
from the sales of separate account assets and asset growth. The changes in the
fair value of assets for 1995 and 1994 primarily reflect market value
fluctuations for fixed maturities and equity securities. The increase for 1995
also reflects approximately $525 million from SFAS No. 115 as discussed under
Accounting Pronouncements. The increase in benefit payments and other is
primarily due to an increase in annuity payments of $350 million and the
payment of benefits of $175 million for several large contracts that matured in
1995.
Management expects asset growth to continue to be constrained, resulting
from decisions by plan sponsors to diversify assets and fund management. In
addition, assets under management will continue to be affected by market value
fluctuations for fixed maturities and equity securities.
INDIVIDUAL FINANCIAL SERVICES
<TABLE>
<CAPTION>
(In millions)
- ------------------------------------------------------------------------------------------
FINANCIAL SUMMARY 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Premiums and fees $ 881 $ 824 $ 814
Net investment income 968 741 583
Other revenues 70 64 65
Realized investment gains (losses) 1 8 (15)
------- ------- -------
Total revenues 1,920 1,637 1,447
Benefits and expenses 1,689 1,427 1,283
------- ------- -------
Income before taxes 231 210 164
Income taxes 80 74 54
------- ------- -------
Net income $ 151 $ 136 $ 110
- -----------------------------------------------------=====================================
Realized investment gains (losses),
net of taxes $ 1 $ 5 $ (13)
- -----------------------------------------------------=====================================
</TABLE>
Net income for the Individual Financial Services segment increased 11% and
24% in 1995 and 1994, respectively. Excluding after-tax realized investment
results, income for 1995 was $150 million, compared with $131 million for 1994
and $123 million for 1993. The increase for 1995 reflects higher earnings from
interest-sensitive products, primarily due to business growth. The 1994
increase reflects higher earnings of $14 million from interest-sensitive
products, primarily due to improved interest margins and business growth,
partially offset by the absence of $5 million of favorable tax adjustments
recorded in 1993.
In 1995 and 1994, premiums and fees increased 7% and 1%, respectively,
reflecting growth in business of interest-sensitive products, principally
corporate-owned life insurance.
Net investment income increased 31% and 27% in 1995 and 1994,
respectively, reflecting growth of interest-sensitive and annuity products.
Deposits, which are not included in revenues, totaled $3.2 billion, $3.0
billion and $2.5 billion in 1995, 1994 and 1993, respectively. These increases
primarily reflect higher annuity sales.
See Other Matters for additional information on corporate-owned life
insurance.
- ------------------------------------------------------------------------------
12
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
PROPERTY AND CASUALTY
<TABLE>
<CAPTION>
(In millions)
- ------------------------------------------------------------------------------------------
FINANCIAL SUMMARY 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Premiums and fees $ 4,640 $ 5,043 $ 5,136
Net investment income 794 756 753
Other revenues 216 223 254
Realized investment gains 85 8 185
------- ------- -------
Total revenues 5,735 6,030 6,328
Benefits and expenses 6,795 6,447 7,290
------- ------- -------
Loss before tax benefits (1,060) (417) (962)
Income tax benefits (387) (182) (432)
------- ------- -------
Net loss $ (673) $ (235) $ (530)
- -----------------------------------------------------=====================================
Realized investment gains,
net of taxes $ 54 $ 4 $ 150
- -----------------------------------------------------=====================================
</TABLE>
Net losses for the Property and Casualty segment increased significantly,
compared with 1994, primarily reflecting third quarter 1995 charges associated
with reserve strengthening for asbestos-related and environmental pollution
(A&E) claims of $686 million after-tax and uncollectible reinsurance for
non-A&E exposures of $88 million after-tax, and charges for cost reduction
initiatives of $55 million after-tax. See Other Matters for additional
information.
The Property and Casualty segment's after-tax results for the year ended
December 31 included the following:
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Underlying operations $ 347 $ 210 $ 20
Realized investment gains 54 4 150
Prior year development:
Asbestos and environmental (787) (179) (367)
Unrecoverable reinsurance (116) (19) (18)
Other (70) (152) (128)
Catastrophe losses (46) (98) (94)
Cost reduction charges (55) (9) (97)
Other -- 8 4
- ------------------------------------------------------------------------------------------
Net loss $ (673) $ (235) $ (530)
- -----------------------------------------------------=====================================
</TABLE>
The improvements in "Underlying operations" for 1995 and 1994 reflect
lower current accident year underwriting losses due to improved claim
experience and rate increases on certain lines of business and, for 1995,
higher net investment income for the international operations. Also, the
improvements reflect expense savings of approximately $40 million after-tax in
1994 and an additional $10 million in 1995, primarily due to lower
employee-related costs resulting from cost reduction initiatives. Although
results are improving, they continue to reflect the highly competitive pricing
environment.
Premiums and fees decreased 8% in 1995, compared with 1994, primarily
reflecting reduced premiums of $444 million in CIGNA's domestic commercial
business. The decrease in the domestic commercial business reflects continued
competition, the application of stricter underwriting standards and, to a
lesser extent, conversions of workers' compensation business from standard risk
transfer to high-deductible policies, and a ratings downgrade by Best late in
1994. In addition, the overall decline reflects a decrease in premiums and fees
from the reinsurance business of $224 million due to CIGNA's withdrawal from
this business late in 1994, as discussed below. Growth in international lines
of business of $320 million, approximately half of which resulted from changes
in foreign currency translations, partially offset the overall decline in
premiums and fees.
Based on a strategic assessment, CIGNA decided in the third quarter of
1994 to substantially withdraw from the property and casualty reinsurance
business. For 1993, the portion of the business affected by the withdrawal had
international and domestic revenues of approximately $500 million, and results
of operations that were not material to CIGNA. In connection with the
withdrawal, CIGNA sold renewal opportunities for a significant portion of its
international reinsurance business and discontinued writing most other property
and casualty reinsurance coverages. These actions have not had a material
effect on CIGNA's results of operations.
Premiums and fees are expected to continue to be constrained by
competition in 1996.
Premiums and fees decreased 2% in 1994, compared with 1993. This decrease
reflects a decline of $388 million for CIGNA's domestic commercial business and
reinsurance business resulting from price competition, strengthened
underwriting standards and domestic agency force reduction in certain lines of
business. Growth in international lines of business of $315 million,
approximately 25% of which resulted from changes in foreign currency
translations, partially offset the overall decline in premiums and fees.
Net investment income for 1995 increased 5%, compared with 1994, primarily
reflecting growth in business for the international operations, partially
offset by negative cash flows in the domestic property and casualty operations.
Net investment income for 1994 was level with 1993.
- ------------------------------------------------------------------------------
13
<PAGE> 9
Pre-tax catastrophe losses, before reinsurance (Gross) and net of
reinsurance (Net), for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(In millions) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross catastrophe losses $ 80 $ 158 $ 308
Net catastrophe losses $ 71 $ 151 $ 145
- ------------------------------------------------------------------------------------------
</TABLE>
Net catastrophe losses included $29 million for Texas hail storms in 1995;
$87 million for the Los Angeles earthquake and $27 million for the severe
winter weather in 1994; and $36 million for the East Coast blizzard in 1993.
The effect of reinsurance on these catastrophe losses was not material. Also,
1993 included $41 million, net (gross, $173 million) for the World Trade Center
bombing.
CIGNA's principal property catastrophe reinsurance program provides, on a
combined basis, approximately 95% recovery of losses between $70 million and
$400 million for its domestic operations and approximately 95% recovery of
losses between $40 million and $300 million for international operations.
CIGNA's future results of operations could be volatile, depending on the
frequency and severity of future catastrophes.
LOSS RESERVES AND REINSURANCE RECOVERABLES
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 17 to the Financial Statements.
In summary, CIGNA's property and casualty loss reserves of $17.0 billion
and $16.8 billion as of December 31, 1995 and 1994, respectively, are an
estimate of future payments for reported and unreported claims for losses and
related expenses with respect to insured events that have occurred. The basic
assumption underlying the many traditional 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. The
process of establishing loss reserves is subject to uncertainties that are
normal, recurring and inherent in the property and casualty business.
CIGNA continually attempts to improve its loss estimation process by
refining its process of analyzing 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 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.
CIGNA changed its methodology for estimating asbestos-related and
environmental pollution reserves in the third quarter of 1995, as discussed
below. CIGNA's reserves for asbestos-related and environmental pollution claims
are a reasonable estimate of its ultimate liability for these claims, based on
currently known facts, reasonable assumptions where the facts are not known,
current law and methodologies currently available.
Reserving for all property and casualty claims continues to be a complex
and uncertain process, requiring the use of informed estimates and judgments.
As additional experience and other data become available and are reviewed or,
in the case of asbestos-related and environmental pollution reserves, as new or
improved methodologies are developed or as current law changes, CIGNA's
estimates and judgments may be revised. Any such revisions could result in
future changes in estimates of losses or reinsurance recoverables, and would be
reflected in CIGNA's results of operations for the period in which the
estimates are changed. While the effect of any such changes in estimates of
losses or reinsurance recoverables could be material to future results of
operations, CIGNA does not expect such changes to have a material effect on its
liquidity or financial condition.
CIGNA manages its loss exposure through the use of reinsurance. While
reinsurance arrangements are designed to limit losses from large exposures and
to permit recovery of a portion of direct losses, reinsurance does not relieve
CIGNA of liability to its insureds. Accordingly, CIGNA's loss reserves
represent total gross losses, and reinsurance recoverables represent
anticipated recoveries of a portion of these losses.
In management's judgment, information currently available has been
appropriately considered in estimating CIGNA's loss reserves and reinsurance
recoverables.
- ------------------------------------------------------------------------------
14
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table shows CIGNA's gross losses for incurred claims and
claim adjustment expenses (Gross), amounts ceded to reinsurers (Reinsurance)
and net losses for incurred claims and claim adjustment expenses (Net) for the
year ended December 31. The table also categorizes those amounts as they relate
to insured events of the current year and of prior years (prior year
development).
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
(In millions) Gross Reinsurance Net Gross Reinsurance Net Gross Reinsurance Net
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current year $ 3,304 $ (918) $ 2,386 $ 4,280 $ (1,187) $ 3,093 $ 5,021 $ (1,495) $ 3,526
- ----------------------------------------------------------------------------------------------------------------------------------
Prior year development:
Asbestos-related 298 (43) 255 64 (4) 60 303 (132) 171
Environmental
pollution 1,265 (310) 955 280 (65) 215 482 (88) 394
Assumed reinsurance
exposures 73 (41) 32 70 (11) 59 84 (15) 69
Unrecoverable
reinsurance -- 179 179 -- 29 29 -- 28 28
Other 7 70 77 (46) 221 175 380 (253) 127
- ----------------------------------------------------------------------------------------------------------------------------------
Total prior year
development 1,643 (145) 1,498 368 170 538 1,249 (460) 789
- ----------------------------------------------------------------------------------------------------------------------------------
Total incurred claims
and claim adjustment
expenses $ 4,947 $ (1,063) $ 3,884 $ 4,648 $ (1,017) $ 3,631 $ 6,270 $ (1,955) $ 4,315
- -------------------------=========================================================================================================
</TABLE>
Declines in gross and net losses for insured events of the current year
for 1995 and 1994 reflect improvements in the quality of underwriting and
reduced premium volume in certain lines of business. CIGNA expects that
strengthened underwriting will result in continued reductions in losses for
insured events of current years, relative to premiums.
CIGNA historically was not able to estimate its ultimate liabilities for
asbestos-related and environmental pollution claims because of the significant
uncertainties associated with them that are not generally present for other
types of claims. Traditional actuarial techniques were not adequate for
estimating these liabilities because of the lack of developed case law and
adequate claim history.
However, as industry experience in dealing with these exposures has
accumulated, various industry-related parties have evaluated newly emerging
methods for estimating asbestos-related and environmental pollution
liabilities, and these methods have attained growing credibility. In addition,
outside actuarial firms and others have developed data bases to supplement the
information that can be derived from a company's claim files.
CIGNA evaluated these methods and expanded its data bases of
asbestos-related and environmental pollution claims. Using these recent
developments, CIGNA completed a comprehensive review of its asbestos-related
and environmental pollution exposures during the third quarter of 1995 and
increased asbestos-related reserves by $255 million ($194 million, net of
reinsurance) and environmental pollution reserves by $1.2 billion ($861
million, net of reinsurance). These amounts are included in the 1995 gross
asbestos-related losses of $298 million ($255 million, net of reinsurance) and
gross environmental pollution losses of $1.3 billion ($955 million, net of
reinsurance) as shown in the above table.
CIGNA's methodology, which was reviewed by an outside actuarial firm,
consisted of a detailed analysis of its reported claims, using a stratified
sampling approach. Reported claims representing approximately 50% of CIGNA's
estimated asbestos-related exposure and approximately 75% of its estimated
environmental pollution exposure were analyzed individually, with the results
of the claim reviews extrapolated to the remainder of the reported claim
population.
Each claim review involved analyzing various characteristics of the
applicable policies, including their related attachment points, limits of
liability, terms, conditions and exclusions. For environmental pollution
claims, the reviews also evaluated damages per site using CIGNA's claim files
and information from a site data base obtained from external and internal
sources. The possible effects of Superfund reform were not considered. The
claim reviews considered specific coverage defenses and the allocation and
spreading of losses across policy periods and among other insurers and the
policyholder. The previous history of payments and the type of business
conducted by the policyholder were also considered. Based on this work,
additional reserves for reported claims were established.
- ------------------------------------------------------------------------------
15
<PAGE> 11
Also, CIGNA estimated reserves for incurred but not reported (IBNR) claims
by using the recent developments described above. For environmental pollution
claims, the IBNR reserve was based on estimates of future development for sites
yet to be identified, of additional claims related to currently identified
sites and of third-party liability. For asbestos-related claims, the IBNR
reserve was based on estimates of additional claims against known policyholders
as well as claims against policyholders that have not yet asserted claims
against CIGNA.
In addition to CIGNA's own reserve review, a state insurance department
retained an outside actuarial consulting firm to review CIGNA's reserves in
conjunction with a quadrennial NAIC zone examination of certain of CIGNA's
property and casualty subsidiaries. That firm applied its methods, including
its proprietary model, a loss development approach and a market share approach,
for estimating possible outcomes of asbestos-related and environmental
pollution liabilities. The results of the firm's work, which was statistically
based, corroborated, in the aggregate, the results of CIGNA's work, which was
largely based on the judgment of experienced claims professionals in reviewing
claim files, as described above. This corroboration between two different
approaches to estimating CIGNA's asbestos-related and environmental pollution
liabilities provided confidence in the results and supported CIGNA's decision
to increase its reserves in 1995.
In 1993, following a re-evaluation, reserves of $489 million ($375
million, net of reinsurance; $244 million after-tax) were recorded for future
legal and associated expenses for reported asbestos-related claims ($72
million, net of reinsurance), environmental pollution claims ($268 million, net
of reinsurance) and long-term exposure claims ($35 million, net of
reinsurance).
Losses for "assumed reinsurance exposures" for 1995 primarily reflect $31
million ($17 million, net of reinsurance) for London reinsurance exposures. For
1994, losses for "assumed reinsurance exposures" primarily reflect $48 million
($40 million, net of reinsurance) resulting from a review of reserves for
certain reinsurance lines of business (principally closed books of business)
other than London reinsurance exposures. For 1993, losses for "assumed
reinsurance exposures" primarily reflect $55 million ($31 million, net of
reinsurance) for London reinsurance exposures.
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. Reinsurance disputes have increased
in recent years, particularly on larger and more complex claims such as those
related to professional liability, asbestos and London reinsurance exposures.
Reinsurance disputes may increase in the future, and are likely to include
disputes related to environmental pollution. Allowances have been established
for amounts deemed uncollectible. In the third quarter of 1995, CIGNA increased
the allowance for uncollectible reinsurance by $210 million pre-tax, including
$75 million, which is reported as asbestos-related and environmental pollution
prior year development in the table on page 15. The remainder of the increase
($135 million) relates to CIGNA's assumed reinsurance business that it
previously exited and domestic commercial business. While future charges for
unrecoverable reinsurance may materially affect results of operations in future
periods, such amounts are not expected to have a material adverse effect on
CIGNA's liquidity or financial condition.
Gross and net losses for "other" prior year development in 1995 reflect
unfavorable development on workers' compensation ($114 million, net of
reinsurance) and long-term exposures ($34 million, net of reinsurance),
partially offset by favorable loss reserve development on commercial packages,
commercial fire, and general and excess liability lines of business. For 1994,
"other" prior year development was primarily attributable to workers'
compensation ($74 million, net of reinsurance), long-term exposures ($31
million, net of reinsurance) and the general and excess liability line of
business. In addition, in 1994 CIGNA performed an actuarial review of certain
businesses, including captives, that are substantially reinsured. Such review
resulted in a reduction in gross loss reserves of approximately $250 million,
with a corresponding decrease in reinsurance recoverables. In 1993, other prior
year development was primarily attributable to losses for long-term exposures
($76 million, net of reinsurance), including the $35 million previously
discussed, and the commercial packages line of business.
CIGNA's reinsurance recoverables were approximately $6.7 billion and $7.1
billion as of December 31, 1995 and 1994, net of allowances for unrecoverable
reinsurance of approximately $700 million and $435 million, respectively.
CIGNA recognized significant recoveries in 1995, 1994 and 1993 from
reinsurance arrangements as shown in the table on page 15. Reinsurance
recoveries for all periods presented, including recoveries for asbestos-related
and environmental pollution claims, increased or decreased as a result of
comparable changes in gross losses. Reinsurance recoveries are also affected by
the factors previously noted for "unrecoverable reinsurance".
CIGNA expects to continue to have significant recoveries from its
reinsurance arrangements, including recoveries of asbestos-related and
environmental pollution losses. However, the extent of recoveries in the
aggregate, including for asbestos-related and environmental pollution losses,
will depend on future gross loss experience and the particular reinsurance
arrangements to which future losses relate.
- ------------------------------------------------------------------------------
16
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
At December 31, 1995 and 1994, approximately 12% of CIGNA's reinsurance
recoverables related to paid claims. The timing and collectibility of such
recoverables have not had, and are not expected to have, a material adverse
effect on CIGNA's liquidity.
OTHER OPERATIONS
Other Operations primarily includes unallocated investment income, expenses
(principally debt service) and taxes. Also included in Other Operations are the
results of CIGNA's settlement annuity business and non-insurance operations
engaged primarily in investment and real estate activities.
Losses for Other Operations were $58 million, $85 million and $94 million
for 1995, 1994 and 1993, respectively. After-tax realized investment results
included in these amounts were gains of $17 million in 1995, compared with
losses of $4 million and $16 million in 1994 and 1993, respectively.
Excluding after-tax realized investment results, losses were $75 million
for 1995, $81 million for 1994 and $78 million for 1993. Losses for all three
years are comparable, excluding, for 1994, a gain of $20 million after-tax from
the sale of a California personal automobile and homeowners insurance business,
a charge of $16 million after-tax resulting from reserve strengthening in the
settlement annuity business and an $8 million after-tax loss for an oil and gas
divestiture.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
(In millions)
- ------------------------------------------------------------------------------------------
FINANCIAL SUMMARY 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-term investments $ 1,113 $ 853 $ 1,357
Cash and cash equivalents 1,559 1,693 1,211
Short-term debt 414 271 351
Long-term debt 1,066 1,389 1,235
Shareholders' equity 7,157 5,811 6,575
- ------------------------------------------------------------------------------------------
</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. Property and casualty, as well as accident and health
reserves, including long-term disability, consist of both short-term and
long-term liabilities. Life insurance and pension plan 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.
Accident and health claim demands are stable and predictable but generally
shorter term, requiring greater liquidity.
Generally, CIGNA has met its operating requirements by maintaining
appropriate levels of liquidity in its investment portfolio and utilizing
overall positive cash flows. Overall cash flows have been constrained by
negative cash flows in the property and casualty business, resulting from
operating losses and claim payments related to insurance reserves established
in prior periods. Liquidity for CIGNA and its insurance subsidiaries has
remained strong, as evidenced by significant amounts of short-term investments
and cash and cash equivalents, which totaled $2.7 billion and $2.5 billion as
of December 31, 1995 and 1994, respectively.
During 1995, cash and cash equivalents decreased $134 million to $1.6
billion as of December 31, 1995. This decrease primarily reflects net
investment purchases ($3.6 billion) and payments of dividends on CIGNA common
stock ($222 million). The decrease was partially offset by deposits and
interest credited, net of withdrawals, to contractholder deposit funds ($2.6
billion), proceeds from the issuance of long-term debt ($88 million), and cash
flows from operating activities ($1.1 billion) resulting from earnings and the
timing of cash receipts and cash disbursements. Cash flow from operating
activities was constrained by negative cash flow of approximately $400 million
from the property and casualty business, reflecting claim payments related to
insurance reserves established in prior periods.
During 1994, cash and cash equivalents increased $482 million from $1.2
billion as of December 31, 1993. This increase primarily reflects the issuance
of long-term debt ($158 million); deposits and interest credited, net of
withdrawals, to contract-holder deposit funds ($2.2 billion); and cash flows
from operating activities ($475 million) resulting from earnings and the
timing of cash receipts and cash disbursements. The increase was partially
offset by net investment purchases ($2.0 billion), payments of dividends on
CIGNA common stock ($219 million) and debt repayments ($46 million). Cash flow
from operating activities was constrained by negative cash flow from the
property and casualty business of approximately $200 million resulting from
operating losses.
The 1993 increase in cash and cash equivalents primarily reflects deposits
and interest credited, net of withdrawals, to contractholder deposit funds;
issuance of long-term debt; and cash flows from operating activities 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.
- ------------------------------------------------------------------------------
17
<PAGE> 13
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, 1995, 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.
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 businesses.
CIGNA had $1.1 billion of long-term debt outstanding at December 31, 1995,
compared with $1.4 billion at December 31, 1994. The decrease in long-term debt
primarily reflects the reclassification of $150 million of CIGNA's 8% Notes due
September 1996 to short-term, and conversions of $248 million of CIGNA's 8.2%
Convertible Debentures into 3.6 million shares of CIGNA common stock. The
decline in long-term debt was partially offset by the issuance of $25 million
of 7.17% Notes due in 2002, $25 million of 8.16% Notes due in 2000 and $36
million of medium-term notes. The proceeds from these issuances were used for
general corporate purposes.
At December 31, 1995, CIGNA had approximately $800 million remaining under
an effective shelf registration statement filed with the Securities and
Exchange Commission that may be issued as debt, equity securities or both,
depending upon market conditions and CIGNA's capital requirements.
CIGNA contributed approximately $250 million and $150 million of capital
during 1994 and 1993, respectively, to the domestic property and casualty
operations, as a result of continued losses. Also, in connection with the
domestic property and casualty restructuring, CIGNA contributed $375 million of
additional capital to the run-off operations. This contribution, which is
reflected in the run-off operations' statutory surplus as of December 31, 1995,
was funded in 1996 through internal sources. See Other Matters for additional
information.
INVESTMENT ASSETS
<TABLE>
<CAPTION>
(In millions)
- ---------------------------------------------------------------------------
FINANCIAL SUMMARY 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Fixed maturities: at fair value $ 36,241 $ 18,521
Fixed maturities: at amortized cost -- 12,296
Equity securities 661 1,806
Mortgage loans 11,010 9,970
Real estate 1,283 1,747
Other, primarily policy loans 8,515 6,579
- ---------------------------------------------------------------------------
Total investment assets $ 57,710 $ 50,919
- ----------------------------------------------------=======================
</TABLE>
CIGNA's investment strategy is to manage the characteristics of investment
assets, such as liquidity, currency, yield and duration, to reflect the
underlying characteristics of the related insurance and contractholder
liabilities, which vary among CIGNA's principal product lines. In connection
with this investment strategy, CIGNA uses derivative instruments through
hedging applications to manage market risk. Additional information regarding
CIGNA's investment assets and related accounting policies is included in Notes
2, 4, 5 and 20 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>
- ---------------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Fixed maturities 30% 32%
Mortgage loans 58% 57%
Real estate 57% 55%
- ---------------------------------------------------------------------------
</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.
- ------------------------------------------------------------------------------
18
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
FIXED MATURITIES
Investments in fixed maturities (bonds) include publicly traded and
private placement debt securities; asset-backed securities, including
collateralized mortgage obligations (CMOs); and redeemable preferred stocks.
As of December 31, 1995, fixed maturities classified as available-for-sale
had an aggregate fair value, including policyholder share, that was greater
(less) than amortized cost by $3.0 billion, compared with approximately ($378)
million as of December 31, 1994. The increase in unrealized appreciation
primarily reflects the downward movement in interest rates since December 31,
1994.
Quality Ratings
As of December 31, 1995, $34.7 billion, or 96%, of bonds were investment
grade, and $1.5 billion, or 4%, were below investment grade (BA and below, or
equivalent).
The quality ratings of CIGNA's below investment grade bonds are
concentrated toward the higher end of the non-investment grade spectrum.
Approximately 29% of 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 results of operations, although such effects are not expected to be
material to CIGNA's liquidity or financial condition.
Potential Problem Bonds
Potential problem bonds are fully current but judged by management to have
certain characteristics that increase the likelihood of problem classification.
Potential problem bonds, including amounts attributable to policyholder
contracts, were $137 million as of December 31, 1995, compared with $141
million as of December 31, 1994. There were no cumulative write-downs for
potential problem bonds as of December 31, 1995 and 1994. Potential problem
bonds attributable to policyholder contracts represented 29% and 17% of total
potential problem bonds at December 31, 1995 and 1994, respectively.
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, 1995 and 1994, problem bonds, including amounts attributable to
policyholder contracts, were $196 million and $307 million, net of related
cumulative write-downs of $140 million and $119 million, respectively. Problem
bonds attributable to policyholder contracts represented 33% and 37% of total
problem bonds at December 31, 1995 and 1994, respectively.
Cumulative Write-downs For Bonds
Cumulative write-downs for bonds as of December 31, 1995 and 1994 were
$144 million and $123 million, respectively, including $55 million and $50
million attributable to policyholder contracts. Also, cumulative write-downs as
of December 31, 1995 and 1994 included $4 million for bonds no longer
classified as problem or potential problem bonds.
During 1995 and 1994, write-downs of $75 million and $50 million,
respectively, were established for problem bonds. Such amounts included $26
million and $22 million attributable to policyholder contracts for 1995 and
1994, respectively. The adverse after-tax effect of write-downs on CIGNA's net
income was $32 million, $19 million and $18 million for 1995, 1994 and 1993,
respectively.
In 1995 and 1994, certain bonds were restructured into equity securities.
Accordingly, assets of $3 million and $27 million, which were net of cumulative
write-downs of $3 million and $6 million, respectively, were transferred from
bonds to equity securities. In addition, during 1995 and 1994, write-downs of
$5 million and $12 million, respectively, were established for equity
securities. Such amounts included $2 million and $1 million attributable to
policyholder contracts for 1995 and 1994, respectively. As of December 31, 1995
and 1994, CIGNA had $34 million and $57 million, respectively, of cumulative
write-downs for equity securities, including $5 million and $14 million
attributable to policyholder contracts.
- ------------------------------------------------------------------------------
19
<PAGE> 15
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 on policyholder
contracts and on CIGNA's net income for the year ended December 31 is shown in
the following table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
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 $ 20 $ 37 $ 23 $ 40 $ 35 $ 46
Less net investment income received 8 16 11 15 19 27
---- ---- ---- ---- ---- ----
Forgone investment income 12 21 12 25 16 19
Tax effect -- (8) -- (9) -- (7)
- -----------------------------------------------------------------------------------------------------------------------------------
Net effect of non-accruals $ 12 $ 13 $ 12 $ 16 $ 16 $ 12
- --------------------------------------------------------===========================================================================
</TABLE>
MORTGAGE LOANS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
As of December 31,
1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Mortgage loans (in millions) $ 11,010 $ 9,970
Property type:
Retail facilities 42% 39%
Office buildings 35 37
Apartment buildings 12 11
Hotels 6 7
Other 5 6
- ---------------------------------------------------------------------------
Total 100% 100%
- ----------------------------------------------------=======================
</TABLE>
CIGNA's investment strategy requires diversification of the mortgage loan
portfolio. This strategy includes guidelines relative to property type,
location and borrower 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.
Adverse conditions in real estate markets and more stringent lending
practices by financial institutions have affected scheduled maturities of
mortgage loans. During 1995, approximately $796 million of mortgage loans was
scheduled to mature, of which $207 million was paid in full, $146 million was
extended at existing loan rates for a weighted average of 11 months and $369
million was refinanced at current market rates. Mortgage loan extensions and
refinancings are loans in good standing. The remaining scheduled maturities
were problem mortgage loans ($46 million -- foreclosed; $18 million --
restructured; and $10 million -- delinquent). The effect of not receiving
timely cash payments on maturing mortgage loans is not expected to have a
material adverse effect on CIGNA's future results of operations, liquidity or
financial condition.
- ------------------------------------------------------------------------------
20
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
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. Potential problem
mortgage loans, including amounts attributable to policyholder contracts, were
$211 million as of December 31, 1995, compared with $350 million as of December
31, 1994, net of related valuation reserves of $29 million and $55 million,
respectively. Potential problem mortgage loans attributable to policyholder
contracts represented 59% and 57% of total potential problem mortgage loans at
December 31, 1995 and 1994, respectively.
As discussed in Note 2 to the Financial Statements, CIGNA adopted SFAS
Nos. 114 and 118. Implementation of these standards as of January 1, 1995
resulted in a decline of $29 million in valuation reserves for potential
problem mortgage loans, $16 million attributable to policyholder contracts and
$13 million attributable to CIGNA.
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
or extend the maturity. As of December 31, 1995, restructured mortgage loans
with a carrying value of approximately $347 million had their original maturity
date extended, with an average extension of approximately four years.
Restructured mortgage loans generated annualized cash returns averaging
approximately 7 1/2% as of December 31, 1995. During 1995, approximately $70
million of restructured mortgage loans were reclassified to loans in good
standing since they were performing under the terms of the restructured loan
agreement and, at the time of restructure, such terms were generally equivalent
to terms that CIGNA was willing to accept for a comparable new loan.
As of December 31, 1995 and 1994, problem mortgage loans, including
amounts attributable to policyholder contracts, were $575 million and $796
million, net of valuation reserves of $59 million and $124 million,
respectively. Problem mortgage loans attributable to policyholder contracts
represented 56% and 57% of total problem mortgage loans at December 31, 1995
and 1994, respectively.
As of December 31, problem mortgage loans by property type and by
geographic region, including amounts attributable to policyholder contracts,
were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(In millions) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
PROPERTY TYPE:
Office buildings $ 294 $ 393
Hotels 138 190
Retail facilities 59 87
Apartment buildings 35 50
Other 49 76
- ---------------------------------------------------------------------------
Total $ 575 $ 796
- -------------------------------------------------------====================
GEOGRAPHIC REGION:
Middle Atlantic $ 210 $ 228
Central 101 215
Pacific 99 117
New England 69 114
South Atlantic 41 70
Other 55 52
- ---------------------------------------------------------------------------
Total $ 575 $ 796
- -------------------------------------------------------====================
</TABLE>
Valuation Reserves For Mortgage Loans
Valuation reserves for mortgage loans at December 31, 1995 and 1994 were
$88 million and $179 million, respectively, including $61 million and $95
million attributable to policyholder contracts. Valuation reserves established
for problem and potential problem mortgage loans during 1995 and 1994 were $13
million and $32 million, respectively. Such amounts included $10 million and
$24 million attributable to policyholder contracts for 1995 and 1994,
respectively. The adverse after-tax effect of the net increase in valuation
reserves on CIGNA's results was $2 million, $5 million and $40 million for
1995, 1994 and 1993, respectively.
- ------------------------------------------------------------------------------
21
<PAGE> 17
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 on
policyholder contracts and on CIGNA's net income for the year ended December 31
is shown in the following table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
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 $ 47 $ 28 $ 76 $ 46 $ 96 $ 54
Less net investment income received 41 27 52 29 68 30
---- ---- ---- ---- ---- ----
Forgone investment income 6 1 24 17 28 24
Tax effect -- -- -- (6) -- (8)
- -----------------------------------------------------------------------------------------------------------------------------------
Net effect of non-accruals $ 6 $ 1 $ 24 $ 11 $ 28 $ 16
- --------------------------------------------------------===========================================================================
</TABLE>
REAL ESTATE
Investment real estate includes real estate held for the production of
income and real estate held for sale, primarily 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) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Real estate held for sale
(primarily foreclosure properties) $1,050 $1,228
Less cumulative write-downs 272 281
Less valuation reserves 58 55
------ ------
720 892
------ ------
Real estate held for the production
of income 614 904
Less valuation reserves 51 49
------ ------
563 855
- ---------------------------------------------------------------------------
Investment real estate $1,283 $1,747
- ------------------------------------------------------=====================
</TABLE>
Foreclosure properties attributable to policyholder contracts represented
58% and 59% of total foreclosure properties at December 31, 1995 and 1994,
respectively.
As of December 31, real estate held for sale, primarily foreclosure
properties, by property type and by geographic region, including amounts
attributable to policyholder contracts, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(In millions) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
PROPERTY TYPE:
Office buildings $ 609 $ 629
Hotels 34 173
Retail facilities 29 52
Other 48 38
- ---------------------------------------------------------------------------
Total $ 720 $ 892
- -------------------------------------------------------====================
GEOGRAPHIC REGION:
Central $ 260 $ 180
Pacific 148 219
Middle Atlantic 122 145
South Atlantic 86 213
New England 61 63
Other 43 72
- ---------------------------------------------------------------------------
Total $ 720 $ 892
- -------------------------------------------------------====================
</TABLE>
- ------------------------------------------------------------------------------
22
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS
Real Estate Write-downs And Valuation Reserves
Cumulative write-downs and valuation reserves for real estate at
December 31, 1995 and 1994 were $381 million and $385 million, respectively,
including $199 million and $212 million attributable to policyholder contracts.
Write-downs and valuation reserves established for real estate during 1995 and
1994 were $27 million and $48 million, respectively. Such amounts included $18
million and $28 million attributable to policyholder contracts for 1995 and
1994, respectively. The adverse after-tax effect of write-downs and the net
increase in valuation reserves on CIGNA's net income was $6 million, $13
million and $24 million for 1995, 1994 and 1993, respectively.
SUMMARY
The adverse effects of write-downs and changes in valuation reserves
("write-downs and reserves") as well as of non-accruals on policyholder
contracts and on CIGNA's net income for the year ended December 31 were as
follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
Policyholder Policyholder Policyholder
(In millions) Contracts CIGNA Contracts CIGNA Contracts CIGNA
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Write-downs and reserves:
Bonds $ 26 $ 32 $ 22 $ 19 $ 15 $ 18
Mortgage loans 10 2 24 5 48 40
Real estate 18 6 28 13 51 24
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 54 $ 40 $ 74 $ 37 $ 114 $ 82
- --------------------------------------------------------===========================================================================
Non-accruals:
Bonds $ 12 $ 13 $ 12 $ 16 $ 16 $ 12
Mortgage loans 6 1 24 11 28 16
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 18 $ 14 $ 36 $ 27 $ 44 $ 28
- --------------------------------------------------------===========================================================================
</TABLE>
Economic conditions, including real estate market conditions, have
improved. However, additional losses from problem investments are expected to
occur for specific investments in the normal course of business, particularly
due to continuing weak conditions in certain office building markets. Assuming
no significant deterioration in economic conditions, CIGNA does not expect
additional non-accruals, write-downs and reserves to materially affect future
results of operations, liquidity or financial condition, or to result in a
significant decline in the aggregate carrying value of its assets.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for historical information provided in this Management's Discussion
and Analysis, statements made throughout this document are forward-looking and
contain information about financial results, economic conditions, trends and
known uncertainties. CIGNA cautions the reader that actual results could differ
materially from those expected by CIGNA, depending on the outcome of certain
factors (some of which are described with the forward-looking statements)
including: 1) adverse catastrophe experience in CIGNA's property and casualty
businesses; 2) adverse property and casualty loss development for events that
CIGNA insured in prior years; 3) an increase in medical costs in CIGNA's health
care operations, including increases in utilization and costs of medical
services; 4) heightened competition, particularly price competition, reducing
product margins in CIGNA's businesses; and 5) significant changes in interest
rates.
- ------------------------------------------------------------------------------
23
<PAGE> 19
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(In millions, except per share amounts)
- ------------------------------------------------------------------------------------------
For the year ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and fees $ 13,914 $ 13,912 $ 13,712
Net investment income 4,296 3,946 3,902
Other revenues 512 492 506
Realized investment gains 233 42 282
-------- ------- --------
Total revenues 18,955 18,392 18,402
-------- ------- --------
BENEFITS, LOSSES AND EXPENSES
Benefits, losses and settlement expenses 13,855 12,926 13,419
Policy acquisition expenses 1,181 1,166 1,210
Other operating expenses 3,668 3,495 3,608
-------- ------- --------
Total benefits, losses and expenses 18,704 17,587 18,237
-------- ------- --------
INCOME BEFORE INCOME TAXES 251 805 165
-------- ------- --------
Income taxes (benefits):
Current 258 224 413
Deferred (218) 27 (482)
-------- ------- --------
Total taxes 40 251 (69)
-------- ------- --------
NET INCOME 211 554 234
Common dividends declared (222) (219) (219)
Retained earnings, beginning of year 4,052 3,717 3,702
- ------------------------------------------------------------------------------------------
RETAINED EARNINGS, END OF YEAR $ 4,041 $ 4,052 $ 3,717
- ----------------------------------------------------======================================
EARNINGS PER SHARE $ 2.86 $ 7.66 $ 3.25
- ----------------------------------------------------======================================
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
- ------------------------------------------------------------------------------
24
<PAGE> 20
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
(In millions, except per share amounts)
- ---------------------------------------------------------------------------------------------------------------
As of December 31, 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available-for-sale, at fair value (amortized cost, $33,275; $18,899) $ 36,241 $ 18,521
Held-to-maturity, at amortized cost (fair value, $12,276) -- 12,296
Equity securities, at fair value (cost, $565; $1,651) 661 1,806
Mortgage loans 11,010 9,970
Policy loans 7,107 5,355
Real estate 1,283 1,747
Other long-term investments 295 371
Short-term investments 1,113 853
-------- --------
Total investments 57,710 50,919
Cash and cash equivalents 1,559 1,693
Accrued investment income 908 835
Premiums, accounts and notes receivable 4,268 3,986
Reinsurance recoverables 7,120 7,486
Deferred policy acquisition costs 1,109 1,128
Property and equipment, net 864 914
Deferred income taxes, net 1,866 2,264
Other assets 1,149 1,161
Goodwill 1,118 1,165
Separate account assets 18,232 14,551
- ---------------------------------------------------------------------------------------------------------------
Total $ 95,903 $ 86,102
- --------------------------------------------------------------------------------------=========================
LIABILITIES
Contractholder deposit funds $ 30,055 $ 27,000
Unpaid claims and claim expenses 19,303 19,246
Future policy benefits 12,007 10,453
Unearned premiums 2,176 2,575
-------- --------
Total insurance and contractholder liabilities 63,541 59,274
Accounts payable, accrued expenses and other liabilities 5,408 4,726
Current income taxes 187 156
Short-term debt 414 271
Long-term debt 1,066 1,389
Separate account liabilities 18,130 14,475
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 88,746 80,291
- ---------------------------------------------------------------------------------------------------------------
CONTINGENCIES -- NOTE 19
SHAREHOLDERS' EQUITY
Common stock (shares issued, 87; 83) 87 83
Additional paid-in capital 2,536 2,248
Net unrealized appreciation (depreciation), fixed maturities 1,025 (122)
Net unrealized appreciation, equity securities 73 141
Net translation of foreign currencies (27) (27)
Retained earnings 4,041 4,052
Less treasury stock, at cost (578) (564)
- ---------------------------------------------------------------------------------------------------------------
Total shareholders' equity 7,157 5,811
- ---------------------------------------------------------------------------------------------------------------
Total $ 95,903 $ 86,102
- --------------------------------------------------------------------------------------=========================
SHAREHOLDERS' EQUITY PER SHARE $ 93.76 $ 80.46
- --------------------------------------------------------------------------------------=========================
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
- ------------------------------------------------------------------------------
25
<PAGE> 21
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
(In millions)
- ----------------------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 211 $ 554 $ 234
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Insurance liabilities 550 (853) 575
Reinsurance recoverables 362 862 380
Premiums, accounts and notes receivable (184) (10) 94
Accounts payable, accrued expenses, other liabilities and current income taxes 589 (119) 608
Deferred income taxes, net (218) 27 (482)
Realized investment gains (233) (42) (282)
Gain on sale of subsidiaries and other equity interests -- (28) (29)
Other, net 27 84 22
--------- --------- ---------
Net cash provided by operating activities 1,104 475 1,120
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments sold:
Fixed maturities--available-for-sale 6,492 4,868 --
Fixed maturities--held-to-maturity -- 12 1,012
Equity securities 1,668 681 2,259
Mortgage loans 430 601 1,182
Other (primarily short-term investments) 16,969 16,076 19,317
Investment maturities and repayments:
Fixed maturities--available-for-sale 1,144 1,946 --
Fixed maturities--held-to-maturity 2,177 2,624 5,162
Mortgage loans 389 194 210
Investments purchased:
Fixed maturities--available-for-sale (9,906) (7,809) --
Fixed maturities--held-to-maturity (1,790) (2,477) (8,553)
Equity securities (348) (606) (1,587)
Mortgage loans (1,829) (953) (1,005)
Other (primarily short-term investments) (18,957) (17,109) (21,133)
Proceeds from sale of subsidiaries and other equity interests -- 58 36
Other, net (152) (198) (111)
--------- --------- ---------
Net cash used in investing activities (3,713) (2,092) (3,211)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits and interest credited to contractholder deposit funds 7,346 6,424 7,565
Withdrawals and benefit payments from contractholder deposit funds (4,733) (4,217) (5,166)
Net change in commercial paper (13) (38) (48)
Issuance of long-term debt 88 158 327
Repayment of debt (9) (46) (148)
Issuance of common stock 21 5 6
Common dividends paid (222) (219) (219)
--------- --------- ---------
Net cash provided by financing activities 2,478 2,067 2,317
--------- --------- ---------
Effect of foreign currency rate changes on cash (3) 32 (26)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (134) 482 200
Cash and cash equivalents, beginning of year 1,693 1,211 1,011
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 1,559 $ 1,693 $ 1,211
- --------------------------------------------------------------------------------------============================================
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds $ 233 $ 531 $ 121
Interest paid $ 123 $ 117 $ 116
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
- ------------------------------------------------------------------------------
26
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF BUSINESS
CIGNA Corporation's subsidiaries provide insurance and related financial
services throughout the United States and in many locations worldwide.
Principal products and services include group life and health insurance,
managed care products and related services, individual life and health
insurance and annuity products, retirement and investment products and
services, and property and casualty insurance.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION: The consolidated financial statements include
the accounts of CIGNA Corporation and all significant subsidiaries (CIGNA).
These consolidated financial statements have been prepared in conformity with
generally accepted accounting principles, and reflect management's estimates
and assumptions, such as those regarding medical costs and interest rates, that
affect the recorded amounts. Significant estimates used in determining
insurance and contractholder liabilities and related reinsurance recoverables,
and valuation allowances for investment assets and deferred tax assets are
discussed throughout the Notes to the Financial Statements.
Certain reclassifications have been made to prior years' amounts to
conform with the 1995 presentation.
B) RECENT ACCOUNTING PRONOUNCEMENTS: In 1993, CIGNA implemented Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115 required that debt and
equity securities be classified into different categories and carried at fair
value if they are not classified as held-to-maturity. During the fourth quarter
of 1995, the Financial Accounting Standards Board (FASB) issued a guide to
implementation of SFAS No. 115, which permits a one-time opportunity to
reclassify securities subject to SFAS No. 115. Consequently, CIGNA reclassified
all held-to-maturity securities to available-for-sale as of December 31, 1995.
The non-cash reclassification of these securities, which had an aggregate
amortized cost of $11.8 billion and fair value of $12.8 billion, resulted in an
increase of approximately $300 million, net of policyholder-related amounts and
deferred income taxes, in net unrealized appreciation included in Shareholders'
Equity as of December 31, 1995.
In 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," which provides guidance on the accounting and disclosure
for impaired loans. In 1994, the FASB issued SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - - Income Recognition and Disclosures,"
which eliminates the income recognition requirements of SFAS No. 114. CIGNA
adopted SFAS Nos. 114 and 118 in the first quarter of 1995, which resulted in
an $8 million increase in net income.
In 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
requires write-down to fair value when long-lived assets to be held and used
are impaired. Long-lived assets to be disposed of, including real estate held
for sale, must be carried at the lower of cost or fair value less costs to
sell. Depreciation of assets to be disposed of is prohibited. CIGNA will adopt
this standard in the first quarter of 1996. The effect on CIGNA's results of
operations, liquidity and financial condition is not expected to be material.
In 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," effective for 1996 financial statements. This statement provides
guidance on the prospective accounting and reporting for the cost of
stock-based compensation. Cost related to stock options is permitted to be
recorded or disclosed, and such cost must be measured at the grant date based
upon estimated fair values using option pricing models. CIGNA will disclose the
effect of stock-based compensation in its 1996 financial statements.
C) FINANCIAL INSTRUMENTS: In the normal course of business, CIGNA enters
into transactions involving various types of financial instruments, including
investments such as fixed maturities and equity securities; debt; and
off-balance-sheet financial instruments such as investment and loan commitments
and financial guarantees. These instruments have credit risk and also may be
subject to risk of loss due to interest rate and market fluctuations. CIGNA
evaluates and monitors each financial instrument individually and, where
appropriate, uses certain derivative instruments or obtains collateral or other
forms of security to minimize risk of loss. See Note 20 for additional
information on the fair value of financial instruments.
D) INVESTMENTS: Investments in fixed maturities include bonds;
asset-backed securities, including collateralized mortgage obligations (CMOs);
and redeemable preferred stocks. Fixed maturities classified as
available-for-sale are carried at fair value, with unrealized appreciation or
depreciation included in Share-holders' Equity, and those classified as
held-to-maturity are carried at amortized cost, net of impairments. Fixed
maturities are considered impaired and written down to fair value when a
decline in value is considered to be other than temporary.
Mortgage loans are carried principally at unpaid principal balances, net
of valuation reserves. Mortgage loans are considered impaired when it is
probable that CIGNA will be unable to collect all amounts according to the
contractual terms of the loan agreement. If impaired, a valuation reserve is
utilized when a decline in the fair value of the underlying collateral is below
the carrying value.
- ------------------------------------------------------------------------------
27
<PAGE> 23
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. Real
estate investments held for sale are generally those which are acquired through
the foreclosure of mortgage loans. These assets are valued at their fair value
at the time of foreclosure. The fair value is established as the new cost
basis and the asset acquired 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. Equity securities and short-term investments
are classified as available-for-sale.
Policy loans generally are carried at unpaid principal balances.
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-related amounts and net of deferred income taxes, if applicable,
for investments carried at fair value are included in Shareholders' Equity.
See Note 4(F) for a discussion of CIGNA's accounting policies for
derivative financial instruments.
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. Allowances are established for amounts
estimated to be 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
estimated to be unrecoverable, they are expensed. If such costs are estimated
to be unrecoverable as a result of treating unrealized investment gains and
losses as though they had been realized, a deferred acquisition cost valuation
allowance may be established or adjusted, with a comparable offset in net
unrealized appreciation (depreciation).
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 $1.1 billion
and $977 million at December 31, 1995 and 1994, respectively.
I) OTHER ASSETS: Other Assets consists of various insurance-related
assets, principally ceded unearned premiums and reinsurance deposits.
J) 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 estimated to be derived from the acquisitions. CIGNA evaluates the
carrying amount of goodwill by analyzing historical and estimated future income
and undiscounted estimated cash flows of the related businesses. Goodwill is
written down when impaired. Amortization periods are revised if it is estimated
that the remaining period of benefit of the goodwill has changed. Accumulated
amortization was $909 million and $862 million at December 31, 1995 and 1994,
respectively.
- ------------------------------------------------------------------------------
28
<PAGE> 24
K) SEPARATE ACCOUNTS: Separate account assets and liabilities are
principally carried at market value, with less than 5% 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) CONTRACTHOLDER DEPOSIT FUNDS: Contractholder Deposit Funds are
liabilities for investment-related and universal life products, which were
$20.1 billion and $10.0 billion, respectively, as of December 31, 1995,
compared with $18.9 billion and $8.1 billion, respectively, as of December 31,
1994. 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 charges.
M) UNPAID CLAIMS AND CLAIM EXPENSES: Liabilities for unpaid claims and
claim expenses are estimates of payments to be made on property and casualty
and health insurance and on prepaid health and dental claims for reported
losses and estimates of losses incurred but not reported. Estimated amounts of
salvage and subrogation are deducted from the liability for unpaid claims.
N) FUTURE POLICY BENEFITS: Future policy benefits are liabilities for
life, health and annuity 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 11%, generally graded down
after 10 to 30 years. Mortality, morbidity and withdrawal assumptions are based
on either CIGNA's own experience or various actuarial tables.
O) UNEARNED PREMIUMS: 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.
P) OTHER LIABILITIES: Other Liabilities consists principally of
postretirement and postemployment benefits and various insurance-related
liabilities, including amounts related to reinsurance contracts, the present
value of obligations related to a closed book of reinsurance business acquired
in 1984, and guaranty fund assessments that can be reasonably estimated.
Q) 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. The
translation gain or loss on such functional currencies, net of applicable
taxes, is generally reflected in Shareholders' Equity. Revenues and expenses
are translated at average rates of exchange prevailing during the year.
R) PREMIUMS AND FEES, REVENUES AND RELATED EXPENSES: Premiums for property
and casualty insurance, group life, accident and health insurance, and prepaid
health and dental coverages are recognized as revenue on a pro-rata basis over
their contract periods. Premiums for individual life and health insurance as
well as individual and group annuity products, excluding universal life and
investment-related products, are recognized as revenue when due. Benefits,
losses and expenses are matched with premiums.
Revenues for universal life products consist of net investment income and
mortality, administration and surrender fees assessed against the fund values
during the period. Benefit expenses for universal life products consist of
benefit claims in excess of fund values and interest credited to fund values.
Revenues for investment-related products consist of net investment income and
contract charges assessed against the fund values during the period. Benefit
expenses for investment-related products primarily consist of interest credited
to the fund values after deduction for investment and risk fees.
S) 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 6.0%, 4.6% and 3.2% of total insurance in
force at December 31, 1995, 1994 and 1993, respectively.
T) INCOME TAXES: CIGNA and its domestic subsidiaries file a consolidated
United States federal income tax return. Included in tax returns for domestic
subsidiaries are the taxable income and taxes paid for certain foreign
subsidiaries. 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. See
Note 9 for additional information.
- ------------------------------------------------------------------------------
29
<PAGE> 25
NOTE 3 -- ACQUISITIONS AND DISPOSITIONS
During 1994, CIGNA sold the California personal automobile and homeowners
insurance business that it had retained from the 1989 sale of its Horace Mann
insurance subsidiaries. A gain on the sale of approximately $20 million
after-tax was recognized in 1994.
CIGNA had other acquisitions and dispositions during 1995, 1994 and 1993,
including the substantial withdrawal from the property and casualty reinsurance
business in 1994, the effects of which were not material to the financial
statements.
NOTE 4 -- INVESTMENTS
A) FIXED MATURITIES: Fixed maturities are net of cumulative write-downs of
$144 million and $123 million, including policyholder share, as of December 31,
1995 and 1994.
As of December 31, 1995, all fixed maturities are classified as
available-for-sale and are carried at fair value. See Note 2(B) for additional
information. The amortized cost and fair value by contractual maturity periods
for available-for-sale fixed maturities (carried at fair value), including
policyholder share, as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Amortized Fair
(In millions) Cost Value
- ---------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 1,767 $ 1,813
Due after one year through five years 9,152 9,670
Due after five years through ten years 9,087 9,884
Due after ten years 5,456 6,620
Asset-backed securities 7,813 8,254
- ---------------------------------------------------------------------------
Total $ 33,275 $ 36,241
- ----------------------------------------------------=======================
</TABLE>
Actual maturities could differ from contractual maturities because issuers
may have the right to call or prepay obligations with or without call or
prepayment penalties. Also, CIGNA may extend maturities in some cases.
Gross unrealized appreciation (depreciation) for fixed maturities,
including policyholder share, by type of issuer was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
December 31, 1995
- --------------------------------------------------------------------------------------------------------
Amortized Fair
(In millions) Cost Appreciation Depreciation Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
(CARRIED AT FAIR VALUE)
Federal government
bonds $ 1,307 $ 344 $ (1) $ 1,650
State and local
government bonds 1,594 226 (4) 1,816
Foreign government
bonds 2,354 161 (7) 2,508
Corporate securities 20,207 1,905 (99) 22,013
Asset-backed
securities 7,813 500 (59) 8,254
- --------------------------------------------------------------------------------------------------------
Total $ 33,275 $ 3,136 $(170) $36,241
- ----------------------------------------------------====================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
December 31, 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
(CARRIED AT FAIR VALUE)
Federal government
bonds $ 1,323 $ 53 $ (47) $ 1,329
State and local
government bonds 1,396 171 (55) 1,512
Foreign government
bonds 1,950 24 (69) 1,905
Corporate securities 9,455 149 (426) 9,178
Asset-backed
securities 4,775 143 (321) 4,597
- --------------------------------------------------------------------------------------------------------
Total $ 18,899 $ 540 $ (918) $ 18,521
- ----------------------------------------------------====================================================
HELD-TO-MATURITY
(CARRIED AT AMORTIZED COST)
State and local
government bonds $ 82 $ 5 $ (3) $ 84
Foreign government
bonds 59 1 (2) 58
Corporate securities 9,862 349 (299) 9,912
Asset-backed
securities 2,293 55 (126) 2,222
- --------------------------------------------------------------------------------------------------------
Total $ 12,296 $ 410 $ (430) $ 12,276
- ----------------------------------------------------====================================================
</TABLE>
Asset-backed securities include investments in CMOs as of December 31,
1995 of $3.3 billion carried at fair value (amortized cost, $3.2 billion). As
of December 31, 1994, investments in CMOs consisted of $2.5 billion carried at
fair value (amortized cost, $2.7 billion) and $162 million carried at amortized
cost (fair value, $172 million). Certain of these securities are backed by
Aaa/AAA-rated government agencies. All other CMO securities have high quality
standards through use of credit
- ------------------------------------------------------------------------------
30
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS
enhancement provided by subordinated securities or mortgage insurance from an
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, represented approximately 1% and 5% of total CMO
investments at December 31, 1995 and 1994, respectively.
At December 31, 1995, contractual fixed maturity investment commitments
approximated $266 million. The majority of investment commitments are for the
purchase of investment grade fixed maturities, bearing interest at a fixed
market rate, 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 1996, with the majority occurring within the first three months.
B) SHORT-TERM INVESTMENTS AND CASH EQUIVALENTS: Short-term investments and
cash equivalents, in the aggregate, included debt securities, principally
corporate securities of $1.4 billion and $1.3 billion, federal government
securities of $159 million and $74 million, and foreign government securities
of $19 million and $29 million, at December 31, 1995 and 1994, respectively.
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, by borrower. Mortgage loans are collateralized by the related property
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, including policyholder share, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(In millions) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Mortgage loans $ 11,010 $ 9,970
-------- --------
Real estate:
Held for sale 720 892
Held for production of income 563 855
-------- --------
Total real estate 1,283 1,747
- ---------------------------------------------------------------------------
Total $ 12,293 $ 11,717
- ----------------------------------------------------=======================
</TABLE>
Valuation reserves and cumulative write-downs related to real estate,
including policyholder share, were $381 million and $385 million as of December
31, 1995 and 1994, respectively.
During 1995, 1994 and 1993, non-cash investing activities included real
estate acquired through foreclosure of mortgage loans, which totaled $146
million, $169 million and $460 million, respectively.
At December 31, mortgage loans and real estate investments comprised the
following property types and geographic regions:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(In millions) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
PROPERTY TYPE:
Office buildings $ 4,804 $ 4,638
Retail facilities 4,696 4,372
Apartment buildings 1,392 1,135
Hotels 731 839
Other 670 733
- ---------------------------------------------------------------------------
Total $ 12,293 $ 11,717
- ----------------------------------------------------=======================
GEOGRAPHIC REGION:
Central $ 3,815 $ 3,534
Pacific 2,772 2,902
Middle Atlantic 2,063 1,835
South Atlantic 1,813 1,794
New England 1,252 1,108
Other 578 544
- ---------------------------------------------------------------------------
Total $ 12,293 $ 11,717
- ----------------------------------------------------=======================
</TABLE>
At December 31, 1995, scheduled mortgage loan maturities were as follows:
1996 -- $1.2 billion; 1997 -- $1.0 billion; 1998 -- $789 million; 1999 -- $1.4
billion; 2000 -- $1.7 billion; and $4.9 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 1995 and 1994, CIGNA refinanced approximately $400 million
and $600 million of its mortgage loans relating to borrowers that were unable
to obtain alternative financing.
At December 31, 1995, CIGNA's total investment in impaired mortgage loans
was $874 million, including $474 million, before valuation reserves totaling
$88 million, and $400 million, which had no valuation reserves. During 1995,
valuation reserves for mortgage loans, including policyholder share, decreased
from $179 million as of December 31, 1994 to $88 million as of December 31,
1995. The net decrease for the year reflects 1) $54 million of mortgage loan
reserves transferred to foreclosed real estate, 2) $50 million of charge-offs,
and 3) a $13 million net increase in valuation reserves.
During 1995, the average total investment in impaired mortgage loans,
before valuation reserves, was approximately $1 billion, and interest income
recorded and cash received on these loans was approximately $75 million.
At December 31, 1995, contractual commitments to extend credit under
commercial mortgage loan agreements amounted to approximately $615 million, all
of which were at a fixed market rate of interest. These commitments expire
within three months, and are diversified by property type and geographic
region.
- ------------------------------------------------------------------------------
31
<PAGE> 27
D) NET UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS: Unrealized
appreciation (depreciation) for investments carried at fair value as of
December 31 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(In millions) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Unrealized appreciation:
Fixed maturities $ 3,136 $ 540
Equity securities 151 320
------- -------
3,287 860
------- -------
Unrealized depreciation:
Fixed maturities (170) (918)
Equity securities (55) (165)
------- -------
(225) (1,083)
------- -------
3,062 (223)
Less policyholder-related amounts 1,408 (169)
------- -------
Shareholder net unrealized
appreciation (depreciation) 1,654 (54)
Less deferred income taxes (benefits) 556 (73)
- ---------------------------------------------------------------------------
Net unrealized appreciation $ 1,098 $ 19
- ----------------------------------------------------=======================
</TABLE>
Net unrealized appreciation (depreciation) for investments carried at fair
value is included as a separate component of Shareholders' Equity, net of
policyholder-related amounts and deferred income taxes. The net unrealized
appreciation (depreciation) for these investments, primarily fixed maturities,
during 1995, 1994 and 1993 was $1.1 billion, ($1.2) billion and $835 million,
respectively.
During 1995, 1994 and 1993, the net unrealized appreciation (depreciation)
for fixed maturities that were carried at amortized cost in the financial
statements was $20 million, ($1.5) billion and ($657) million, respectively.
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) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Fixed maturities $ 102 $ 99
Mortgage loans 17 88
Real estate 288 330
Other long-term investments 8 2
- ---------------------------------------------------------------------------
Total $ 415 $ 519
- -------------------------------------------------------====================
</TABLE>
F) DERIVATIVE FINANCIAL INSTRUMENTS: CIGNA's investment strategy is to
manage the characteristics of investment assets, such as liquidity, currency,
yield and duration, to reflect the underlying characteristics of the related
insurance and contract-holder liabilities, which vary among CIGNA's principal
product lines. In connection with this investment strategy, CIGNA uses
derivative instruments through hedging applications to manage market risk.
Generally, CIGNA uses interest rate swap contracts to create, when
combined with cash flows from variable rate bonds, fixed rate cash flows that
meet its portfolio investment strategy. Currency swaps are used to match the
currency of individual investments to that of the associated liabilities.
Interest rate futures are used to temporarily hedge against changes in market
values of bonds and mortgage loans to be purchased or sold, and stock index
futures may be used to hedge the temporary cash position of equity accounts.
Interest rate futures also are used to hedge interest rate risk associated with
withdrawals by contractholders over a scheduled time period.
Cash requirements arise as a result of CIGNA's derivative activities.
Under interest rate swaps, CIGNA agrees with other parties to exchange, at
specified intervals, the difference between fixed rate and variable rate
interest amounts calculated by reference to an agreed-upon notional principal
amount. Under futures contracts, initial margin requirements are settled with
cash or other instruments and changes in the contract values are settled in
cash daily with the exchange on which the instrument is traded. Under currency
swaps, the parties generally exchange a principal amount in the two relevant
currencies, agreeing to re-exchange principal amounts at a specified future
date using an agreed-upon exchange rate, and agreeing to periodically exchange
amounts equal to interest payments using the agreed-upon exchange rate.
Because CIGNA's use of derivatives is limited to hedging applications,
changes in the market value of the derivatives are substantially offset by
changes in the market value of the hedged assets or underlying liabilities,
minimizing market risk. CIGNA routinely monitors, by individual counterparty,
exposure to credit risk associated with swap contracts. Futures contracts are
exchange-traded and, therefore, credit risk is limited since the exchange
assumes the obligations. CIGNA manages legal risks by following industry
standardized documentation procedures, by monitoring legal developments and,
consistent with its credit exposure policies, by limiting risks associated with
counterparty failure by diversifying the swaps portfolio among approved dealers
of high credit quality.
- ------------------------------------------------------------------------------
32
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS
Changes in the market value of futures contracts that qualify for hedge
accounting are deferred and recorded as adjustments to the carrying value of
the related bond or mortgage loan. Deferred gains and losses are amortized into
net investment income over the life of the investments purchased or recognized
in full as realized investment gains and losses in the event that the
investment or futures contract is sold prior to maturity. Futures contracts
totaled $22 million and $142 million as of December 31, 1995 and 1994,
respectively, and were accounted for as hedges. At December 31, 1995, gains
and losses on futures contracts deferred in anticipation of investment
purchases were $4 million and $1 million, respectively. At December 31, 1994,
gains and losses on futures contracts deferred in anticipation of investment
purchases were $1 million and $3 million, respectively.
Net interest received or paid on an interest rate swap contract is
recognized currently as an adjustment to net investment income. The fair value
of interest rate swap contracts is reported as an adjustment to the fair value
of the related investment. Underlying notional principal amounts associated
with interest rate swap contracts outstanding were $601 million and $770
million at December 31, 1995 and 1994, respectively.
The interest payment cash flows received in U.S. dollars from currency
swaps related to foreign currency denominated investment securities (primarily
Canadian dollars, pounds sterling, Swiss francs and Japanese yen) are
recognized as net investment income when received. The fair value of currency
swaps is reported as an adjustment to the fair value of the related investment.
Underlying principal amounts associated with currency swap contracts
outstanding were $371 million and $414 million at December 31, 1995 and 1994,
respectively.
As of December 31, 1995 and 1994, CIGNA's variable rate investments
consisted of approximately $1.4 billion and $1.2 billion of fixed maturities,
respectively. As of December 31, 1995 and 1994, CIGNA's fixed rate investments
consisted of $34.8 billion and $29.6 billion, respectively, of fixed
maturities, and $11 billion and $10 billion, respectively, of mortgage loans.
Net investment income on bonds and mortgage loans was increased by $10
million and $1 million, respectively, in 1995 as a result of recognizing
amortization of deferred market value changes in futures contracts. Net
investment income on bonds and mortgage loans was increased by $7 million and
$1 million, respectively, in 1994 as a result of recognizing amortization of
deferred market value changes in futures contracts. In addition, the increase
in net investment income for bonds resulting from interest rate swap contracts
was $9 million, $17 million and $26 million for 1995, 1994 and 1993,
respectively.
G) OTHER: As of December 31, 1995 and 1994, CIGNA had no concentration of
investments in a single investee exceeding 10% of Shareholders' Equity.
NOTE 5 -- 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) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities $ 2,587 $ 2,465 $ 2,257
Equity securities 47 67 80
Mortgage loans 932 892 1,006
Policy loans 511 371 255
Real estate 317 327 287
Other long-term investments 77 73 62
Short-term investments 183 128 291
------- ------- --------
4,654 4,323 4,238
Less investment expenses 358 377 336
- ------------------------------------------------------------------------------------------
Net investment income $ 4,296 $ 3,946 $ 3,902
- -----------------------------------------------------=====================================
</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 $1.8 billion for
1995, $1.5 billion for 1994 and $1.6 billion for 1993. Net investment income
for separate accounts, which is not reflected in CIGNA's revenues, was $885
million, $699 million and $611 million for 1995, 1994 and 1993, respectively.
As of December 31, 1995, fixed maturities and mortgage loans on
non-accrual status, including policyholder share, were $196 million and $575
million, including restructured investments of $139 million and $494 million,
respectively. As of December 31, 1994, fixed maturities and mortgage loans on
non-accrual status, including policyholder share, were $307 million and $796
million, including restructured investments of $205 million and $605 million,
respectively. If interest on these investments had been recognized in
accordance with their original terms, net income would have been increased by
$14 million, $27 million and $28 million in 1995, 1994 and 1993, 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) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Realized investment gains (losses):
Fixed maturities $ 26 $ (6) $ 50
Equity securities 187 38 257
Mortgage loans (3) (1) (51)
Real estate 19 10 (46)
Other 4 1 72
------ ------ ------
233 42 282
Less income taxes 55 14 58
- ------------------------------------------------------------------------------------------
Net realized investment gains $ 178 $ 28 $ 224
- -------------------------------------------------------===================================
</TABLE>
- ------------------------------------------------------------------------------
33
<PAGE> 29
Impairments in the value of investments, net of recoveries, that are
included in realized investment gains and losses were $46 million, $50 million
and $100 million in 1995, 1994 and 1993, respectively.
Realized investment gains (losses) for separate accounts, which are not
reflected in CIGNA's revenues, were $412 million, ($51) million and $612
million for 1995, 1994 and 1993, respectively. Realized investment gains
(losses) attributable to policyholder contracts, which also are not reflected
in CIGNA's revenues, were ($7) million, $5 million and $3 million for 1995,
1994 and 1993, respectively.
Sales of available-for-sale fixed maturities and equity securities,
including policyholder share, for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(In millions) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Proceeds from sales $ 8,160 $ 5,549
Gross gains on sales $ 426 $ 232
Gross losses on sales $ (205) $ (222)
- ---------------------------------------------------------------------------
</TABLE>
Prior to the SFAS No. 115 reclassification described in Note 2(B), $218
million of fixed maturities classified as held-to-maturity, including
policyholder share, were transferred to the available-for-sale category in 1995
resulting in the recognition in Shareholders' Equity of unrealized depreciation
of $11 million, net of policyholder-related amounts and deferred income taxes.
During 1994, CIGNA sold $14 million of held-to-maturity fixed maturities,
including policyholder share, resulting in gross proceeds of $12 million and a
pre-tax realized loss of $2 million. In addition, in 1994, $102 million of
fixed maturities classified as held-to-maturity, including policyholder share,
were transferred to the available-for-sale category at fair value, which was
not significantly different from the carrying value. The sales of fixed
maturities classified as held-to-maturity and the transfer of such securities
to the available-for-sale category were the result of significant credit
deterioration of the issuers of the affected investments.
Prior to the adoption of SFAS No. 115, proceeds from voluntary sales of
investments in fixed maturities, including policyholder share, were $1.0
billion in 1993. Such sales resulted in gross realized gains and gross realized
(losses), including policyholder share, of $44 million and ($22) million in
1993. These amounts exclude the effects of sales of fixed maturities that,
prior to the implementation of SFAS No. 115, were classified as short-term
investments.
NOTE 6 -- DEBT
Short and long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(In millions) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM
Commercial paper $ 253 $ 266
Current maturities of long-term debt 161 5
- ---------------------------------------------------------------------------
Total short-term debt $ 414 $ 271
- ----------------------------------------------------=======================
LONG-TERM
Unsecured Debt:
8.2% Convertible Subordinated
Debentures due 2010 $ -- $ 248
8% Notes due 1996 -- 150
8.16% Notes due 2000 25 --
8 3/4% Notes due 2001 100 100
7.17% Notes due 2002 25 --
7.4% Notes due 2003 100 100
6 3/8% Notes due 2006 100 100
8 1/4% Notes due 2007 100 100
7.65% Notes due 2023 100 100
8.3% Notes due 2023 100 100
Medium-term Notes 242 215
Secured Debt (principally by real estate) 174 176
- ---------------------------------------------------------------------------
Total long-term debt $ 1,066 $ 1,389
- ----------------------------------------------------=======================
</TABLE>
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, 1995 and 1994, the weighted average interest rate on commercial paper was
approximately 6%.
Medium-term notes have original maturity dates ranging from approximately
five to ten years and interest rates ranging from 5 3/4% to 9 3/4%. As of
December 31, 1995 and 1994, the weighted average interest rate on medium-term
notes was 8.5% and 8.6%, respectively.
During 1995, CIGNA's 8.2% Convertible Subordinated Debentures due in 2010
were converted through non-cash transactions into approximately 3.6 million
shares of CIGNA common stock.
In 1995, CIGNA issued $25 million of unsecured 8.16% Notes due in 2000,
$25 million of unsecured 7.17% Notes due in 2002 and $36 million in medium-term
notes. The proceeds from these issues were used for general corporate purposes.
- ------------------------------------------------------------------------------
34
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS
In 1994, CIGNA issued $100 million of unsecured 6 3/8% Notes due in 2006
and $12 million in medium-term notes. The proceeds from these issues were used
for general corporate purposes.
As of December 31, 1995, CIGNA had available approximately $650 million in
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.
As of December 31, 1995, CIGNA had approximately $800 million remaining
under an effective shelf registration statement filed with the Securities and
Exchange Commission that may be issued as debt, equity securities or both,
depending upon market conditions and CIGNA's capital requirements.
Maturities of long-term debt for each of the next five years are as
follows: 1996 -- $161 million; 1997 -- $43 million; 1998 -- $86 million; 1999
- -- $60 million; and 2000 -- $57 million.
Interest expense was $120 million, $121 million and $124 million in 1995,
1994 and 1993, respectively.
NOTE 7 -- COMMON AND PREFERRED STOCK
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(Shares in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common: Par value $1
200,000 shares authorized
Outstanding -- January 1 72,225 72,015 71,720
Issued for stock option
and other benefit plans 504 210 295
Issued upon conversion of 8.2%
Convertible Subordinated
Debentures 3,603 -- --
------ ------ ------
Outstanding -- December 31 76,332 72,225 72,015
Treasury shares 11,014 10,844 10,615
- ------------------------------------------------------------------------------------------
Issued -- December 31 87,346 83,069 82,630
- ------------------------------------------------------====================================
</TABLE>
Stock issued under stock option and other benefit plans resulted in
increases in Additional Paid-in Capital of $41 million, $26 million and $16
million in 1995, 1994 and 1993, respectively. Such stock issuances also
resulted in net increases in Treasury Stock of $14 million, $19 million and $8
million in 1995, 1994 and 1993, respectively. In 1995, conversion of CIGNA's
8.2% Convertible Subordinated Debentures resulted in an increase in Common
Stock and Additional Paid-in Capital of $4 million and $247 million,
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 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,
1995, 1994 and 1993.
NOTE 8 -- 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. As of
December 31, 1995, certain of CIGNA's insurance subsidiaries discounted certain
asbestos-related and environmental pollution liabilities, which resulted in an
increase to statutory surplus of approximately $260 million for the property
and casualty insurance companies.
As part of its overall restructuring plan, CIGNA contributed $375 million
of additional capital to certain property and casualty insurance companies. See
Note 18 for additional information on the restructuring.
The amounts of statutory net income (loss) for the year ended, and surplus
as of, December 31 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(In millions) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIFE INSURANCE COMPANIES:
Net income $ 471 $ 514 $ 571
Surplus $ 2,672 $ 2,564 $ 2,630
PROPERTY AND CASUALTY INSURANCE
Companies:
Net income (loss) $ (201) $ 51 $ (331)
Surplus $ 1,589 $ 1,565 $ 1,575
- ------------------------------------------------------------------------------------------
</TABLE>
As a result of property and casualty losses, CIGNA contributed $250
million and $150 million of capital in 1994 and 1993, respectively, to enhance
the capital base of the domestic property and casualty operations. Also during
1993, manage-
- ------------------------------------------------------------------------------
35
<PAGE> 31
ment 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.
CIGNA's insurance subsidiaries are subject to various regulatory
restrictions that limit the amount of annual dividends or other distributions,
such as 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 1996
without prior approval is approximately $770 million. The amount of restricted
net assets as of December 31, 1995 was approximately $6.4 billion.
NOTE 9 -- INCOME TAXES
CIGNA's net deferred tax asset of $1.9 billion and $2.3 billion as of
December 31, 1995 and 1994, respectively, reflects management's belief that
CIGNA's taxable income in future years will be sufficient to realize the net
deferred tax asset based on CIGNA's earnings history and its future
expectations. 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.
CIGNA's deferred tax asset is net of valuation allowances of $48 million
and $47 million as of December 31, 1995 and 1994, 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 will be made if there is a change in management's assessment of the
amount of the deferred tax asset that is realizable. During 1995, 1994 and
1993, the valuation allowance was increased (decreased) by $1 million, ($6)
million and ($29) million, respectively, to reflect management's assessment of
changes related to certain foreign operations.
As of December 31, 1995 and 1994, the net deferred tax asset included a
benefit of $287 million and $125 million, respectively, resulting from tax
basis net operating loss carryforwards of $819 million and $357 million,
respectively. Subject to statutory limitations, these carryforwards are
available to offset taxable income through the year 2010.
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. The balance in the account of approximately
$450 million at December 31, 1995 would result in a tax liability of $158
million 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 completed audits of
the years 1982 through 1990. During 1995, one of two outstanding issues for
those years was resolved with no effect on CIGNA's results of operations. The
remaining issue, which relates only to years prior to 1989, could result in an
assessment of approximately $200 million. CIGNA is contesting this issue in
court. Although the outcome is uncertain, management believes that CIGNA should
prevail.
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) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Loss reserve discounting $ 741 $ 700
Other insurance and contractholder liabilities 718 752
Employee and retiree benefit plans 433 446
Investments, net 211 279
Operating loss carryforwards 287 125
Bad debt expense 123 77
Unrealized depreciation on investments -- 73
Other 195 144
------- -------
Deferred tax assets before valuation allowance 2,708 2,596
Valuation allowance for deferred tax assets (48) (47)
------- -------
Deferred tax assets, net of valuation allowance 2,660 2,549
------- -------
DEFERRED TAX LIABILITIES:
Policy acquisition expenses 52 60
Depreciation 129 140
Unrealized appreciation on investments 556 --
Other 57 85
------- -------
Total deferred tax liabilities 794 285
- ---------------------------------------------------------------------------
Deferred income taxes, net $ 1,866 $ 2,264
- -----------------------------------------------------======================
</TABLE>
- ------------------------------------------------------------------------------
36
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS
The components of income taxes (benefits) for the year ended December 31
were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(In millions) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT TAXES:
U.S. income $ 185 $ 182 $ 373
Foreign income 73 42 40
------- ------- ------
258 224 413
------- ------- ------
DEFERRED TAXES (BENEFITS):
U.S. income (212) 22 (499)
Foreign income (6) 5 17
------- ------- ------
(218) 27 (482)
- ------------------------------------------------------------------------------------------
Total income taxes (benefits) $ 40 $ 251 $ (69)
- -----------------------------------------------------=====================================
</TABLE>
Total income taxes (benefits) for the year ended December 31 were less
than the amount computed using the nominal federal income tax rate of 35% for
the following reasons:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(In millions) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax expense at nominal rate $ 88 $ 282 $ 58
Tax-exempt interest income (34) (37) (45)
Realized investment gains (24) (5) (63)
Dividends received deduction (8) (10) (14)
Amortization of goodwill 16 30 43
Interest on provisions 10 10 9
Resolved federal tax audit issues (7) (7) (3)
Other foreign (1) (4) 24
Valuation allowance 1 (6) (29)
Federal tax rate change -- -- (48)
Other (1) (2) (1)
- ------------------------------------------------------------------------------------------
Total income taxes (benefits) $ 40 $ 251 $ (69)
- ------------------------------------------------------====================================
</TABLE>
Temporary and other differences which resulted in the deferred taxes
(benefits) for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(In millions) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating loss carryforwards $ (162) $ (28) $ (10)
Loss reserve discounting (41) 16 (71)
Other insurance and
contractholder liabilities 34 86 (284)
Realized investment gains (24) (5) (63)
Policy acquisition expenses (8) (11) (65)
Bad debt expense (46) (15) (17)
Investments, net 68 (121) 4
Other foreign (24) 61 80
Cost reduction initiatives (5) 25 (41)
Valuation allowance 1 (6) (29)
Other (11) 25 14
- ------------------------------------------------------------------------------------------
Deferred taxes (benefits) $ (218) $ 27 $ (482)
- ------------------------------------------------------====================================
</TABLE>
NOTE 10 -- 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 plan covering most domestic employees (the Plan) 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.
The following table summarizes the status as of December 31 of pension
plans for which assets exceeded accumulated benefit obligations:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(In millions) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 1,877 $ 1,513
------- -------
Accumulated benefit obligation $ 1,913 $ 1,546
------- -------
Pension liability included in Other Liabilities:
Projected benefit obligation $ 2,318 $ 1,896
Less plan assets at fair value 2,071 1,775
------- -------
Plan assets less than projected
benefit obligation 247 121
Unrecognized net loss from past
experience (225) (117)
Unrecognized prior service cost (28) (66)
Unamortized SFAS 87 transition asset 58 69
- ---------------------------------------------------------------------------
Pension liability $ 52 $ 7
- -----------------------------------------------------======================
</TABLE>
At December 31, 1995 and 1994, plans under which accumulated benefits
exceeded assets had projected benefit obligations of $246 million and $179
million, respectively, and related assets at fair value of $37 million and $27
million for 1995 and 1994, respectively. The accumulated benefit obligation as
of December 31, 1995 and 1994 related to these plans was $187 million and $135
million, respectively. The pension liability included in Other Liabilities
related to these plans was $157 million and $108 million, respectively.
- ------------------------------------------------------------------------------
37
<PAGE> 33
Components of net pension cost for the year ended December 31 were as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(In millions) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost -- benefits earned
during the year $ 83 $ 104 $ 94
Interest accrued on projected
benefit obligation 163 151 138
Actual return on assets (392) (26) (194)
Net amortization and deferral 231 (121) 55
- ------------------------------------------------------------------------------------------
Net pension cost $ 85 $ 108 $ 93
- ------------------------------------------------------====================================
</TABLE>
Determination of the projected benefit obligation was based on an
estimated discount rate of 7.1% and 8.1% for 1995 and 1994, respectively, and
an estimated long-term rate of compensation increase of 4.7% for both 1995 and
1994. The estimated long-term rate of return on assets was 9% for both 1995 and
1994. 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 297,500 shares of CIGNA common stock
at both December 31, 1995 and 1994, with a market value of $31 million and $19
million at December 31, 1995 and 1994, 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 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. CIGNA's contributions
for health care benefits depend upon a retiree's date of retirement, age, years
of service and cost-sharing features, such as deductibles and coinsurance.
Under the terms of the benefit plans, benefit provisions and cost-sharing
features can 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.
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) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Retirees $ 446 $ 456
Other fully eligible plan participants 27 34
Other active plan participants 170 178
----- -----
Total accumulated benefit obligations 643 668
Less plan assets at fair value 54 46
----- -----
Plan assets less than accumulated
benefit obligations 589 622
Unrecognized prior service cost 156 167
Unrecognized net gain from past
experience 158 105
- ---------------------------------------------------------------------------
Other postretirement benefit liability $ 903 $ 894
- -------------------------------------------------------====================
</TABLE>
At December 31, 1995 and 1994, plan assets of $54 million and $46 million,
respectively, represented partial funding for retiree life insurance plans with
accumulated benefit obligations of $131 million and $112 million, respectively,
and such plan assets were invested in the general account assets of CGLIC, with
an estimated long-term rate of return of 7% for both 1995 and 1994.
Components of net other postretirement benefit cost for the year ended
December 31 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(In millions) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost -- benefits earned
during the year $ 14 $ 23 $ 27
Interest accrued on benefit
obligation 44 49 47
Actual return on assets (9) 2 (5)
Net amortization and deferral (13) (16) (9)
- ------------------------------------------------------------------------------------------
Net other postretirement benefit cost $ 36 $ 58 $ 60
- -------------------------------------------------------===================================
</TABLE>
Determination of the accumulated other postretirement benefit obligations
for 1995 and 1994 was based on an estimated discount rate of 7.2% and 8.2%,
respectively, and an estimated long-term rate of compensation increase of 4.5%
for both 1995 and 1994. The estimated rate of future increases in per capita
cost of health care benefits (the health care cost trend rate) was 11.5%
decreasing ratably to 5.0% over seven years, which reflects CIGNA's current
claim experience and management's estimate 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 $80 million and the annual service and interest cost by $10
million, before taxes. Gains and losses that occur because actual experience
differs from that estimated are amortized over the average future service
period of employees.
- ------------------------------------------------------------------------------
38
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS
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.
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 18 for additional information regarding severance
benefits accrued as part of cost reduction plans.
D) CAPITAL ACCUMULATION PLANS: CIGNA sponsors various capital accumulation
plans in which employee contributions on a pre-tax basis (401(k)) are
supplemented by CIGNA matching contributions. Contributions are invested, at
the election of the employee, in one or more of the following investments:
CIGNA common stock fund, several non-CIGNA stock and bond portfolios, and a
fixed-income fund. CIGNA's expense for such plans totaled $37 million for 1995,
compared with $34 million for 1994 and $33 million for 1993.
NOTE 11 -- EMPLOYEE INCENTIVE PLANS
The People Resources Committee of the Board of Directors can award to 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, 1995, 1994
and 1993, stock available for award aggregated 6,007,504 shares, 1,746,135
shares and 3,020,098 shares, respectively. The increase in 1995 was due to the
adoption of a new plan.
Grants of restricted shares of CIGNA common stock during 1995, 1994 and
1993 totaled 321,494 shares, 331,757 shares and 164,994 shares, respectively.
Restricted stock grants of 747,397 shares for 1,418 employees were outstanding
at December 31, 1995.
Options to purchase CIGNA common stock are awarded at market price on the
date of grant and expire no later than 10 years after that date. Certain
outstanding options have a replacement option feature providing that when the
underlying option is exercised by tendering stock a new option is granted
covering shares equal to the number tendered. These options are exercisable at
the market price on the date of the new grant and expire on the expiration date
of the original option. 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>
- ------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding -- January 1 1,611,949 745,614 776,617
Granted 536,823 1,095,200 183,550
Expired or canceled (30,350) (111,922) (25,895)
Exercised (509,533) (116,943) (188,658)
- ------------------------------------------------------------------------------------------
Outstanding -- December 31 1,608,889 1,611,949 745,614
- ---------------------------------------------------=======================================
Average exercise price of
options exercised $ 61.87 $ 52.46 $ 49.45
- ---------------------------------------------------=======================================
</TABLE>
As of December 31, 1995, 683,376 options outstanding were exercisable.
As of December 31, 1995, the exercise price for options outstanding
(covering 1,608,889 shares of common stock held by 311 individuals) ranged from
$48.00 to $112.44.
NOTE 12 -- EARNINGS PER SHARE
Earnings per share were based on net income divided by weighted average
common shares, including common share equivalents, of 73.7 million, 72.3
million and 72.0 million for 1995, 1994 and 1993, respectively.
There was no significant difference between earnings per share on a
primary and a fully diluted basis.
As discussed in Note 6, CIGNA's 8.2% Convertible Subordinated Debentures
were converted into approximately 3.6 million shares of CIGNA common stock
during 1995. If these conversions had taken place on January 1, 1995 and the
related interest expense ($10 million after-tax) were excluded from net income
for the year, earnings per share for 1995 would have been $2.89.
NOTE 13 -- 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 primarily includes
unallocated investment income, expenses (principally debt service) and taxes.
Also included in Other Operations are the results of CIGNA's settlement annuity
business and non-insurance subsidiaries engaged primarily in investment and
real estate activities.
- ------------------------------------------------------------------------------
39
<PAGE> 35
CIGNA's Property and Casualty operations routinely insure various forms of
property, including large property risks. A major catastrophe could have a
material adverse effect on CIGNA's results of operations. However, because
CIGNA, through its risk assessment and accumulation processes, monitors
writings to avoid significant concentrations, it is not likely that such
adverse effect would be material to the Company's liquidity or financial
condition.
CIGNA's operations are not materially dependent on one or a few customers,
brokers or agents.
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) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Property and Casualty:
Domestic $ 2,571 $ 3,004 $ 3,396
International 2,968 2,610 2,365
Other, primarily reinsurance 196 416 567
------- ------- -------
Total Property and Casualty 5,735 6,030 6,328
Employee Life and Health Benefits 9,167 8,650 8,392
Employee Retirement and Savings
Benefits 1,983 1,935 2,111
Individual Financial Services 1,920 1,637 1,447
Other Operations 150 140 124
- ------------------------------------------------------------------------------------------
Total $18,955 $18,392 $18,402
- ----------------------------------------------------======================================
INCOME (LOSS) BEFORE
INCOME TAXES
Property and Casualty:
Domestic $(1,093) $ (389) $ (876)
International 153 76 5
Other, primarily reinsurance (120) (104) (91)
------- ------- -------
Total Property and Casualty (1,060) (417) (962)
Employee Life and Health Benefits 860 829 851
Employee Retirement and Savings
Benefits 284 287 223
Individual Financial Services 231 210 164
Other Operations (64) (104) (111)
- ------------------------------------------------------------------------------------------
Total $ 251 $ 805 $ 165
- ----------------------------------------------------======================================
IDENTIFIABLE ASSETS
Property and Casualty:
Domestic $16,352 $16,445 $17,177
International 7,468 6,541 6,192
Other, primarily reinsurance 2,498 2,649 3,100
------- ------- -------
Total Property and Casualty 26,318 25,635 26,469
Employee Life and Health Benefits 12,206 11,331 11,398
Employee Retirement and Savings
Benefits 37,736 33,939 34,384
Individual Financial Services 15,913 12,195 9,368
Other Operations 3,730 3,002 3,356
- ------------------------------------------------------------------------------------------
Total $95,903 $86,102 $84,975
- ----------------------------------------------------======================================
</TABLE>
NOTE 14 -- FOREIGN OPERATIONS
CIGNA provides international property and casualty and life and health
insurance coverages on a direct and reinsured basis, primarily in Europe, the
Pacific region, Canada and Latin America.
There was no change in Net Translation of Foreign Currencies for the year
ended December 31, 1995. For the year ended December 31, 1994 and 1993, the
change in Net Translation of Foreign Currencies reflects increases (decreases)
of $47 million (including a tax benefit of $16 million) and ($28) million (net
of tax benefit of $7 million), 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) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 3,240 $ 2,991 $ 2,821
Income before income taxes $ 82 $ 32 $ 40
Identifiable assets $ 9,589 $ 8,742 $ 8,411
- ------------------------------------------------------------------------------------------
</TABLE>
CIGNA's income before income taxes included aggregate foreign exchange
transaction losses of $1 million, $5 million and $6 million in 1995, 1994 and
1993, respectively.
NOTE 15 -- LEASES AND RENTALS
Rental expenses for operating leases, principally with respect to
buildings, amounted to $248 million, $255 million and $284 million in 1995,
1994 and 1993, respectively.
As of December 31, 1995, future net minimum rental payments under
non-cancelable operating leases were approximately $780 million, payable as
follows: 1996 -- $160 million; 1997 -- $125 million; 1998 -- $105 million; 1999
- -- $88 million; 2000 -- $63 million; and $239 million thereafter.
- ------------------------------------------------------------------------------
40
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS
NOTE 16 -- 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, 1995 and 1994, approximately 8% and 9%, respectively, of
reinsurance recoverables were due from certain syndicates affiliated with
Lloyd's of London.
Failure of reinsurers to indemnify CIGNA, as a result of reinsurer
insolvencies and disputes, could result in losses. Allowances for uncollectible
amounts were $700 million and $435 million as of December 31, 1995 and 1994,
respectively. During 1995, CIGNA increased the allowance for uncollectible
reinsurance by $210 million pre-tax ($138 million after-tax) for
asbestos-related and environmental pollution losses, for CIGNA's assumed
reinsurance business that it previously exited and domestic commercial
business. While future charges for unrecoverable reinsurance may materially
affect results of operations in future periods, such amounts are not expected
to have a material adverse effect on CIGNA's liquidity or financial condition.
The effects of reinsurance on net earned premiums and fees for the year
ended December 31 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(In millions) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-DURATION CONTRACTS
PREMIUMS AND FEES:
Direct $ 12,144 $ 12,281 $ 11,493
Assumed 1,881 2,039 2,564
Ceded (2,115) (2,236) (2,098)
- ------------------------------------------------------------------------------------------
Net earned premiums and fees $ 11,910 $ 12,084 $ 11,959
- ----------------------------------------------------======================================
LONG-DURATION CONTRACTS
PREMIUMS AND FEES:
Direct $ 1,979 $ 1,983 $ 1,635
Assumed 162 154 216
Ceded (137) (309) (98)
- ------------------------------------------------------------------------------------------
Net earned premiums and fees $ 2,004 $ 1,828 $ 1,753
- ----------------------------------------------------======================================
</TABLE>
The effects of reinsurance on written premiums and fees for short-duration
contracts were not materially different from the amounts shown in the above
table. Benefits, losses and settlement expenses for 1995, 1994 and 1993 were
net of reinsurance recoveries of $1.5 billion, $1.2 billion and $2.1 billion,
respectively.
NOTE 17 -- PROPERTY AND CASUALTY UNPAID CLAIMS AND CLAIM EXPENSE RESERVES AND
REINSURANCE RECOVERABLES
As described in Note 2(M), CIGNA establishes loss reserves, which are
estimates of future payments of reported and unreported claims for losses and
related expenses, with respect to insured events that have occurred.
Activity in the reserve for unpaid claims and claim adjustment expenses
for the year ended December 31 was as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(In millions) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross reserve -- January 1 $ 16,825 $ 17,764 $ 17,926
Less reinsurance recoverable 6,190 7,104 7,364
-------- -------- --------
Net reserve -- January 1 10,635 10,660 10,562
-------- -------- --------
Plus incurred claims and claim
adjustment expenses:
Provision for insured events of
the current year 2,386 3,093 3,526
Increase in provision for
insured events of prior years 1,498 538 789
-------- -------- --------
Total incurred claims and
claim adjustment expenses 3,884 3,631 4,315
-------- -------- --------
Less payments for claims and
claim adjustment expenses
attributable to:
Insured events of the current
year 971 1,020 1,160
Insured events of prior years 2,389 2,636 3,057
-------- -------- --------
Total payments for claims and
claim adjustment expenses 3,360 3,656 4,217
-------- -------- --------
Net reserve -- December 31 11,159 10,635 10,660
Plus reinsurance recoverable 5,864 6,190 7,104
- ------------------------------------------------------------------------------------------
Gross reserve -- December 31 $ 17,023 $ 16,825 $ 17,764
- ----------------------------------------------------======================================
</TABLE>
The basic assumption underlying the many traditional 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. The process of establishing loss reserves is subject to
uncertainties that are normal, recurring and inherent in the property and
casualty business.
CIGNA changed its methodology for estimating asbestos-related and
environmental pollution reserves in the third quarter of 1995, as discussed
below. CIGNA's reserves for asbestos-related and environmental pollution claims
are a reasonable estimate of its ultimate liability for these claims, based on
currently known facts, reasonable assumptions where the facts are not known,
current law and methodologies currently available.
- ------------------------------------------------------------------------------
41
<PAGE> 37
Reserving for all property and casualty claims continues to be a complex
and uncertain process, requiring the use of informed estimates and judgments.
As additional experience and other data become available and are reviewed or,
in the case of asbestos-related and environmental pollution reserves, as new or
improved methodologies are developed or as current law changes, CIGNA's
estimates and judgments may be revised. Any such revisions could result in
future changes in estimates of losses or reinsurance recoverables, and would be
reflected in CIGNA's results of operations for the period in which the
estimates are changed. While the effect of any such changes in estimates of
losses or reinsurance recoverables could be material to future results of
operations, CIGNA does not expect such changes to have a material effect on its
liquidity or financial condition.
In management's judgment, information currently available has been
appropriately considered in estimating CIGNA's loss reserves and reinsurance
recoverables.
CIGNA historically was not able to estimate its ultimate liabilities for
asbestos-related and environmental pollution claims because of the significant
uncertainties associated with them that are not generally present for other
types of claims. Traditional actuarial techniques were not adequate for
estimating these liabilities because of the lack of developed case law and
adequate claim history.
However, as industry experience in dealing with these exposures has
accumulated, various industry-related parties have evaluated newly emerging
methods for estimating asbestos-related and environmental pollution
liabilities, and these methods have attained growing credibility. In addition,
outside actuarial firms and others have developed data bases to supplement the
information that can be derived from a company's claim files.
CIGNA evaluated these methods and expanded its data bases of
asbestos-related and environmental pollution claims. Using these recent
developments, CIGNA completed a comprehensive review of its asbestos-related
and environmental pollution exposures during the third quarter of 1995 and
increased asbestos-related reserves by $255 million ($194 million, net of
reinsurance) and environmental pollution reserves by $1.2 billion ($861
million, net of reinsurance).
Charges to income for increases in the Property and Casualty segment's
liability for insured events of prior years (prior year development) for
asbestos-related and environmental pollution losses and charges for
unrecoverable reinsurance in the aggregate were $1.4 billion, $304 million and
$593 million for the years ended December 31, 1995, 1994 and 1993,
respectively. Prior year development for 1995 reflects the asbestos-related and
environmental pollution charge previously noted, as well as $135 million for
unrecoverable reinsurance related to CIGNA's assumed reinsurance business that
it previously exited and domestic commercial business.
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 $489 million ($375 million, net of reinsurance) 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.
CIGNA's reserves for asbestos-related and environmental pollution exposure
were $749 million ($457 million, net of reinsurance) and $1.7 billion ($1.3
billion, net of reinsurance), respectively, as of December 31, 1995, compared
with $594 million ($281 million, net of reinsurance) and $707 million ($542
million, net of reinsurance) as of December 31, 1994.
Prior year development other than for asbestos-related and environmental
pollution claims and charges for unrecoverable reinsurance, was $109 million,
$234 million and $196 million for the years ended December 31, 1995, 1994 and
1993, respectively.
NOTE 18 -- RESTRUCTURING AND COST REDUCTION INITIATIVES
During the third quarter of 1995, CIGNA announced its plan to restructure
its domestic property and casualty businesses into two separate operations. The
plan was approved by regulators in February 1996, and is effective as of
December 31, 1995. One operation will manage ongoing business (ongoing
operations) and the other will manage run-off policies and related claims,
including those for asbestos-related and environmental pollution exposures
(run-off operations).
As part of its overall restructuring plan, CIGNA contributed $375 million
of additional capital to the run-off operations. This contribution, which is
reflected in the run-off operations' statutory surplus as of December 31, 1995,
was funded in 1996 through internal sources. Also, the ongoing operations will
contribute an additional $50 million to the run-off operations by December 31,
2001. In addition, the ongoing operations assumed $125 million of liabilities,
primarily related to employee benefits of the run-off operations, and will
reinsure up to $800 million of claims of the run-off operations in the unlikely
event that the statutory capital and surplus of the run-off operations falls
below $25 million.
- ------------------------------------------------------------------------------
42
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS
As a result of this restructuring, the domestic run-off operations had
statutory capital and surplus of approximately $245 million, pro forma
investment assets of approximately $4.3 billion and insurance liabilities of
approximately $4.2 billion, as of December 31, 1995.
During 1995, CIGNA implemented cost reduction plans, which resulted in an
$85 million pre-tax charge, included in Other Operating Expenses, for the
Domestic Property and Casualty operations. The components of the charge were as
follows: severance, $37 million, representing costs associated with
nonvoluntary terminations of approximately 1,600 domestic employees in various
functions and locations; real estate, $25 million, primarily related to vacated
lease space; and other costs, $23 million, including $10 million of costs
associated with exiting certain business and $6 million for fixed asset
write-offs. The cash outlays associated with these initiatives began in the
third quarter of 1995 and will continue through 1998, with most of the cash
outlays expected to occur in 1996 and 1997. During 1995, $13 million of
severance was paid to 700 terminated employees. CIGNA has funded, and will
continue to fund, these costs through liquid assets, and such funding will not
have a material adverse effect on its liquidity.
During 1995, CIGNA recorded a $30 million pre-tax charge, included in
Other Operating Expenses, for cost reduction initiatives in the Employee Life
and Health Benefits segment. The charge consisted primarily of
severance-related expenses representing costs associated with nonvoluntary
employee terminations covering approximately 2,400 employees (approximately 45%
in the indemnity operations and 55% in the HMO operations). The cash outlays
associated with the restructuring initiatives began in the third quarter of
1995 and will continue through 1997, with most of the cash outlays expected to
occur in 1996. During 1995, $5 million of severance was paid to 900 terminated
employees. CIGNA has funded, and will continue to fund, these costs through
liquid assets, and such funding will not have a material adverse effect on its
liquidity.
During 1993, CIGNA implemented cost reduction 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. Results for 1993 reflected a pre-tax charge of $165 million
for the estimated costs of these cost reduction actions, of which $80 million
and $70 million related to Domestic and International Property and Casualty
operations, respectively. The remaining $15 million related to the Employee
Life and Health Benefits segment. The Property and Casualty cost reduction
charges consisted of the following: 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 cost reduction initiatives; and other
costs, $22 million, primarily for employee relocation and outplacement
services. The cash outlays associated with the cost reduction initiatives began
in the fourth quarter of 1993 and were substantially completed in 1995. CIGNA
funded these costs through liquid assets, and such funding has not had a
material adverse effect on its liquidity.
NOTE 19 -- CONTINGENCIES
FINANCIAL GUARANTEES
CIGNA, 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 20 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, 1995 and 1994
was $266 million and $296 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
- ------------------------------------------------------------------------------
43
<PAGE> 39
as earned. During 1994, losses for industrial revenue bonds were $1 million.
There were no such losses in 1995 and 1993.
In addition, CIGNA is liable for guarantee business of $1.3 billion and
$1.7 billion at December 31, 1995 and 1994, 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 38 years. The nature of this guarantee business is similar to the
reinsurance transactions described in Note 16. 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.
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, 1995 and
1994. 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 $9 million and $3 million as
of December 31, 1995 and 1994, 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, 1995 and 1994, the amount of minimum benefit
guarantees for separate account contracts was $5.1 billion and $4.8 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, 1994, reserves of $6 million were recorded. No
such reserves were required as of December 31, 1995. 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 liquidity or financial condition.
REGULATORY AND INDUSTRY DEVELOPMENTS
CIGNA's businesses are subject to a changing social, economic, legal,
legislative and regulatory environment that could affect them. Some of the
changes include initiatives to: revise the system of funding cleanup of
environmental damages; reform the federal tax system; reinterpret insurance
contracts long after the policies were written to provide coverage
unanticipated by CIGNA; restrict insurance pricing and the application of
underwriting standards; reform health care; and expand regulation. Some of the
more significant issues are discussed below.
Legislation is expected to be considered by Congress that is likely to
limit, and eventually substantially eliminate, the tax deductibility of policy
loan interest for corporate-owned life insurance. The outcome of such
legislation is uncertain and, although it could have a material adverse effect
on results of operations for the Individual Financial Services segment, it is
not expected to be material to CIGNA's consolidated results of operations,
liquidity or financial condition.
Proposed legislation for Superfund reform remains under consideration by
Congress. Any changes in Superfund relating to 1) allocating responsibility, 2)
funding cleanup costs or 3) establishing cleanup standards could affect the
liabilities of potentially responsible parties and insurers. Due to
uncertainties associated with the timing and content of any future Superfund
legislation, the effect on CIGNA's results of operations, liquidity or
financial condition cannot be reasonably estimated at this time.
CIGNA expects proposals for federal and state legislation seeking some
health care insurance reforms and limitations on formation and operation of
efficient health care networks. Due to uncertainties associated with the timing
and content of any health care legislation, the effect on CIGNA's future
results of operations, liquidity or financial condition cannot be reasonably
estimated at this time.
The National Association of Insurance Commissioners is currently
addressing risk-based capital guidelines for health maintenance organizations
(HMOs). CIGNA does not expect such guidelines to have a material adverse effect
on its future results of operations, liquidity or financial condition.
- ------------------------------------------------------------------------------
44
<PAGE> 40
NOTES TO FINANCIAL STATEMENTS
In recent years, the number of insurance companies that are impaired or
insolvent has increased. 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. CIGNA's insurance subsidiaries recorded pre-tax charges of $29
million, $27 million and $28 million for 1995, 1994 and 1993, respectively, for
guaranty fund assessments that can be reasonably estimated before giving effect
to future premium tax recoveries. 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 liquidity or
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. One such area of litigation involves policy coverage and judicial
interpretation of legal liability for asbestos-related and environmental
pollution claims.
While the outcome of all litigation involving CIGNA, including
insurance-related litigation, cannot be determined, litigation (including that
related to asbestos and environmental pollution claims) is not expected to
result in losses that differ from recorded reserves by amounts that would be
material to results of operations, liquidity or financial condition. Also,
reinsurance recoveries related to claims in litigation, net of the allowance
for uncollectible reinsurance, are not expected to result in recoveries that
differ from recorded recoverables by amounts that would be material to results
of operations, liquidity or financial condition.
NOTE 20 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
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 following table. The fair values
used for financial instruments are estimates that, in many cases, may differ
significantly from the amounts that 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. The fair value of liabilities for contractholder deposit funds was
estimated using the amount payable on demand and, for those not payable on
demand, discounted cash flow analyses.
The following table presents carrying amounts and estimated fair values as
of December 31 for CIGNA's financial instruments that are not carried in the
financial statements at amounts approximating fair value.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
(In millions) Amount Value Amount Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Fixed maturities--
held-to-maturity $ -- $ -- $ 12,296 $ 12,276
Mortgage loans $ 11,010 $ 11,160 $ 9,970 $ 9,638
LIABILITIES:
Contractholder
deposit funds--
non-insurance
products $ 20,092 $ 20,184 $ 18,866 $ 18,817
Long-term debt $ 1,066 $ 1,130 $ 1,389 $ 1,347
- --------------------------------------------------------------------------------------------------------
</TABLE>
For additional information on fair values of fixed maturities, see Note
4(A). Fair values of off-balance-sheet financial instruments as of December 31,
1995 and 1994 were not material.
- ------------------------------------------------------------------------------
45
<PAGE> 41
REPORT OF INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
THE BOARD OF DIRECTORS AND SHAREHOLDERS
CIGNA CORPORATION FEBRUARY 13, 1996
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, 1995 and 1994, and the results
of their operations and their cash flows for each of the years ended December
31, 1995, 1994 and 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.
/s/ PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
- ------------------------------------------------------------------------------
46
<PAGE> 42
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, 1995 and 1994.
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
1995*
Total revenues $ 4,754 $ 4,753 $ 4,642 $ 4,806
Income (loss) before income taxes 402 304 (883) 428
Net income (loss) 290 205 (566) 282
Net income (loss) per share--primary** 4.00 2.82 (7.76) 3.69
1994
Total revenues $ 4,531 $ 4,538 $ 4,600 $ 4,723
Income before income taxes 170 204 178 253
Net income 114 135 123 182
Net income per share--primary** 1.58 1.86 1.70 2.52
STOCK AND DIVIDEND DATA
1995
Price range of common stock--high $ 76 3/8 $ 79 $ 106 $ 115
--low $ 62 1/4 $ 68 1/4 $ 77 1/2 $ 95 1/4
Dividends declared per common share $ .76 $ .76 $ .76 $ .76
1994
Price range of common stock--high $ 70 1/2 $ 74 $ 74 $ 69 3/8
--low $ 58 $ 57 $ 59 3/8 $ 59
Dividends declared per common share $ .76 $ .76 $ .76 $ .76
- --------------------------------------------------------------------------------------------------------
</TABLE>
*The third quarter of 1995 includes after-tax charges totaling $849 million,
reflecting $686 million for asbestos-related and environmental pollution
claims, $88 million for unrecoverable reinsurance and $75 million for cost
reduction initiatives.
**Earnings per share for the three months ended March 31, 1995 on a fully
diluted basis were $3.85. For all other periods presented, earnings per share
on a fully diluted basis were not significantly different from amounts
presented.
- ------------------------------------------------------------------------------
47
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, 1995
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>
<S> <C>
CIGNA Holdings, Inc. (Delaware)
I. Connecticut General Corporation (Connecticut)
A. CG Trust Company (Illinois)
B. CIGNA Associates, Inc. (Connecticut)
C. CIGNA Benefits Processing Ireland Ltd. (Delaware)
D. 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)
(15) CIGNA Dental Health Plan of Arizona, Inc. (Arizona)
E. CIGNA Financial Advisors, Inc. (Connecticut)
F. CIGNA Financial Partners, Inc. (Connecticut)
G. CIGNA Financial Services, Inc. (Delaware)
H. CIGNA Health Corporation (Delaware)
(1) CIGNA HealthCare of Arizona, Inc. (Arizona)
(a) CIGNA Community Choice, Inc. (Arizona)
(2) CIGNA HealthCare of California, Inc. (California)
(3) CIGNA HealthCare of Colorado, Inc. (Colorado)
(4) CIGNA HealthCare of Connecticut, Inc. (Connecticut)
(5) CIGNA HealthCare of Delaware, Inc. (Delaware)
(6) CIGNA HealthCare of Florida, Inc. (Florida)
(7) CIGNA HealthCare of Georgia, Inc. (Georgia)
(8) CIGNA HealthCare of Illinois, Inc. (Delaware) (99.6%)
(9) CIGNA HealthCare of Kansas/Missouri, Inc. (Kansas)
(10) CIGNA Healthplan of Louisiana, Inc. (Louisiana)
(11) CIGNA HealthCare of Massachusetts, Inc. (Massachusetts)
(12) CIGNA HealthCare Mid-Atlantic, Inc. (Maryland)
(13) CIGNA HealthCare of New Jersey, Inc. (New Jersey)
(14) CIGNA HealthCare of New York, Inc. (New York)
(15) CIGNA HealthCare of North Carolina, Inc. (North Carolina)
(16) CIGNA HealthCare of North Louisiana, Inc. (Louisiana)
(17) CIGNA HealthCare of Northern New Jersey, Inc. (New Jersey)
(18) CIGNA HealthCare of Ohio, Inc. (Ohio)
</TABLE>
<PAGE> 2
<TABLE>
<C> <S> <C> <C>
(19) CIGNA HealthCare of Oklahoma, Inc. (Oklahoma)
(20) CIGNA HealthCare of Pennsylvania, Inc. (Pennsylvania)
(21) CIGNA HealthCare of St. Louis, Inc. (Missouri)
(22) CIGNA HealthCare of Tennessee, Inc. (Tennessee)
(23) CIGNA HealthCare of Texas, Inc. (Texas)
(24) CIGNA HealthCare of Utah, Inc. (Utah)
(25) CIGNA HealthCare of Virginia, Inc. (Virginia)
(26) Lovelace Health Systems, Inc. (New Mexico)
(27) Temple Insurance Company Limited (Bermuda)
I. CIGNA RE Corporation (Delaware)
J. Connecticut General Life Insurance Company (Connecticut)
(1) CIGNA Life Insurance Company (Connecticut)
(2) ICO, INC. (Delaware)
(3) Quebec Street Investments, Inc. (Delaware)
K. Connecticut General Pension Services, Inc. (Connecticut)
L. INA Life Insurance Company of New York (New York)
M. International Rehabilitation Associates, Inc. d/b/a Intracorp (Delaware)
N. Life Insurance Company of North America (Pennsylvania)
(1) CIGNA Life Insurance Company of Canada (Canada)
(2) CIGNA Private Equities, Inc. (Delaware)
(3) CIGNA Road & Travel Club, Inc. (Texas)
(4) INA Life Insurance Co., Ltd. (Japan) (90%)
O. MCC Behavioral Care, Inc. (Minnesota)
(1) MCC Behavioral Care of California, Inc. (California)
P. TEL-DRUG, INC. (South Dakota)
II. INA Corporation (Pennsylvania)
A. CIGNA International Holdings, Ltd. (Delaware)
(1) AFIA CIGNA Corporation (Delaware)
(2) AFIA (INA) Corporation, Limited (Delaware)
(3) Afia Finance Corporation (Delaware)
(a) CIGNA Reinsurance New Zealand Limited (New Zealand)
(b) P.T. Asuransi CIGNA Indonesia (Indonesia)
(4) CIGNA Argentina Compania de Sequros S.A. (Argentina)
(5) CIGNA Brasil Empreendimentos Ltda. (Brazil)
(a) CIGNA Seguradora S.A. (Brazil) (85.8% with 13.792% owned by other CIGNA
subsidiaries)
(6) CIGNA Compania de Seguros (Chile) S.A. (Chile) (45.20% with balance owned by other
CIGNA subsidiaries)
(7) CIGNA G.B. Holdings, Ltd. (Delaware)
(a) CIGNA Reinsurance Company (UK) Limited (United Kingdom)
(b) Insurance Company of North America (U.K.) Limited (United Kingdom)
(8) CIGNA Insurance Asia Pacific Limited (Australia)
(9) CIGNA Insurance Company (Hellas) S.A. (Greece) (99.58% with balance owned by
another CIGNA subsidiary)
(10) CIGNA Insurance Company Limited (Rep. of South Africa)
(11) CIGNA Insurance Company of Puerto Rico (Puerto Rico)
(12) CIGNA Insurance New Zealand Limited (New Zealand)
(a) CIGNA Life Insurance New Zealand Limited (New Zealand)
(13) CIGNA International Corporation (Delaware)
(14) CIGNA Overseas Insurance Company Ltd. (Bermuda)
(a) CIGNA Insurance Company of Europe S.A.-N.V. (Belgium)
(i) CIGNA Life Insurance Company of Europe S.A.-N.V. (Belgium)
(ii) CIGNA SICAV I (France)
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
(15) CIGNA Worldwide Insurance Company (Delaware)
(a) P.T. Asuransi Niaga CIGNA Life (Indonesia)
(16) Delpanama S.A. (Panama)
(a) CIGNA Compania de Seguros de Panama S.A. (Panama)
(17) ESIS International, Inc. (Delaware)
(18) INACAN Holdings, Ltd.
(a) Insurance Company of Canada
(19) Inversiones INA Limitada (Chile) (98.603% with balance owned by another CIGNA
subsidiary)
(a) CIGNA Compania de Seguros de Vida (Chile) S.A. (Chile) (98.64% with balance
owned by non-affiliate)
(b) CIGNA Salud Isapre S.A. (Chile) (99.20% with balance owned by another CIGNA
subsidiary)
(20) LATINA Holdings, Ltd. (Delaware)
(a) CIGNA Seguros de Colombia S.A. (Colombia) (85.763% with balance owned by
other CIGNA subsidiaries and non-affiliate)
(b) Colina Insurance Company Limited (Bahamas)
(c) Empresa Guatemalteca CIGNA de Seguros, Sociedad Anonima
(Guatemala)
(21) Seguros CIGNA, S.A. (Mexico) (49%)
B. INA Financial Corporation (Delaware)
(1) Brandywine Holdings Corporation
(a) CIGNA International Reinsurance Company, Ltd. (Bermuda)
(b) Century Indemnity Company (Pennsylvania)
(i) Century Reinsurance Company (Pennsylvania)
(ii) CIGNA Reinsurance Company (Pennsylvania)
(a) CIGNA Reinsurance Company, S.A.-N.V. (Belgium)
(c) Cravens, Dargan & Company, Pacific Coast (Delaware)
(d) Trans Asian Insurance Services, Inc.
(2) INA Holdings Corporation
(a) Bankers Standard Insurance Company (Pennsylvania)
(i) Bankers Standard Fire & Marine Company (Texas)
(b) CIGNA Property and Casualty Insurance Company (Connecticut)
(i) ALIC Incorporated
(a) CIGNA Lloyds Insurance Company
(ii) CIGNA Fire Underwriters Insurance Company (Pennsylvania)
(iii) CIGNA Insurance Company
(a) Pacific Employers Insurance Company
(i) CIGNA Insurance Company of Texas
(ii) Illinois Union Insurance Company
(iv) CIGNA Insurance Company of the Midwest
(v) CIGNA Real Estate, Inc.
(a) 2525 East Arizona Biltmore Circle Corporation
(b) Congen Properties, Inc.
(c) ESIS, Inc. (California)
(d) INAC Corp. (Delaware)
(e) INAC Corp. of California (California)
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
(f) Insurance Company of North America
(a) Atlantic Employers Insurance Company (New Jersey)
(b) CIGNA Employers Insurance Company (Pennsylvania)
(c) CIGNA Insurance Company of Ohio
(d) Coast to Coast Corporation
(e) INA County Mutual Insurance Company
(f) Indemnity Insurance Company of North America (Pennsylvania)
(i) Allied Insurance Company
(ii) CIGNA Indemnity Insurance Company(Pennsylvania)
(iii) CIGNA Insurance Company of Illinois
(g) INA Surplus Insurance Company (Pennsylvania)
(g) Marketdyne International, Inc. (Delaware)
(h) Recovery Services International, Inc. (Delaware)
III. CIGNA Investment Group, Inc. (Delaware)
A. CIGNA International Finance Inc. (Delaware)
(1) CIGNA International Investment Advisors, Ltd. (Delaware)
(a) CIGNA International Investment Advisors Australia Limited (Australia)
(b) 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 Leveraged Capital Fund, Inc. (Delaware)
D. Philadelphia Investment Corporation of Delaware (Delaware)
</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. 2-91972, No. 2-97899, No. 33-39269, and No.
33-65396) and Form S-8 (No. 2-76445, No. 2-76444, No. 33-44371, No. 33-51791 and
No. 33-60053) of CIGNA Corporation, of our report dated February 13, 1996
appearing on Page 46 of the 1995 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 LLP
Philadelphia, Pennsylvania
March 29, 1996
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or the Securities
Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments thereto
(collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
22nd day of February, l996.
/s/ Robert P. Bauman
--------------------------
Robert P. Bauman
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or the Securities
Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments thereto
(collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
22nd day of February, l996.
/s/ Robert H. Campbell
--------------------------
Robert H. Campbell
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or the Securities
Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments
thereto (collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
22nd day of February, l996.
/s/ Alfred C. DeCrane, Jr.
--------------------------
Alfred C. DeCrane, Jr.
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or the Securities
Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments thereto
(collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
21st day of February, l996.
/s/ James F. English, Jr.
--------------------------
James F. English, Jr.
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or the Securities
Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments thereto
(collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
22nd day of February, l996.
/s/ Bernard M. Fox
--------------------------
Bernard M. Fox
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or the Securities
Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments thereto
(collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
29th day of February, l996.
/s/ Frank S. Jones
--------------------------
Frank S. Jones
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or the Securities
Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments thereto
(collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
28th day of February, l996.
/s/ Gerald D. Laubach
--------------------------
Gerald D. Laubach
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or the Securities
Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments thereto
(collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 her 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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
26th day of February, l996.
/s/ Marilyn W. Lewis
--------------------------
Marilyn W. Lewis
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or the Securities
Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments thereto
(collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
22nd day of February, l996.
/s/ Paul F. Oreffice
--------------------------
Paul F. Oreffice
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or the Securities
Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments thereto
(collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
28th day of February, l996.
/s/ Charles R. Shoemate
--------------------------
Charles R. Shoemate
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or the Securities
Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments thereto
(collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
27th day of February, l996.
/s/ Louis W. Sullivan, M.D.
--------------------------
Louis W. Sullivan, M.D.
<PAGE> 12
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or
the Securities Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments thereto
(collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
22nd day of February, l996.
/s/ Wilson H. Taylor
--------------------------
Wilson H. Taylor
<PAGE> 13
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or the Securities
Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments thereto
(collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 her 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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
21st day of February, l996.
/s/ Carol Cox Wait
--------------------------
Carol Cox Wait
<PAGE> 14
POWER OF ATTORNEY
KNOW ALL PERSONS 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 l933 or the Securities
Exchange Act of l934, both as amended, of:
(i) CIGNA's Annual Report on Form l0-K and all amendments thereto
(collectively, "CIGNA's Form l0-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, CIGNA's registration statements on Form S-8 (Registration
Numbers 2-76444, 2-76445, 33-51791, 33-44371 and 33-60053); 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; 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
l0-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 l5, l997.
IN WITNESS WHEREOF, the undersigned has executed this document as of the
22nd day of February, l996.
/s/ Ezra K. Zilkha
--------------------------
Ezra K. Zilkha
<PAGE> 1
EXHIBIT 24.2
[CIGNA 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 28, 1996, 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, 1995, 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 14, 1996 /s/ Carol J. Ward
--------------------------- ----------------------------
Carol J. Ward
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
EXHIBIT 27
CIGNA CORPORATION FINANCIAL DATA SCHEDULE
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCORPORATED BY REFERENCE IN ITEM 8 OF PART II TO CIGNA'S
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<DEBT-HELD-FOR-SALE> 36,241
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 661
<MORTGAGE> 11,010
<REAL-ESTATE> 1,283
<TOTAL-INVEST> 57,710
<CASH> 1,559
<RECOVER-REINSURE> 7,120<F1>
<DEFERRED-ACQUISITION> 1,109
<TOTAL-ASSETS> 95,903
<POLICY-LOSSES> 12,007
<UNEARNED-PREMIUMS> 2,176
<POLICY-OTHER> 19,303
<POLICY-HOLDER-FUNDS> 30,055
<NOTES-PAYABLE> 1,480
0
0
<COMMON> 87
<OTHER-SE> 7,070
<TOTAL-LIABILITY-AND-EQUITY> 95,903
13,914
<INVESTMENT-INCOME> 4,296
<INVESTMENT-GAINS> 233
<OTHER-INCOME> 512
<BENEFITS> 13,855
<UNDERWRITING-AMORTIZATION> 1,181
<UNDERWRITING-OTHER> 3,668
<INCOME-PRETAX> 251
<INCOME-TAX> 40
<INCOME-CONTINUING> 211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 211
<EPS-PRIMARY> 2.86
<EPS-DILUTED> 0
<RESERVE-OPEN> 10,635<F2>
<PROVISION-CURRENT> 2,386
<PROVISION-PRIOR> 1,498
<PAYMENTS-CURRENT> 971
<PAYMENTS-PRIOR> 2,389
<RESERVE-CLOSE> 11,159<F2>
<CUMULATIVE-DEFICIENCY> 1,498
<FN>
<F1>AMOUNT INCLUDES RECOVERABLES ON PAID AND UNPAID LOSSES.
<F2>AMOUNTS ARE NET OF REINSURANCE RECOVERABLES.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 28.1
CIGNA CORPORATION
PROPERTY AND CASUALTY STATUTORY RESERVES
RECONCILIATION OF SCHEDULE P TO TOTAL STATUTORY RESERVES
1995
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
---------------------
<S> <C>
Schedule P: Part 1, Column 34, Line 12................................. $ 5,821
Part 1, Column 35, Line 12................................ 1,402
--------
Total statutory reserves as reported in consolidated annual
statement balance sheet......................................... 7,223
Reconciliation to amounts reported in Form 10-K:
Foreign subsidiaries not included in consolidated domestic annual
statement............................................................. 2,389
Other................................................................... 92
--------
Total statutory reserves as reported in Form 10-K....................... $ 9,704
=================
</TABLE>
