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    2013 CIGNA ANNUAL REPORT YOUR WORLD. YOUR NEEDS.


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    m o nd a y 6:48 AM HOUSTON, TEXAS TABLE OF CONTENTS To our shareholders 2 Service: Personal. Relevant. Meaningful. 16 Support: A helping hand around the world 18 Security: Unique, yet universal 20 Cigna in Perspective 22 Corporate and Board of Directors 24


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    Around the world, around the block, around the clock Today, a teacher in Texas laces up to train for her first marathon, one year after beating cancer. A boy in Korea sees his bright new smile after his first trip to the dentist. A banker in China schedules surgery, while a sales manager in Turkey dreams of retirement. A father in Denver takes a front-row seat at his daughter’s school science fair and applauds the world’s next biologist. Around the world, people have their own unique stories. And around the clock, Cigna supports their needs for a healthy, secure life. 1


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    A message from David Cordani Cigna once again delivered strong revenue and earnings* growth in 2013, marking our fourth consecutive year of competitively attractive financial results. We achieved these results in the face of a disruptive and dynamic global environment, with contributions from multiple geographies and each of Cigna’s three primary business segments: Global Health Care, Global Supplemental Benefits and Group Disability and Life. In the four years since implementing our strategy of “Go Deep, Go Global, Go Individual,” Cigna has achieved compound annual growth of 15% for both revenues and adjusted income from operations per share.* I am proud of Cigna’s performance, which has outpaced that of our industry for more than four years, providing healthy returns for our investors. Cigna has proven its ability to anticipate and adapt to significant changes and difficult market conditions. We remain well-prepared to successfully confront disruptive market forces such as ongoing market pressures on Medicare Advantage, and changing client and customer needs our industry faces in 2014. Cigna: 2013 at a glance % change from 2012 Consolidated Total Revenue $32.4 billion +11% Adjusted Income from Operations* $1.93 billion +11% Adjusted Income from Operations per share* $6.79/share +13% Global Health Care Premiums and Fees $22.9 billion +9% Adjusted Income from Operations* $1.6 billion +6% Global Supplemental Benefits Premiums and Fees $2.5 billion +27% Adjusted Income from Operations* $183 million +24% Group Disability and Life Premiums and Fees $3.4 billion +10% Adjusted Income from Operations* $311 million +11% 2


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    In the following conversation, David Cordani discusses Cigna’s 2013 performance; the trends, opportunities and challenges shaping Cigna’s go-forward strategies for 2014 and beyond; and the company’s approach to bringing more personalized products and services to its customers and clients. 2013 Performance Q How do you characterize Cigna’s 2013 We also had many important strategic achievements performance from an investor perspective? that made a tangible, positive impact on our performance. To name just a few: A Cigna delivered strong, competitively differentiated results for our shareholders in 2013 – extending an We entered a transaction with Berkshire Hathaway, Inc. outstanding track record of financial performance over to effectively exit our run-off reinsurance business. This the past four years. We generated a total shareholder transaction, completed during the first quarter, significantly return of approximately 64% in 2013, which ranked as improved our financial flexibility and strengthened our the highest among our core managed care competitors. balance sheet. We adapted to an environment of considerable market We made further improvement to our Pharmacy Benefits disruption, most notably from Health Care Reform and Management capabilities through a new strategic changes to Medicare Advantage in the United States. arrangement. This further enhanced our pharmacy offerings for our customers and clients, and it allows In addition to solid performance from each of our operating us to leverage an enhanced technology platform and business segments, we strengthened our balance sheet streamlined operating capabilities – to drive greater and generated significant free cash flow from our businesses, flexibility and affordability for our customers and clients. enabling us to return approximately $1 billion in value to And we continued to deepen our global footprint, with shareholders in 2013 through share repurchases. meaningful progress in important growth markets such We delivered a full-year medical cost trend of below as Turkey, India and China. Our capabilities outside of 5% for our U.S. Commercial business for 2013, which the United States clearly give us a more diverse platform was among the best in our industry and which directly for growth. benefited the approximately 85% of Cigna’s U.S. All of these results and actions helped us to deliver more customers who are in self-funding arrangements. personalized products and services, which we view as essential to excelling in a highly competitive marketplace, and to meeting the individual needs of our customers. *Earnings refers to Adjusted Income from Operations which, along with Adjusted Income from Operations per share, are each non-GAAP measures used to describe the Company’s financial results. Definitions of Adjusted Income from Operations on a consolidated and segment basis are contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) on page 31 and 43, respectively, of the Form 10-K included in this annual report. The MD&A also includes reconciliations of Adjusted Income from Operations to the most directly comparable GAAP measures. 3


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    Q This marks four consecutive years of overall Finally, we launched our venture with TTK in India, where growth for Cigna. What is driving this? we’re the first U.S. insurer to be part of a stand-alone joint venture health insurance company. A I attribute our growth to our emphasis on targeted customer and client segments, and focus on our Our Global Supplemental business brings valuable health, targeted markets. life and other solutions to serve the rapidly growing middle classes in these countries – also consistent with Four years ago, we made the choice to focus our our “Go” strategy. In 2013, we continued to see examples organization on the strategy of “Go Deep, Go Global, of how Cigna’s global presence allowed us to share best Go Individual.” Our “Go” strategy has served as a practices among geographies. For instance, we are foundation for pursuing three goals that have clearly leveraging our market-leading, direct-to-consumer sales contributed to our long-term performance: repositioning our portfolio for growth in target markets; improving capabilities from Asia to the U.S., to be deployed in public our strategic and financial flexibility; and pursuing new and private exchanges. opportunities in high-growth markets, with a special Q Building on that, is Cigna exploring new emphasis on individuals. geographies or regions? Our strategy puts our customers at the center of all A We will continue our global growth strategy – we do, and guides our organization of approximately particularly our geographic expansion. In the United 35,000 employees in more than 30 countries. States, this means new cities for Medicare and individual Can you discuss the Go Global part of your solutions – and, outside of the United States, it means Q strategy? What sorts of contributions did evaluating opportunities in new countries. you see from your businesses outside of the Q What didn’t go as well as you anticipated in 2013? United States? A The industry experienced uncertainty surrounding A For Cigna, “Go Global” is about creating borderless Medicare Advantage reimbursement levels. In the environments to leverage our capabilities in new short term, we expect these pressures will continue even geographies. It’s about supporting an expanding, globally as we focus on opportunities to improve our medical mobile population through our proprietary expatriate costs for our Seniors business. network, which remains the broadest and best-established in the world. What’s especially gratifying, even given these pressures To mention just a few examples from 2013: Korea continued and disruptions, is that we were the only publicly traded its long, sustained track record of growth; we deepened our company to achieve a five-star CMS rating – for our partnership in Thailand with Tesco, to offer personal health Medicare Advantage business in Florida. We remain and accident insurance; and we got off to a good start in confident that initiatives such as our 2013 acquisition of Turkey with our Cigna Finans joint venture, where we Alegis Care, a company focused on physician-based home market life and pension products in one of the fastest- health care, further strengthen our Cigna-HealthSpring growing, least-penetrated global insurance markets. We Seniors business and physician engagement capabilities – also celebrated the tenth anniversary of our very successful and that we will continue to create even greater value for venture in China with China Merchants Bank, meeting the our customers. health, life and accident insurance needs of that country’s growing middle class. 4


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    tuesday 8:23 AM BEIJING, CHINA The disruptive global environment their health care partners, and the levels of transparency they expect. Q Let’s talk about the “disruptive environment:” How do you describe the global competitive In the U.S., consumers have more health care choices – environment? What’s changing? What makes in part driven by the public and private exchanges, as it so challenging? well as more convenient access to health care through We’re seeing a fundamental reshaping of virtually employer clinics and telemedicine, to give just a couple A every aspect of how we do business, and in the of examples. Outside of the U.S., consumers with growing demographics we serve. Populations are aging. Middle incomes are looking for trusted, easy-to-use, personal and classes are expanding. Chronic disease levels are rising, reliable plans to protect their families. and affordability pressures for health care are increasing In short: distribution channels, supply chains, primary for all. purchasers, political and health care systems are all in At the same time, a digital world means that everything flux. Within this environment of change, at Cigna we today is faster and more personalized. Information flows continue to drive innovation with our physician partners faster; decisions get made faster; expectations change for the benefit of our customers and clients. And we faster, and customers expect higher levels of personalization. continue to view information and supporting technology as critical resources to support our partners, customers Evolution in technology and health care systems across and clients. the globe is transforming how people interact with 5


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    Q Why do demographic changes matter so much? create more consumer choice, such as products that supplement the government’s traditional, base-level A The ability to respond to these changes will determine offerings. who succeeds and who does not. Anticipating and proactively responding to these challenges positions In the U.S., we’re just beginning to see the initial impact Cigna to continue to meet the needs of our customers of the Affordable Care Act. The law generally affects and clients, to deliver differentiated value – and, as a Cigna less than many of our competitors, because about result, to achieve our performance goals. 85% of our Commercial business relationships are self-funded employer relationships, rather than fully Evolving demographics result in a different balance of insured. At the same time, it’s a significant change: for needs for our customers. The needs of a 65-year-old differ our customers, our clients and even our own employees. in many ways from those of a 30-year-old – an older population is more prone to chronic disease. Looking Q When many people talk about Health Care beyond age, the expectations of a larger, global middle Reform in the U.S., they think first in terms class differ from those of an historically less affluent of the public exchanges. What is Cigna’s population. Quality of life, health protection and asset perspective on the exchanges? protection become major factors. A In the near term, the public exchanges are not At Cigna, we have strategically positioned our company a significant business driver for us – we’ve taken to anticipate and adapt to these types of shifts. We’ve a focused approach, participating in only five states broken out of the traditional mode of being a health that most closely align with our “Go Deep” strategy. insurer focused on financing sick care, and transformed In these states, we are focused on select metropolitan ourselves into a global health service company that areas where we have our strongest physician networks focuses on health, wellness and preventive care, and and collaborative accountable care relationships. sense of security solutions. Q How about the private exchanges? A We view private exchanges as a potential long- Health Care Reform term growth opportunity. We’ll continue to monitor evolving programs, and we’re poised to go deeper into Q Shifting gears, what is Cigna’s perspective on private exchanges should they prove to deliver differentiated Health Care Reform thus far? value to consumers. A While the question is U.S.-biased, in reality, we’re While we are positioned in the majority of third-party seeing transforming health care systems throughout private exchanges, we recently introduced a new, proprietary the world – not only in the U.S. – in response to changing private exchange. Here, we tailor benefit programs for the customer needs. There’s tremendous pressure on these needs of employer clients and brokers, providing greater systems to improve affordability, and in many cases to choice and personalization for our customers. 6


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    wednesday 3:42 PM CHICAGO, ILLINOIS 7


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    Q Where does Cigna believe Health Care Reform Employers are also the best situated to drive what we should go from here? refer to as “positive disruption,” through their existing communications platform, and their ability to incentivize A From the beginning of the health care debate, healthier behaviors; aggressive adoption of preventive Cigna believed that the expansion of affordable and chronic care programs; and use of the highest- solutions, improvement of clinical and health quality, performing, value-based physician networks. and improvements in affordability are all critical to create sustainable change. But, again, it’s important to remember that no single public or private entity can take our health care system to where More specifically, a sustainable health care system starts it needs to go. We need to work together to lead change. with individuals making healthy lifestyle and behavior In a larger sense, it’s all about being attuned to the decisions, to maximize their personal health, quality of changing global environment, and being nimble enough life and productivity. Consumers must pursue high- to adapt to the changing needs of our customers and value health care alternatives. And, when health care is clients – which can only happen by listening to them, delivered, health care providers should be compensated understanding what they need, and partnering with the based on the value they bring, not on the volume of clinical community for their betterment. services they provide. It will be important for aspects of the law to evolve, which is only achievable through true collaboration involving The importance of personalization policymakers, health care professionals and business leaders. Cigna actively plays a convening role in encouraging You often reference “personalization” and Q “personalized” products and services. this direction in Washington, and in our industry. What do you mean by this? We recognize this is harder than ever in a polarized A This gets to the heart of our “Go Individual” strategy. environment. However, in recognition of the long-term Personalization is what customers demand today. societal impact, we remain steadfast in our active, They expect our products and services to be personally principle-based engagement with policy leaders. relevant to them, and adaptable to their needs; it’s part of What is most distinctive about Cigna’s point of an increased retail orientation. Q view on achieving the goals of reform? Cigna is committed to personalizing our products and A We believe employers play an essential role in services across customer segments and around the world creating access to high-quality health care. They – whether it’s for a Government or Voluntary products are uniquely capable of driving increased consumer customer, a Supplemental Benefits customer, or a customer health engagement due to the shared culture and from one of our Regional or Select employer-group clients. common purpose they create. In short, they represent We do this in collaboration with the physicians we engage; distinctive “communities.” to drive quality health outcomes and affordability, and with more than 150 affinity partners who help make our products and services locally relevant to our global clients around the world. 8


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    The advantages for our customers are better health outcomes The only way to help customers navigate through these and a greater sense of security. The advantages for our changes is to be much more personally relevant to them, employer clients are lower costs and higher productivity. and more personally engaged with them. Q That provides a logical segue to how Cigna is In health care, it also means being personally engaged in working with its customers and clients on a daily partnerships with the physicians who treat our customers – basis. The world is changing: How are your and with the employers who hire them and rely on their customer and client relationships changing along productivity. At Cigna, we seek to support and connect with it? employees, clients and physicians. A First, let me offer some background, as context. Q What is an example of this? Traditional, reactive models of treating illness, disease and disability are collapsing under the weight of A Our care delivery and physician partnerships economic and demographic disruptions. To effectively provide a great example of how Cigna is delivering respond, health care systems have to evolve and reorient superior health and productivity outcomes in a local and rapidly to focus on the achievement and preservation of personalized fashion. health and productivity – not only on the provision of treatment to those who are sick. In 2013, we increased the number of customers benefiting from our collaborative relationships with physicians by To date, the modern health care system has undervalued 50%. By the end of the year, we had 86 collaborative the engagement of individuals in their own health, well- accountable care initiatives, up from 52 at the end of 2012. being and health care purchasing decisions. We believe We’re seeing positive cost and quality outcomes, and health when individuals are incentivized to engage in value- care professionals give us frequent feedback that Cigna’s based health care; to make healthier lifestyle and health approach to these initiatives is differentiated in the market. care access choices; and are empowered by effective support programs, information and communication – What makes our collaborative approach unique, and so they can and will make better decisions. This, in turn, personalized, is the degree to which it harnesses aligned will have a dramatic impact on overall quality of life and incentives around closing gaps in health care delivery the health care cost curve. and desirable health behaviors; specific, actionable information; and care extenders such as health advocates However, particularly in the United States today, individuals and case managers. are highly disconnected from, and unaware of, the underlying cost of health care and the role that individual choice In addition, our global network of doctors and hospitals, plays as a key driver of those costs. Although lifestyle and coupled with our localized health management and behavioral choices are major drivers of individual health coordination resources, enable us to offer more expansive care costs, Americans are less healthy than ever, and care options for customers in our target markets around medical costs continue to rise. In no other consumption- the world. based market or industry is there such a disconnect between individual choice and financial obligation. 9


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    thursday 4:31 PM BLOOMFIELD, CONNECTICUT Q How does all of this relate to the investments Cigna makes in its capabilities? A Actually, it’s a virtuous circle: We invest to further our ability to personalize our services and, as a result, further our performance. Then, based on what we achieve and what we learn, we revisit our investments. We invest in several areas, some of which include collaborative physician relationships; joint ventures; technologies and tools; and expansion of our service capabilities. I’ll reference three key areas in which Cigna continues to invest, to ensure we are positioned for ongoing success: customer insights and engagement, consultative distribution and innovative physician partnership models. Insights give us deep knowledge that allows us to better match distribution channels to our customers’ needs. When combined with our consultative distribution capabilities – which identify the best solutions for the organizations we work with – our insights give Cigna a unique ability to bring our customers personalized solutions as their life and health stages change. Our third key area – our care delivery and physician partnership capabilities – also drives our successful collaborative accountable care and facilitates the delivery of quality, affordable care. 10


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    “Cigna’s community involvement is one of the things I’m most proud of as our president and CEO.” David M. Cordani Q Many of your investments and innovations are In the community technology driven. Discuss the role technology plays at Cigna. Q Discuss Cigna’s community involvement in 2013. A Technology enables our team to better communicate A Cigna’s community involvement is one of the things with each other, and to in turn better communicate I’m most proud of as our president and CEO. with all of our stakeholders. We’ve evolved to the point Our global employees step up, time and again, to serve where our technology people think first in terms of our people in the communities where we live and work – from customers’ needs, and then identify the best technologies assisting people impacted by environmental and other to deliver differentiated value. tragedies, to our ongoing participation with organizations We’re sharply focused on making ongoing, targeted such as Habitat for Humanity, ChildObesity180, the investments to help position us for sustained growth. March of Dimes, Achilles International and Blessings These investments are enabling us to create deeper, in a Backpack, a U.S. charity that provides weekend more personal relationships with our customers – to nourishment to school children. better understand their needs, and to align, integrate Our philanthropic arm, the Cigna Foundation, further and develop our products and services with those expanded its global focus last year. In addition to numerous needs. Technology is fueling our ability to create a new, charitable activities and support, we sponsored the first personalized health care experience for our customers, Global Healthy Workplace Summit in London, where the where mobile, social, gamification and web-based global business community shared innovative health incentives intersect to drive improved health behaviors, practices to extend and enhance better workforce health health outcomes and affordability of health care services. worldwide. The Cigna Foundation also led charitable One example from 2013 was our new initiative with efforts from China to Korea, and from the U.S. to Europe. the digital health and social engagement company, SocialWellth, to help individuals choose which health and fitness apps are most appropriate to help them meet their health and wellness goals. 11


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    friday 9:26 PM DENVER, COLORADO 12


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    2014 and beyond Q Let’s conclude with a discussion about what investors should expect from Cigna in the coming years. A I remain confident that Cigna will continue to extend our track record for outstanding performance, into a fifth consecutive year. We have multiple sources for growth, including the addition of new customers, and expansion of existing relationships through increased market share and increased contributions from our ancillary product offerings. We expect to drive continued growth in our Commercial Health Care business around the world, as well as continued growth in our Global Supplemental Benefits business. We also see long-term opportunity for Medicare Advantage growth based on our positioning relative to demographics and market expansion, and we expect an improving economic environment for our Disability and Life segment. In addition, we anticipate that benefits from our Pharmacy Benefits Management arrangement and operating expense efficiencies will contribute to our long-term growth. We will also continue the effective deployment of our capital, and will have good capital flexibility driven by the strong free cash flows generated from our businesses. Based on all of these factors – along with the continued execution of our “Go Deep, Go Global, Go Individual” strategy in our target markets, and in new ones where we see opportunities – Cigna expects to further improve individual health and productivity, and deliver attractive and sustainable long-term growth, all while continuing to invest back in our company. Our clear direction, strong product portfolio, financial flexibility and outstanding global team give us a solid foundation for continued success. On behalf of my approximately 35,000 colleagues around the world, we appreciate the confidence that our shareholders have placed in our company. We look forward to growing Cigna together over the years ahead. David M. Cordani President and Chief Executive Officer Cigna Corporation 13


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    all around you Cigna provides assistance for customers who have a disability and aren’t able to walk their dogs. Children run regularly, through ChildObesity180 school programs made possible by Cigna Foundation grants of $450,000. 3:58 2:15 PM PM BOSTON, MASSACHUSETTS LONDON, E N GLAND Cigna’s people, products and programs make a difference. The fact that we do this all around PHILADELPHIA, P E N N SY LVA N I A PITTSBURGH, PENNSY LVA N I A AM AM 11:34 8:09 5:48 PM Cigna volunteers knit shawls SHANGHAI, C H I N A A ballerina with scoliosis that warm the spirits of customers celebrates her triumph with cancer. over adversity at a Cigna Foundation-sponsored Pennsylvania Ballet Volunteers visit children at the Shanghai Bo’ai performance. Children’s Rehabilitation Center. 14


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    Arjan Toor, a marketing leader at Cigna, visits an African village with his family and brings needed food and supplies. the world makes us global. The fact that we do it one individual at a time makes us Cigna. 9:38 AM NAMIBIA, AFRICA 15


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    Personal. Relevant. Meaningful. You want a health service company that understands you. One that makes every interaction personal and relevant. One that works with doctors you can trust, and provides information you can understand. A company that gives you the answers you need when you need them. The myCigna.com website provides answers nearly 60,000 times a day as customers search online for doctors. Cigna’s team talks with customers hundreds of thousands of times each week. Personalized health and wellness information is at our customers’ fingertips. One example from 2013 is our arrangement with mobile technology giant Samsung, which will put Cigna health and wellness information on their mobile devices. Another is our new initiative with SocialWellth, the digital health social engagement company, to help individuals choose the mobile apps that match their health and wellness goals. Our collaborative care arrangements with doctors are helping to improve quality of care, costs and patient experience, leading to 50% fewer emergency room visits compared to the market.* And our health information and service lines are open 24 hours a day, because our customers’ needs can’t wait until tomorrow. *Source: Cigna Collaborative Accountable Care, Large PCP Group Results, 2013. Results vs. market average 16


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    saturday 12:50 PM WELLINGTON, NEW ZEALAND 17


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    A helping hand around the world Providing you with meaningful help goes beyond service. It extends to the support we give the people and places where we live and work. We created the new Cigna Korea Foundation to improve the lives of seniors and the underprivileged in Korea. This continued our long tradition of helping the elderly in Korea, where Cigna volunteers make weekly calls to check on seniors living alone. The Cigna Foundation marked five decades of giving in 2013 with a new global focus. This was highlighted by our sponsorship of the first Global Healthy Workplace Summit in London, where the global business community shared innovative health practices to extend and enhance better workforce health worldwide. Our Corporate Responsibility Cigna Connects, our corporate responsibility platform, empowers and guides us in connecting our mission, expertise and resources to a broad range of social, environmental and economic efforts. Cigna customer George Rodriguez celebrates crossing the finish line at the Hope & Possibility Race, sponsored by the Cigna Foundation. saturday 10:13 AM NEW YORK, NEW YORK 18


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    At the heart of Cigna Connects are our people who give generously of their time and talent and demonstrate they have more than a job; they have a career in helping others. This work includes community involvement, diversity and inclusion, environmental sustainability and ethics and governance. This year, Cigna will communicate our unique set of initiatives in a formal corporate responsibility report highlighting our efforts as we work to create positive impact on the health of people, communities and the environment. Employees giving back Cigna’s people give generously of their time and talent, whether turning out in force or quietly volunteering one by one. Two thousand employees organized Cigna Day 2013, raising nearly $100,000 for community service programs worldwide. In China, our volunteers visited children at the Shanghai Bo’ai Children’s Rehabilitation Center. In Connecticut, Cigna employees worked alongside Blessings in a Backpack, to send children home from school with healthy food for the weekend. And in Pittsburgh, Pennsylvania, we were proud to honor our Cigna 2013 Volunteer of the Year, Brian Urban. A health educator from Baldwin, Pennsylvania, Brian’s leadership helped people get cancer screenings through the Obediah Cole Prostate Cancer Foundation in Pittsburgh. Guiding the way Within Cigna’s disability business, we work with Achilles International. Together with this nonprofit organization, we help our customers with long- term disabilities return to productivity and regain a sense of achievement through training for, and completing, a race – representing independence and an important milestone on their road to recovery. Cigna and our employee volunteers have teamed up with Achilles International since 2008, helping adults and children with disabilities participate in the Walt Disney World® Marathon Weekend, and many other events. Supporting customers and communities is an important part of who and where we are. 19


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    Unique, yet universal Each one of us is unique. But as different as we are, we share a universal need: We all want to feel secure. Secure that you can call a Cigna health information line in the middle of the night when you’re worried because your child can’t stop coughing. Secure that your husband’s asthma is under control, because you’re working with Cigna, a company that has received National Committee for Quality Assurance Patient and Practitioner Oriented Disease Management Accreditation for the following programs: asthma, chronic obstructive pulmonary disease, congestive heart failure, coronary artery disease, depression and diabetes. Secure that your mom is getting quality care for her diabetes, because her doctor is with Cigna-HealthSpring. In 2013, Cigna-HealthSpring earned the highest possible rating – five stars from the Centers for Medicare & Medicaid Services – for its Medicare Advantage business in Florida. Secure that when you’ve been hurt and can’t earn a living, you’ll hear from a Cigna disability case manager who has a plan to help with your recovery and return to work, as part of Cigna’s award-winning disability and rehabilitation case management. The desire for security circles the globe. When you’re working on assignment outside your home country and need an operation, you can count on Cigna to direct you to medical care within a global network of one-million health care professionals – and to help you navigate through paperwork and payments so you can focus on getting well. And whether you live in New Zealand, China, Indonesia or Turkey – and many places in between – you can find a Cigna plan that will help you prepare for retirement, illness, injury or financial loss – and will offer protection to you and your family. From country to country and customer to customer, Cigna helps give people the sense of security they need to achieve what matters most in their lives. 20


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    sunday 9:23 AM AMRITSAR, INDIA 21


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    Cigna in Perspective Cigna is a global health service leader that provides medical, dental, disability, life and accident insurance and related products and services to customers in the United States and around the globe. Global Health Care Global Health Care includes a commercial line of business encompassing U.S. and international operations. Commercial offers a broad line of insured and self-insured medical, dental, behavioral health, vision, prescription drug benefit plans, health advocacy programs and other products and services that may be integrated to provide comprehensive global health care benefit programs to employers and their employees, including globally mobile individuals. Global Health Care also includes a government line of business that offers Medicare Advantage, Medicare Part D and Medicaid plans for Medicare or Medicaid-eligible individuals, primarily seniors. A significant portion of our Medicare Advantage customers are served by physicians in innovative plan models designed to improve health outcomes and lower medical costs. Cigna offers Medicare Advantage plans in 15 states and the District of Columbia, Medicare Part D plans in all 50 states and the District of Columbia, and Medicaid plans in targeted markets. In 2014, we expect to expand Medicaid operations to new markets within Texas and Illinois. Global Supplemental Benefits Global Supplemental Benefits offers supplemental health, life and accident insurance products in selected international markets and the United States. With licenses and partnerships across Asia-Pacific, Europe and North America, Cigna offers products and services to local citizens and globally mobile individuals. Global Supplemental Benefits also offers Medicare supplemental coverage. Group Disability and Life Group Disability and Life provides insurance products and related services for group long- and short-term disability insurance, group life insurance, and accident and specialty insurance. Cigna markets products in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands and Canada. Group Disability and Life programs are designed to help improve employee productivity and lower employers’ overall absence costs. Products are coupled with comprehensive tools and services for easy benefit management. 22


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    Global Health Care by product: ■ Medical – 63% Commercial Segment – 68% ■ Dental – 5% ■ Government – 32% Premiums and fees in millions: $22,933 Global Supplemental Benefits by country: ■ South Korea – 51% ■ U.S. – 12% ■ Taiwan – 11% ■ Indonesia – 4% ■ Europe – 10% ■ Other – 12% Premiums and fees in millions: $2,513 Group Disability and Life by product: ■ Disability – 47% ■ Life – 45% ■ Other – 8% Premiums and fees in millions: $3,425 23


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    CORPORATE AND BOARD Board of Directors Jane E. Henney, MD Former Senior Vice President, Isaiah Harris, Jr. Provost and Professor of Medicine, Independent Chairman University of Cincinnati College of of the Board, Medicine, an educational institution Retired President and Chief Executive Officer Eric C. Wiseman AT&T Advertising and Roman Martinez IV Chairman, President and Publishing – East, a Private Investor Chief Executive Officer communications VF Corporation, an apparel services company and footwear company John M. Partridge Retired President David M. Cordani Visa Inc., a consumer Donna F. Zarcone President and Chief credit company President and Chief Executive Officer Executive Officer The Economic Club of Chicago, a Cigna Corporation civic and business leadership James E. Rogers organization Retired Chairman, President Eric J. Foss and Chief Executive Officer President, Chief Executive Duke Energy Corporation, William D. Zollars Officer and Director an electric power company Retired Chairman, President and ARAMARK Corporation, a Chief Executive Officer provider of food services, facilities YRC Worldwide Inc., a management and uniform and Joseph P. Sullivan transportation and related career apparel Private Investor services holding company 24


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    COMMITTEES AND OFFICERS EXECUTIVE COMMITTEE PEOPLE RESOURCES COMMITTEE Isaiah Harris, Jr. William D. Zollars Chair Chair David M. Cordani Matthew G. Manders Jane E. Henney, MD Jane E. Henney, MD President Joseph P. Sullivan John M. Partridge Regional and Operations Eric C. Wiseman Cigna Corporation Donna F. Zarcone William D. Zollars EXECUTIVE OFFICERS Thomas A. McCarthy David M. Cordani Executive Vice President and AUDIT COMMITTEE President, Chief Executive Chief Financial Officer Donna F. Zarcone Officer and Director Cigna Corporation Chair Cigna Corporation John M. Murabito Eric J. Foss Lisa R. Bacus Executive Vice President Roman Martinez IV Executive Vice President and of Human Resources and Services, John M. Partridge Global Chief Marketing Officer Cigna Corporation Cigna Corporation James E. Rogers Jason D. Sadler CORPORATE GOVERNANCE Mark L. Boxer President COMMITTEE Executive Vice President and Global Individual Health, Jane E. Henney, MD Global Chief Information Officer, Life & Accident Segment Chair Cigna Corporation Cigna Corporation Herbert A. Fritch OTHER OFFICERS Eric J. Foss Joseph P. Sullivan President John M. Limongelli Cigna-HealthSpring Corporate Secretary Eric C. Wiseman Cigna Corporation William D. Zollars David D. Guilmette FINANCE COMMITTEE President Timothy D. Buckley Global Employer Segment Vice President and Treasurer John M. Partridge Cigna Corporation Cigna Corporation Chair Nicole S. Jones Mary T. Hoeltzel Roman Martinez IV Executive Vice President Vice President and James E. Rogers and General Counsel Chief Accounting Officer Donna F. Zarcone Cigna Corporation Cigna Corporation 25


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    2014 ANNUAL MEETING Life Insurance Company STOCK LISTING Wednesday, April 23 at 10:00 am of North America Cigna’s common shares are Windsor 4 Ballroom Two Liberty Place listed on the New York Stock Windsor Marriott Hotel 1601 Chestnut Street Exchange. The ticker 28 Day Hill Road Philadelphia, PA 19192-1550 symbol is CI. Windsor, Connecticut 215.761.1000 TRANSFER AGENT Proxies and proxy statements have Computershare DIRECT STOCK been made available to shareholders PURCHASE PLAN P.O. Box 30170 of record as of February 24, 2014. On Shareholders can automatically College Station, TX December 31, 2013, there were 7,535 reinvest their annual dividends 77842-3170 common shareholders of record. and make optional cash purchases Toll-free: 800.760.8864. of common shares. For information Outside the United States FINANCIAL INFORMATION on these services, please contact: and Canada at 201.680.6535. Cigna’s Form 10-K is available online Hearing impaired, TDD: Computershare at Cigna.com. For a copy of Cigna’s 800.231.5469. P.O. Box 30170 quarterly earnings news releases, computershare.com College Station, TX 77842-3170 visit our website at Cigna.com and Toll-free at 800.760.8864. CIGNA ONLINE click on “News.” Outside the United States and To access online information Canada at 201.680.6535 about Cigna, our products OFFICES AND PRINCIPAL SUBSIDIARIES and services, visit Cigna.com. SHAREHOLDER Cigna Corporation ACCOUNT ACCESS 900 Cottage Grove Road You can access your Cigna Bloomfield, CT 06002 shareholder account online 860.226.6000 through the Computershare website: computershare.com. and Or, call 800.760.8864. Two Liberty Place DIRECT DEPOSIT OF 1601 Chestnut Street DIVIDENDS Philadelphia, PA 19192-1550 Direct deposit of dividends provides 215.761.1000 a prompt, efficient way to have your dividends electronically deposited Connecticut General Life into your checking or savings Insurance Company account. It avoids the possibility of 900 Cottage Grove Road lost or delayed dividend checks. The Bloomfield, CT 06002 deposit is made electronically on the 860.226.6000 payment date. For more information and an enrollment authorization Cigna Health and Life form, contact Computershare at Insurance Company 800.760.8864, or outside the United 900 Cottage Grove Road States and Canada at 201.680.6535. Bloomfield, CT 06002 You can access your account online 860.226.6000 through the Computershare website: computershare.com. 26


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    UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ፼ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013 OR 䡺 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-8323 29OCT201118203261 CIGNA CORPORATION (Exact name of registrant as specified in its charter) Delaware 06-1059331 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 900 Cottage Grove Road, Bloomfield, Connecticut 06002 (Address of principal executive offices) (Zip Code) (860) 226-6000 Registrant’s telephone number, including area code (860) 226-6741 Registrant’s facsimile number, including area code SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Title of each class Name of each exchange on which registered Common Stock, Par Value $0.25 New York Stock Exchange, Inc. SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark YES NO • if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ፼ 䡺 • if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. 䡺 ፼ • 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. ፼ 䡺 • whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ፼ 䡺 • 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. 䡺 ፼ • whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of ‘‘large accelerated filer’’, ‘‘accelerated filer’’, and ‘‘smaller reporting company’’ in Rule 12b-2 of the Exchange Act. Large accelerated filer ፼ Accelerated filer 䡺 Non-accelerated filer 䡺 Smaller Reporting Company䡺 • whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 䡺 ፼ The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 28, 2013 was approximately $20.5 billion. As of January 31, 2014, 273,566,004 shares of the registrant’s Common Stock were outstanding. Part III of this Form 10-K incorporates by reference information from the registrant’s definitive proxy statement related to the 2014 annual meeting of shareholders.


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    Table of Contents Page CAUTIONARY STATEMENT PART I 1 ITEM 1. Business................................................................................................................................ 1 • Overview ....................................................................................................................1 • Global Health Care ........................................................................................................2 • Global Supplemental Benefits ...........................................................................................8 • Group Disability and Life ................................................................................................9 • Run-off Reinsurance ..................................................................................................... 11 • Other Operations ........................................................................................................ 11 • Investments and Investment Income.................................................................................. 11 • Regulation ................................................................................................................. 12 • Miscellaneous ............................................................................................................. 17 ITEM 1A. Risk Factors ............................................................................................................................. 18 ITEM 1B. Unresolved Staff Comments ..................................................................................................... 26 ITEM 2. Properties ................................................................................................................................. 26 ITEM 3. Legal Proceedings ..................................................................................................................... 26 ITEM 4. Mine Safety Disclosures ........................................................................................................... 26 EXECUTIVE OFFICERS OF THE REGISTRANT .................................................................................. 27 PART II 28 ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.................................................................................. 28 ITEM 6. Selected Financial Data ............................................................................................................ 30 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations....... 31 ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.................................................... 59 ITEM 8. Financial Statements and Supplementary Data ......................................................................... 60 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......... 115 ITEM 9A. Controls and Procedures ........................................................................................................ 115 ITEM 9B. Other Information ................................................................................................................. 115


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    Page PART III 116 ITEM 10. Directors, Executive Officers and Corporate Governance..................................................... 116 A. Directors of the Registrant ............................................................................................116 B. Executive Officers of the Registrant .................................................................................116 C. Code of Ethics and Other Corporate Governance Disclosures ..................................................116 D. Section 16(a) Beneficial Ownership Reporting Compliance.....................................................116 ITEM 11. Executive Compensation.................................................................................................... 116 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ............................................................................................................... 117 ITEM 13. Certain Relationships, Related Transactions and Director Independence ................................ 117 ITEM 14. Principal Accountant Fees and Services .................................................................................. 117 PART IV 118 ITEM 15. Exhibits and Financial Statement Schedules ........................................................................... 118 SIGNATURES ........................................................................................................................................... 119 INDEX TO FINANCIAL STATEMENT SCHEDULES .........................................................................FS-1 INDEX TO EXHIBITS .............................................................................................................................E-1


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    CAUTIONARY NOTE REGARDING FORWARD- LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on Cigna’s current expectations and projections about future trends, events and uncertainties. These statements are not historical facts. Forward-looking statements may include, among others, statements concerning our business strategy, strategic or operational initiatives, including our ability to deliver improved health services outcomes and productivity for our customers and clients while lowering the costs of health care; future growth and expansion; future financial or operating performance; economic, regulatory or competitive environments; and our projected cash position, future pension funding and financing or capital deployment plans. You may identify forward- looking statements by the use of words such as ‘‘believe,’’ ‘‘expect,’’ ‘‘plan,’’ ‘‘intend,’’ ‘‘anticipate,’’ ‘‘estimate,’’ ‘‘predict,’’ ‘‘potential,’’ ‘‘may,’’ ‘‘should,’’ ‘‘will’’ or other words or expressions of similar meaning, although not all forward-looking statements contain such terms. Forward-looking statements are subject to risks and uncertainties, both known and unknown, that could cause actual results to differ materially from those expressed or implied in forward-looking statements. Such risks and uncertainties include, but are not limited to: our ability to achieve our financial, strategic and operational plans or initiatives; our ability to predict and manage medical costs and price effectively and develop and maintain good relationships with physicians, hospitals and other health care providers; our ability to realize the expected benefits of strategic transactions and/or acquisitions; the substantial level of government regulation over our business and the potential effects of new laws or regulations or changes in existing laws or regulations; the outcome of litigation, regulatory audits, investigations and actions and/or guaranty fund assessments; uncertainties surrounding participation in government-sponsored programs such as Medicare; and unfavorable industry, economic or political conditions, as well as more specific risks and uncertainties discussed in Part I, Item 1A – Risk Factors and Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K and as described from time to time in our future reports filed with the Securities and Exchange Commission. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance or results, and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Cigna undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law.


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    PART I ITEM 1. Business PART I ITEM 1. Business Overview Cigna Corporation, together with its subsidiaries (either individually organization. To do this, we are seeking to further simplify the or collectively referred to as ‘‘Cigna,’’ the ‘‘Company,’’ ‘‘we’’ or ‘‘our’’), buying process by providing choice, transparency of information, is a global health services organization with a mission to help and a personalized customer experience. Our goal is to build customers improve their health, well-being and sense of security. Our long-term relationships with each of our customers and meet their subsidiaries are major providers of medical, dental, disability, life and needs throughout each stage of their lives regardless of the accident insurance and related products and services. customer’s plan type: employer-based, government-sponsored, or individual coverage. To execute on our mission, we have focused our efforts over the past several years on serving the emerging needs of our customers around As part of this strategy, we have focused our efforts on delivering the world through our ‘‘Go Deep, Go Global, Go Individual’’ strategy, innovative health and wellness solutions tailored to our employer and as follows: government customers, enhancing collaboration with physicians and hospitals to offer affordable, value-based high quality care to • GO DEEP: We seek to increase our presence and brand strength in individuals and building deeper relationships with individual key ‘‘go deep’’ geographic areas, grow in targeted segments or customers through the world. Through these efforts, we believe we capabilities, and deepen our relationships with current customers can achieve better health outcomes for our global customers and through cross-selling. improve employee productivity, all while lowering the costs of health • GO GLOBAL: We seek to deliver a range of differentiated products care for all parties. and superior service to meet the distinct needs of a growing global As of December 31, 2013, our consolidated shareholders’ equity was middle class and a globally mobile workforce through expansion in $10.6 billion, assets were $54.3 billion and we reported revenues of existing international markets and extension of our business model $32.4 billion for the year then ended. Our revenues are derived to new geographic areas. principally from premiums on insured products, fees from self-insured • GO INDIVIDUAL: We strive to establish a deep understanding of products and services, mail-order pharmacy sales, and investment our customers’ unique needs and to be a highly customer-centric income. We report the financial results of our businesses in five segments, the following three of which are the most significant: Segment % of revenues Description Global Health Care 78% Aggregates the Commercial and Government operating segments: Commercial • Encompasses both our U.S. commercial and certain international health care businesses. • Serves employers and their employees, including globally mobile individuals, and other groups (e.g. governmental and non-governmental organizations, unions and associations). In addition, our U.S. commercial health care business also serves individuals. • Offers our insured and self-insured customers medical, dental, behavioral health, vision, and prescription drug benefit plans, health advocacy programs and other products and services that may be integrated as part of a comprehensive global health care benefit program. Government • Offers Medicare Advantage, Medicare Part D and Medicaid plans. Global Supplemental Benefits 8% This segment offers supplemental health, life and accident insurance products in selected international markets and the U.S. Group Disability and Life 12% This segment provides group long-term and short-term disability, group life, accident and specialty insurance products and related services. CIGNA CORPORATION - 2013 Form 10-K 1


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    PART I ITEM 1. Business We also report in two other segments: Run-off Reinsurance and Other Operations, including Corporate-owned Life Insurance. Key Transactions Over the past two years, we have entered into a number of • We acquired Great American Supplemental Benefits to both transactions that have helped us to achieve our strategic goals by: strengthen our capabilities in the individual market and facilitate (1) repositioning the portfolio for growth in targeted geographies, our expansion into the Medicare supplemental business. product lines, buying segments and distribution channels; • We entered into a joint venture with Finansbank to expand our (2) improving our strategic and financial flexibility; and (3) pursuing global footprint in Turkey. additional opportunities in high growth markets with particular focus on individuals. Specifically: • In February 2013, we effectively exited our Run-off guaranteed Other Information minimum death benefit (‘‘GMDB’’ also known as ‘‘VADBe’’) and The financial information included in this Annual Report on guaranteed minimum income benefit (‘‘GMIB’’) reinsurance Form 10-K for the fiscal year ended December 31, 2013 businesses by entering into an agreement with Berkshire Hathaway (‘‘Form 10-K’’) is in conformity with accounting principles generally Life Insurance Company of Nebraska (‘‘Berkshire’’) to reinsure accepted in the United States of America (‘‘GAAP’’), unless otherwise 100% of our future exposures for these businesses, net of indicated. Industry rankings and percentages set forth herein are for retrocessional arrangements in place as of February 4, 2013, up to a the year ended December 31, 2013 unless otherwise indicated. In specified limit. addition, statements set forth in this document concerning our rank or position in an industry or particular line of business have been • In June 2013, we entered into a ten-year pharmacy benefit developed internally, based on publicly available information, unless management services agreement with Catamaran Corporation otherwise noted. (‘‘Catamaran’’). Under this agreement, we will utilize Catamaran’s technology and service platforms, prescription drug procurement Cigna Corporation was incorporated in Delaware in 1981. Our and inventory management capabilities, and order fulfillment annual, quarterly and current reports, proxy statements and other services to lower costs and enhance our home delivery pharmacy, filings, and any amendments to these filings, are made available free of retail network contracting and claims processing services. charge on our website (http://www.cigna.com, under the ‘‘Investors – Quarterly Reports and SEC Filings’’ captions) as soon as reasonably • In 2012, we entered into three strategically significant transactions practicable after we electronically file these materials with, or furnish targeting several key markets: seniors, individual and global them to, the Securities and Exchange Commission (the ‘‘SEC’’). We supplemental benefits: use our website as a channel of distribution for material company • We acquired HealthSpring, a Medicare Advantage provider, to information. Important information, including news releases, analyst assist us in serving individuals across their life stages and deepen presentations and financial information regarding Cigna is routinely our presence in a number of geographic markets. This acquisition posted on and accessible at www.cigna.com. See ‘‘Code of Ethics and brought us industry-leading physician partnership capabilities, Other Corporate Governance Disclosures’’ in Part III, Item 10 deepened our existing client and customer relationships, and beginning on page 116 of this Form 10-K for additional available facilitated a broader deployment of our range of health and information. wellness capabilities and product offerings. Global Health Care The Global Health Care segment constitutes approximately 80% of commercial health care business also serves individuals. Through this our revenues and aggregates the Commercial and Government segment, we offer our insured and self-insured customers medical, operating segments due to their similar economic characteristics, dental, behavioral health, vision, and prescription drug benefit plans, products and services and regulatory environment. All products and health advocacy programs and other products and services that may be services sold by this segment are offered by subsidiaries of Cigna integrated as part of a comprehensive global health care benefit Corporation. We seek to differentiate ourselves in this business by program. Our Government operating segment offers Medicare providing deep customer insights, high quality care delivery, effective Advantage, Medicare Part D and Medicaid plans. product integration and unique product offerings. We expect to accomplish these goals by targeting selected geographies and market segments and accelerating our engagement with employers, Principal Products and Services individuals and preferred health care professionals. Commercial Medical Health Plans – U.S. and Our Commercial operating segment encompasses both our U.S. International commercial and certain international health care businesses serving The Commercial operating segment, either directly or through its employers and their employees, including globally mobile individuals, partners, offers some or all of its products in all 50 states, the District and other groups (e.g. governmental and non-governmental organizations, unions and associations). In addition, our U.S. 2 CIGNA CORPORATION - 2013 Form 10-K


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    PART I ITEM 1. Business of Columbia, the U.S. Virgin Islands, Canada, Europe, the Middle • Choice Fund Suite of Consumer-Driven Products. Our medical plans East, and Asia. We offer a variety of medical plans including: are often combined with the Cigna Choice Fund suite of products, • Managed Care Plans. Our managed care benefit plans (including including Health Reimbursement Accounts (‘‘HRA’’), Health Open Access Plus and Health Maintenance Organizations Savings Accounts (‘‘HSA’’) and Flexible Spending Accounts (‘‘FSA’’) (‘‘HMO’’)) encourage the use of ‘‘in-network’’ versus that are designed to encourage customers to understand and manage ‘‘out-of-network’’ health care providers and primary care physicians. their health and health benefits. Customers can use these accounts Employers may elect to use a subset of our network to better manage to pay medical care expenses not covered by their base medical plan. costs and quality. In most cases, these products are combined with a high deductible medical plan. • Preferred Provider Plans. Our preferred provider (‘‘PPO’’) product line features a network with broader provider access than the Managed Care Plans. The preferred provider product line may be at a higher medical cost than our Managed Care Plans. Approximately 85% of our commercial medical customers are in funding arrangements where lower medical costs directly benefit our corporate clients and their employees. These funding arrangements for our commercial medical health plans and dental coverages are as follows: % of Commercial Funding Arrangement Medical Customers Description Administrative Services 81% • ASO plan sponsors are responsible for self-funding all claims, but may purchase stop loss insurance Only (‘‘ASO’’ or to limit exposure for claims in excess of a predetermined amount. ‘‘self-insured’’) • We collect fees from sponsors for providing access to our participating provider network and for other services and programs including: claim administration; behavioral health; disease management; utilization management; cost containment; dental; and pharmacy benefit management. • In some cases, we provide performance guarantees associated with meeting certain service standards, clinical outcomes or financial metrics. Retrospectively 6% • Premium charged during the policy period (‘‘initial premium’’) may be adjusted following the policy Experience-rated period for actual claim, and in some cases, administrative cost experience of the policyholder. (‘‘Insured – Experience- • When claims and expenses are less than the initial premium charged (an ‘‘experience surplus’’), the rated’’) policyholder may be credited for a portion of this premium. • However, if claims and expenses exceed the initial premium (an ‘‘experience deficit’’), we generally bear the risk. In certain cases, experience deficits may be recovered through future year experience surpluses if the policyholder account renews. Insured – Guaranteed 13% • We establish the cost to the policyholder at the beginning of a policy period and generally cannot Cost subsequently adjust premiums to reflect actual claim experience until the next annual renewal. • Employers and other groups with guaranteed cost policies are generally smaller than those with experience-rated group policies; accordingly, our claim and expense assumptions may be based in whole or in part on prior experience of the policyholder or on a pool of accounts, depending on the policyholder’s size and the statistical credibility of their experience. • HMO and individual plans (medical and dental) are offered on a guaranteed cost basis only. Beginning in 2014, the Patient Protection and Affordable Care Act requires that non-grandfathered individual and small group plans be community rated. We offer stop loss insurance coverage for ASO plans that provides medical loss ratio (‘‘MLR’’) requirements are not met. The MLR reimbursement for claims in excess of a predetermined amount for represents the percentage of premiums used to pay customer medical individuals (‘‘specific’’), the entire group (‘‘aggregate’’), or both. We claims and other activities that improve the quality of care. See the also include stop loss features in our experience-rated group medical ‘‘Regulation’’ section of this Form 10-K for additional information on insurance policies. the commercial MLR requirements of Health Care Reform. In most states, individual and group insurance/HMO premium rates must be approved by the applicable state regulatory agency (typically Government Health Plans department of insurance) and state laws may restrict or limit the use of rating methods. Premium rates for groups and individuals are subject Medicare Advantage to state review for unreasonable increases. In addition, the Patient We offer Medicare Advantage plans in 15 states and the District of Protection and Affordable Care Act (also referred to as ‘‘Health Care Columbia through Cigna-HealthSpring. Under a Medicare Reform’’) subjects rate increases above an identified threshold to Advantage plan, Medicare-eligible beneficiaries may receive health review by the United States Department of Health and Human care benefits, including prescription drugs, through a managed care Services (‘‘HHS’’), requires most non-grandfathered individual and health plan such as our coordinated care plans. A significant portion small group health insurance policies to be community rated of our Medicare Advantage customers receive medical care from our (beginning in 2014) and requires payment of premium refunds on innovative plan models that focus on developing highly engaged individual and group medical insurance products if minimum physician networks, aligning payment incentives to improved health CIGNA CORPORATION - 2013 Form 10-K 3


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    PART I ITEM 1. Business outcomes, and using timely and transparent data sharing. We are cost, in-network services, reviewing provider bills, and recovering focused on continuing to expand these models in the future. overpayments from other insurance carriers or health care We receive revenue from the Centers for Medicare and Medicaid providers. We charge fees for providing or arranging for these Services (‘‘CMS’’) for each plan customer based on customer services. demographic data and actual customer health risk factors compared to • Health Advocacy. We offer a wide array of medical management, the broader Medicare population. We also may earn additional disease management, and other health advocacy services to revenue from CMS related to quality performance measures (known employers and other plan sponsors to help individuals improve as ‘‘Medicare Stars’’). Additional premiums may be received from their health, well-being and sense of security. These services are customers, representing the difference between CMS subsidy offered to customers covered under plans that we administer, as payments and our assumed revenue determined as part of our annual well as plans insured or administered by competing insurers or Medicare Advantage bid submissions. Beginning in 2014, Health third-party administrators. Our health advocacy programs and Care Reform requires Medicare Advantage and Medicare Part D plans services include early intervention in the treatment of chronic to meet a minimum MLR of 85%. Under the rules proposed by HHS, conditions. We also offer online tools and software to help if the MLR for a CMS contract is less than 85%, the contractor is customers manage their health and an array of health coaching required to pay a penalty to CMS and could be subject to additional programs designed to address lifestyle management issues such as sanctions if the MLR continues to be less than 85% for successive stress, weight, and tobacco cessation. years. Behavioral Health Specialty Medicaid We arrange for behavioral health care services for customers through We offer Medicaid coverage to low income individuals in selected our network of approximately 83,500 participating behavioral health markets in Texas. Our Medicaid customers benefit from many of the care professionals and 10,500 facilities and clinics. We offer behavioral coordinated care aspects of our Medicare Advantage programs. We health care case management services, employee assistance programs expect to expand our Medicaid operations during 2014 as a result of (EAP), and work/life programs to employers, government entities and previously awarded contracts in Illinois and Texas. other groups sponsoring health benefit plans. We focus on integrating our programs and services with medical, pharmacy and disability programs to facilitate customized, holistic care. Medicare Part D Our Medicare Part D prescription drug program provides a number of plan options, as well as service and information support to Medicare Pharmacy Management and Medicaid eligible customers. Our plans are available in all 50 We offer prescription drug plans to our insured and ASO customers states and the District of Columbia and offer the savings of Medicare both in conjunction with our medical products and on a stand-alone combined with the flexibility to provide enhanced benefits and a drug basis. With a network of over 65,000 contracted pharmacies, Cigna list tailored to individuals’ specific needs. Retirees benefit from broad Pharmacy Management is a comprehensive pharmacy benefits network access and value-added services intended to help keep them manager (‘‘PBM’’) offering clinical integration programs and specialty well and save them money. pharmacy solutions. We also offer fast, cost-effective mail order, telephone and on-line pharmaceutical fulfillment services through our home delivery operation. Cigna Home Delivery Pharmacy provides Specialty Products high-quality, efficient home delivery of prescription medications. Our specialty products and services described below are designed to Our medical and pharmacy coverage can meet the needs of customers improve quality, lower the cost of medical services and help customers with complex medical conditions requiring specialty pharmaceuticals. achieve better health outcomes. These products can be sold on a These types of medications are covered under both pharmacy and standalone basis, but we believe they are most effective when medical benefits and can be expensive, often requiring associated lab integrated with a Cigna-administered health plan. Our specialty work and administration by a health care professional. Therefore, products are focused in the areas of medical, behavioral, pharmacy coordination is critical in improving affordability and outcomes. management, dental and vision. Clients with Cigna-administered medical and pharmacy coverage benefit from continuity of care, integrated reporting, and aggressive Medical Specialty unit cost discounts on all specialty drugs – regardless of where they are • Cost-Containment Service. We administer cost-containment administered. programs on behalf of our clients and customers for health care Under our 2013 agreement, Catamaran provides us with access to services and supplies that are covered under health benefit plans. their technology and service platforms, prescription drug These programs may involve contracted vendors and are designed procurement and inventory management capabilities, retail network to control health costs by reducing out-of-network utilization, contracting and claims processing services. including educating customers regarding the availability of lower 4 CIGNA CORPORATION - 2013 Form 10-K


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    PART I ITEM 1. Business Dental These investments are focused on improving the customer experience and affordability, ensuring high quality production support for our We offer a variety of dental care products including dental health applications and infrastructure, and ensuring regulatory compliance. maintenance organization plans (‘‘Dental HMO’’) in 37 states, dental The customer enabling investments include retail-centric preferred provider organization (‘‘Dental PPO’’) plans in 42 states and infrastructure improvements, flexible and efficient transaction the District of Columbia, exclusive dental provider organization processing and innovative mobile tools and Internet-enabled plans, traditional dental indemnity plans and a dental discount technology that support our focus on providing customers with a program. Employers and other groups can purchase our products as personalized experience in making health care decisions and stand-alone products or integrated with medical products. leveraging customer insights to drive our strategy and mission. Additionally, individual customers can purchase Dental PPO plans in conjunction with individual medical policies. Quality Medical Care As of December 31, 2013, our dental customers totaled approximately 12.1 million, most of whom are in self-insured plans. Our commitment to promoting quality medical care to the people we All of our Dental HMO customers participate in guaranteed cost serve is reflected in a variety of activities. insured plans. Our customers access care from one of the largest Dental PPO networks and Dental HMO networks in the U.S., with the following approximate number of dental care providers: Physician Engagement for Health Improvement 304,900 Dental PPO-contracted access points (105,800 unique Most recently, we have been increasing our engagement with health care professionals) and 77,400 Dental HMO-contracted access physicians through the rapid development of the types of points (19,000 unique health care professionals). arrangements discussed below. More than one million medical customers are currently serviced by physicians compensated under these types of arrangements. Vision • Collaborative Accountable Care Organizations (‘‘CACs’’). We are Cigna Vision offers flexible, cost-effective PPO coverage that includes focused on collaborating with physicians and other health care a range of both in and out-of-network benefits for routine vision professionals and facilities with the goal of improving the quality of services offered in conjunction with our medical and dental product care and patient satisfaction while lowering medical costs, resulting offerings. Our national vision care network, consisting of in improved overall value. This focus is illustrated by our more than approximately 63,000 health care providers in over 24,000 locations, 85 CACs currently established and by our commitment to continue includes private practice ophthalmologist and optometrist offices, as increasing the number of CACs over the next several years. Our goal well as retail eye care centers. is to reach 100 of these programs in 2014. • Independent Practice Associations – Cigna-HealthSpring. With the Service and Quality innovative physician engagement models in our Customer Service Cigna-HealthSpring business, we utilize a variety of business arrangements that shift the physician’s reimbursement from the For U.S.-based customers, we operate 18 service centers that together traditional fee-for-service model to one that is focused on rewarding processed approximately 160 million medical claims in 2013. As of quality medical outcomes and an enhanced patient experience at a December 31, 2013, we operated 13 call centers, ten of which serve lower cost. In these arrangements, the physician groups share customers 24 hours a day, 365 days a year. The remaining three call financial outcomes with us. The Cigna-HealthSpring clinical model centers exclusively service Medicare Advantage health care providers also includes outreach to new and at-risk patients to ensure they are and customers and operate for extended hours during high volume accessing their primary care physician. periods to accommodate customer demands. In our international health care business, we provide our 1.3 million customers around the globe with access to our health care provider Participating Provider Network/Cigna Care networks and case management experts. Claims specialists are NetworkSM available 24 hours a day, 365 days a year, through service centers We have an extensive network of participating health care dedicated to their unique needs. We use a wide range of measurement professionals, hospitals, and other facilities, pharmacies and providers tools to better understand customers’ needs – ranging from quick of health care services and supplies. In most instances, we contract 5-minute surveys of their call-center experience to more elaborate with them directly; however, in some instances, we contract with third tracking of loyalty as measured by the likelihood of them to refer parties for access to their provider networks and care management Cigna to a friend. services. In addition, we have entered into strategic alliances with several regional managed care organizations (e.g. Tufts Health Plan, HealthPartners, Inc., Health Alliance Plan, and MVP Health Plan) to Technology gain access to their provider networks and discounts. We continue to invest in our information technology infrastructure to We credential physicians, hospitals and other health care professionals maximize and leverage the strategic capabilities of our businesses. in our participating provider networks using quality criteria that meet CIGNA CORPORATION - 2013 Form 10-K 5


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    PART I ITEM 1. Business or exceed the standards of external accreditation or state regulatory pharmacists. We operate five stand-alone centers and seven agencies, or both. Typically, most health care professionals are ‘‘practices’’ that incorporate the principles of the larger stand-alone re-credentialed every three years. centers while allowing the customer to continue to see his or her primary care physician in an office setting. In addition, we expanded The Cigna Care Network, a benefit design option available in 69 our service model to include embedded case management resources service areas across the U.S., is a subset of participating specialist in three physician practice locations. physicians so designated based on specific clinical quality and cost-efficiency criteria. Customers pay reduced co-payments or co-insurance when they receive care from a specialist designated as a External Validation Cigna Care Network physician. Participating specialists are evaluated regularly for the Cigna Care Network designation. We continue to demonstrate our commitment to quality and have a broad scope of quality programs validated through nationally recognized external accreditation organizations. We were awarded Onsite Medical Care Excellent, Commendable or Accredited for Health Plan accreditation from NCQA in 36 of our markets. Additional NCQA recognitions • Cigna Medical Group is a multi-specialty medical group practice that include Full Accreditation for Managed Behavioral Healthcare delivers primary care and certain specialty care services through 25 Organization for Cigna Behavioral Health, Performance Reporting medical facilities and approximately 180 employed clinicians in the for Wellness & Health Promotion accreditation for our wellness Phoenix, Arizona metropolitan area. Twenty-two of these programs and Physician & Hospital Quality Certification for our multi-specialty health care centers and their affiliated primary care provider transparency program. We have Full Accreditation for physicians have received the top level of accreditation (level 3) from Health Utilization Management, Case Management and Pharmacy the National Committee for Quality Assurance (‘‘NCQA’’) a Benefit Management from URAC, an independent, nonprofit health private, nonprofit organization dedicated to improving health care care accrediting organization dedicated to promoting health care quality. Cigna Medical Group currently holds the highest level of quality through accreditation, certification and commendation. this accreditation for the greatest number of practices and physicians We participate in the NCQA’s Health Plan Employer Data and in the state of Arizona. Information Set (‘‘HEDIS威’’) Quality Compass Report, whose • Cigna Onsite Health. Our onsite services include more than 150 Effectiveness of Care measures are a standard set of metrics to evaluate health centers at various employer sites that offer health coaching, the effectiveness of managed care clinical programs. Our national wellness seminars and biometric screenings. results compare favorably to industry averages. • LivingWell Health Centers. Our Medicare Advantage customers may receive care from a team of physicians, nurse practitioners and Markets and Distribution We offer health care and related products and services in the following customer segments or markets: % of Medical Customers National Multi-state employers with 5,000 or more U.S.-based, full-time employees. We primarily offer ASO funding 27% solutions in this market segment. Middle Market Employers generally with 250 to 4,999 U.S.-based, full-time employees. This segment also includes single-site 52% employers with more than 5,000 employees, Taft-Hartley plans and other third party payers. We offer ASO, experience-rated and guaranteed cost funding solutions in this market segment. Select Employers generally with 51-249 eligible employees. We offer ASO and guaranteed cost funding solutions in this 7% market segment. Individual Individuals in ten states as of December 31, 2013: Arizona, California, Colorado, Connecticut, Florida, Georgia, 2% North Carolina, South Carolina, Tennessee and Texas. Effective October 1, 2013, we began offering coverage on five public health insurance exchanges (Arizona, Colorado, Florida, Tennessee and Texas). We offer plans only on a guaranteed cost basis in this market segment. Government Offers Medicare Advantage (both to individuals who are post-65 retirees, as well as employer group sponsored 3% pre- and post-65 retirees), Prescription Drug programs, and Medicaid products as managed care alternatives to publicly funded health care programs. International Focused on the needs of local and multinational companies and organizations and their local and globally mobile 9% employees and dependents. We offer guaranteed cost, experience-rated and ASO funding solutions in this market segment. We employ sales representatives to distribute our products and and pharmacy management, and employee assistance services directly services through insurance brokers and insurance consultants or to insurance companies, HMOs, third party administrators and directly to employers, unions and other groups. We also employ employer groups. As of December 31, 2013, our field sales force representatives to sell utilization review services, behavioral health care consisted of over 1,000 sales representatives in more than 100 field 6 CIGNA CORPORATION - 2013 Form 10-K


  • Page 39

    PART I ITEM 1. Business locations. In our Cigna-HealthSpring business, Medicare Advantage The primary competitors of the international health care business enrollment is generally a decision made individually by the customer, include U.S.-based and European health insurance companies with and accordingly, sales agents and representatives focus their efforts on global health benefits operations. The primary competitors for our in-person contacts with potential enrollees, as well as telephonic and international health care operations in the United Kingdom and Spain group selling venues. are regional and local insurers. Competition also arises from smaller regional or specialty companies Competition and Industry Developments with strength in a particular geographic area or product line, administrative service firms and, indirectly, self-insurers. In addition Our business is subject to intense competition and continuing to these traditional competitors, a new group of competitors is industry consolidation that has created an even more competitive emerging. These new competitors are focused on delivering employee business environment. In certain geographic locations, some health benefits and services through internet-enabled technology that allows care companies may have significant market share positions, but no consumers to take a more active role in the management of their one competitor dominates the health care market nationally. We health. This is accomplished primarily through financial incentives, expect a continuing trend of consolidation in the industry given the access to enhanced medical quality data and other information current economic and political environment. We also expect sharing. The effective use of our health advocacy, customer insight continued vertical integration, with the line blurring between and physician engagement capabilities, along with decision support clinicians and hospitals, and traditional insurers. tools (some of which are web-based) and enabling technology are Competition in the health care market exists both for employers and critical to success in the health care industry, and we believe our other groups sponsoring plans and for the employees in those capabilities in these areas will be competitive differentiators. instances where the employer offers its employees a choice of products 2014 is a key year in the implementation of Health Care Reform, with from more than one health care company. Most group policies are the advent of the public Marketplaces (i.e. exchanges), the Health subject to annual review by the policyholder, who may seek Insurer fee, the reinsurance assessment, and the MLR requirement for competitive quotations prior to renewal. We expect competition to Medicare Advantage and Medicare Part D Plans. Despite the increase in the individual market as a result of the introduction of the administrative challenges involved in the rollout of the public new health insurance Marketplaces (or exchanges) under Health Care Marketplaces, we continue to operate under the assumption that Reform. Health Care Reform will largely be implemented as the law was The primary competitive factors are quality and cost-effectiveness of originally written. See the ‘‘Regulation’’ section of this Form 10-K for service and provider networks; effectiveness of medical care additional information regarding Health Care Reform. management; products that meet the needs of employers and their On February 21, 2014, CMS issued its Advance Notice of employees; total cost management; technology; and effectiveness of Methodological Changes for Calendar Year 2015 for Medicare marketing and sales. Financial strength of the insurer, as indicated by Advantage Capitation Rates, Part C and Part D Payment Policies (the ratings issued by nationally recognized rating agencies, is also a ‘‘Notice’’). The final terms are expected to be published on April 7, competitive factor. We believe that our health advocacy capabilities, 2014. While the terms contained within the Notice are within the holistic approach to consumer engagement, breadth of product range of our expectations, there remain numerous open issues and offerings, clinical care and medical management capabilities and array substantial uncertainties regarding the final terms of the Notice. We of product funding options are competitive advantages. These expect that CMS will receive a significant number of comments from advantages allow us to respond to the diverse needs of our customer interested parties (including Cigna) prior to issuance of the final base. We also believe that our focus on helping to improve the health, terms; however, there can be no assurance that CMS will amend its well-being and sense of security of the customers we serve will allow us current positions. Given the uncertainty regarding the final terms of to differentiate ourselves from our competitors. the Notice, we cannot reliably estimate the impact on our business, Our principal competitors in the U.S.-based business are: revenues or results of operations in 2015 and beyond; under certain circumstances, it is possible that the impact could be materially • other large insurance companies that provide group health and life adverse. In addition, we expect to adjust our programs and services in insurance products; response to the proposed 2015 terms. • Blue Cross and Blue Shield organizations; • stand-alone HMOs and PPOs; • HMOs affiliated with major insurance companies and hospitals; and • national managed pharmacy, behavioral health and utilization review services companies. CIGNA CORPORATION - 2013 Form 10-K 7


  • Page 40

    PART I ITEM 1. Business Global Supplemental Benefits Our Global Supplemental Benefits segment offers supplemental variable universal life may be adjusted prospectively to reflect expected health, life and accident insurance products in selected international mortality experience. For Medicare Supplement products, premium markets and the United States. With local licenses and partnerships in rates and fees reflect assumptions about future claims, customer approximately 20 countries and jurisdictions, we are able to offer retention, expenses, customer demographics, investment returns, and products and services to local citizens and globally mobile individuals. profit margins. Most contracts permit premium rate changes at least All products and services are offered by subsidiaries of Cigna annually. Corporation. This segment constituted 8% of our consolidated A global approach to underwriting risk management allows for each revenues for the year ended December 31, 2013. local business to underwrite and accept risk within specified limits. We continue to distinguish ourselves in the global supplemental Retentions are centrally managed through cost effective use of external health, life and accident businesses through our differentiated reinsurance to limit our liability on per life, per risk, and per event direct-to-consumer distribution, customer insights and marketing (catastrophe) bases. capabilities. We enter new markets when the opportunity to bring our product and health solutions is attractive. Over the past several years, we have continued to extend our product offerings and geographic Markets and Distribution reach. For example, in 2012, we extended our reach in Turkey through Our supplemental health, life and accident insurance products are the joint venture with Finansbank and expanded into the U.S. offered primarily in South Korea and select markets in Asia and Medigap and supplemental lines of business through the acquisition Europe, as well as the United States. In China and Turkey we offer of Great American Supplemental Benefits. In 2011, our acquisition of products and services through joint ventures in which we own 50% FirstAssist in the U.K. added a travel insurance product line and and 51% interests, respectively. In 2014, we will begin offering expanded our distribution channels. In 2014, we will begin offering products and services in India through a joint venture in which we products in India through our joint venture with TTK Group. own a 26% interest. Our Medicare supplement product line is primarily distributed through independent agents and telemarketing directly to the U.S. consumer. Principal Products and Services South Korea represents our single largest geographic market for Supplemental Health, Life and Accident Insurance Global Supplemental Benefits. For information on the concentration Supplemental health, life and accident insurance products generally of risk with respect to the Global Supplemental Benefits segment’s provide simple, affordable coverage of risks for the health and business in South Korea, see ‘‘Other Items Affecting Results of Global financial security of individuals. Supplemental health products Supplemental Benefits’’ in the Global Supplemental Benefits section provide specified payments for a variety of health risks and include of the MD&A beginning on page 47 of this Form 10-K. personal accident, accidental death, critical illness, hospitalization, Our supplemental health, life and accident insurance products sold in travel, dental, cancer and other dread disease coverages. We also offer foreign countries are generally marketed through distribution partners customers individual private medical insurance, term and variable with whom the individual insured has an affinity relationship. These universal life insurance, and other savings products. products are sold primarily through direct marketing channels, such as outbound telemarketing, and in-branch bancassurance (where we Medicare Supplement Plans partner with a bank and use the bank’s sales channels to sell our insurance products). Marketing campaigns are conducted through We offer individual Medicare Supplement plans that provide retirees these channels under a variety of arrangements with affinity partners, with federally standardized Medigap-style plans. Retirees may select including banks, credit card companies and other financial and among the various plans with specific plan options to meet their non-financial institutions. We also market directly to consumers via unique needs and may visit, without the need for a referral, any health direct response television and the Internet. Our Medicare supplement care professional or facility that accepts Medicare throughout the product line is distributed primarily through independent agents and United States. telemarketing directly to the consumer. For our supplemental health, life and accident insurance products sold Pricing and Reinsurance in foreign markets we are increasingly exposed to geopolitical and other risks inherent in foreign operations. Also, given that we bill and Premium rates for our global supplemental benefits products are based collect a significant portion of premiums through credit cards, a on assumptions about mortality, morbidity, customer acquisition and substantial contraction in consumer credit could impact our ability to retention, expenses and target profit margins, as well as interest rates. retain existing policies and sell new policies. A decline in customer For variable universal life insurance products, fees consist of mortality, retention would result in both a reduction of revenue and an administrative, asset management and surrender charges assessed acceleration of the amortization of acquisition related costs. Changes against the contractholder’s fund balance. Mortality charges on 8 CIGNA CORPORATION - 2013 Form 10-K


  • Page 41

    PART I ITEM 1. Business in regulation for permitted distribution channels also may impact our distribution through captive agents, with direct marketing being business or results. secondary channels. We estimate that we have less than 2% market share of the total life insurance premiums in any given market in which we operate. Competition In the Medicare supplement business, the principal competitive We expect that the competitive environment for global supplemental factors are underwriting and pricing, relative operating efficiency, benefits will continue to intensify as U.S. and Europe-based insurance broker relations, and the quality of claims and customer service. Our and financial services providers more aggressively pursue global primary competitors in this business include U.S.-based health expansion opportunities. We believe competitive factors will include insurance companies. product and distribution innovation and differentiation, efficient management of marketing processes and costs, commission levels paid to distribution partners, and the quality of claims and customer Industry Developments services. Additionally, in most overseas markets, perception of Pressure on social health care systems and increased wealth and financial strength also will likely continue to be an important education in emerging markets are leading to higher demand for competitive factor. products providing health insurance and financial security. In the Our competitors are primarily locally-based insurance companies, supplemental health, life and accident business, direct marketing including insurance subsidiaries of banks primarily in Asia and channels are growing and attracting new competitors and increasing Europe and multi-national companies. Insurance company demand for local employee talent, while industry consolidation competitors in this segment primarily focus on traditional product among financial institutions and other affinity partners continues. Group Disability and Life Our Group Disability and Life segment provides group long-term and return to work rate. The benefits of this integrated approach also short-term disability insurance, group life insurance, accident and include: specialty insurance and related services. We market these products and • using information from the health care and disability databases to services in all 50 states, the District of Columbia, Puerto Rico, the help identify, treat and manage disabilities before they become U.S. Virgin Islands and Canada. All products and services are offered chronic, longer in duration and more costly; and by subsidiaries of Cigna Corporation. • proactively reaching out to assist employees suffering from a mental health or chronic condition, either as a primary condition or as a Products and Services result of another condition. Group Disability Our disability products and services are offered on a fully insured, Long-term and short-term group disability insurance products experience-rated and ASO basis, although most are fully insured. As generally provide a fixed level of income to replace a portion of wages measured by 2013 premiums and fees, disability constituted lost because of disability. Group disability coverage is typically approximately 47% of this segment’s business. Approximately 13,600 employer-paid or a combination of employer and employee-paid, but insured disability policies covering approximately 7.5 million lives also may include coverage paid for entirely by employees. As part of were in force as of December 31, 2013. our group disability insurance products, we also provide assistance to employees in returning to work and assistance to their employers in managing the cost of employee disability. We are an industry leader in Group Life Insurance helping employees return to work quickly, resulting in higher Group life insurance products offered include term life and universal productivity and lower cost for employers and a better quality of life life. Group term life insurance may be employer-paid basic life for their employees. insurance, employee-paid supplemental life insurance or a combination thereof. Group universal life insurance is an We seek to integrate our disability insurance products with other employee-paid, voluntary life insurance product in which the owner disability benefit programs, behavioral programs, medical programs, may accumulate a cash value. The cash value earns interest at rates social security advocacy, and administration of federal and state declared from time to time, subject to a minimum guaranteed Family and Medical Leave Act (FMLA) laws and other leave of contracted rate, and may be borrowed, withdrawn, or, within certain absence programs. We believe this integration provides our customers limits, used to fund future life insurance coverage. with increased efficiency and effectiveness in disability claims management, enhances productivity and reduces overall costs to As measured by 2013 premiums and fees, group life insurance employers. This integration also provides early insight into employees constituted approximately 45% of this segment’s business. at risk for future disability claims. Coordinating the administration of Approximately 7,300 group life insurance policies covering these disability programs with medical programs offered by our health approximately 6.1 million lives were in force as of December 31, care business provides enhanced opportunities to influence outcomes, 2013. reduce the cost of both medical and disability events and improve the CIGNA CORPORATION - 2013 Form 10-K 9


  • Page 42

    PART I ITEM 1. Business Other Products and Services and groups in the National, Middle Market and Select segments. In marketing these products, we primarily sell through insurance brokers We also offer personal accident insurance coverage, consisting and consultants and employ a direct sales force. As of December 31, primarily of accidental death and dismemberment and travel accident 2013, the field sales force for the products and services of this segment insurance to employers. Group accident insurance may be consisted of approximately 230 sales professionals in 27 office employer-paid or employee-paid. In addition, we offer specialty locations. insurance services that consist primarily of disability and life, accident, and hospital indemnity products to professional or trade associations and financial institutions. Competition We also provide a number of voluntary products that are typically paid The principal competitive factors that affect the Group Disability and by the employee and offered at the employer’s worksite. Our plans Life segment are underwriting and pricing, the quality and provide employers with flexible enrollment options, list billing, effectiveness of claims management, relative operating efficiency, medical underwriting, and individual record keeping. These offerings investment and risk management, distribution methodologies and are designed so that employers will have a complete and simple way to producer relations, the breadth and variety of products and services manage their benefits, including personalized enrollment offered, and the quality of customer service. For certain products with communication and administration of the benefits program. In the longer-term liabilities, such as group long-term disability insurance, last year, we have brought to market two new voluntary offerings – the financial strength of the insurer, as indicated by ratings issued by accidental injury insurance and critical illness coverage. Both these nationally recognized rating agencies, also is a competitive factor. offerings provide additional dollar payouts to employees for accidental The principal competitors of our group disability, life and accident issues or more serious illnesses. businesses are other large and regional insurance companies that market and distribute these or similar types of products. As of Pricing and Reinsurance December 31, 2013, we are one of the top five providers of group disability, life and accident insurance in the United States, based on Premiums and fees charged for disability and term life insurance premiums. products are usually established in advance of the policy period and are generally guaranteed for one to three years and selectively guaranteed for up to five years; policies are generally subject to Industry Developments termination by the policyholder or by the insurance company Employers are expressing a growing interest in employee wellness, annually. Premium rates reflect assumptions about future claims, absence management and productivity and likewise are recognizing a expenses, credit risk, investment returns and profit margins. These strong link between employee health, productivity and their assumptions may be based in whole or in part on prior experience of profitability. As this interest grows, we believe our healthy lifestyle and the account or on a pool of accounts, depending on the group size and return-to-work programs and integrated family medical leave, the statistical credibility of the experience that varies by product. disability and health care programs position us to deliver integrated Premiums for group universal life insurance products consist of solutions for employers and employees. We also believe that our mortality and administrative charges assessed against the strong disability management portfolio and fully integrated programs policyholder’s fund balance. Interest credited and mortality charges provide employers and employees tools to improve health status. This for group universal life may be adjusted prospectively to reflect focus on managing the employee’s total absence enables us to increase expected interest and mortality experience. Mortality charges are the number and likelihood of interventions and minimize disabling subject to guaranteed maximum rates stated in the policy. events. The effectiveness of return to work programs and morbidity levels will The group insurance market remains highly competitive as the rising impact the profitability of disability insurance products. Our previous cost of providing medical coverage to employees has forced companies claim experience and industry data indicate a correlation between to re-evaluate their overall employee benefit spending, resulting in disability claim incidence levels and economic conditions, with lower volumes of group disability and life insurance business and submitted claims rising under adverse economic conditions, although more competitive pricing. Demographic shifts have further driven this impact is not clear. For life insurance products, the degree to demand for products and services that are sufficiently flexible to meet which future experience deviates from mortality and expense the evolving needs of employers and employees who want innovative, assumptions also affects profitability. cost-effective solutions to their insurance needs. Employers continue to shift towards greater employee participatory coverage and voluntary To reduce our exposure to large individual and catastrophic losses purchases. With our broad suite of voluntary offerings and continued under group life, disability and accidental death policies, we purchase focus on developing additional voluntary products and service reinsurance from unaffiliated reinsurers. capabilities, we believe we are well positioned to meet the needs of both employers and employees as the market shifts to become more Markets and Distribution retail-focused. We market our group disability and life insurance products and services to employers, employees, professional and other associations 10 CIGNA CORPORATION - 2013 Form 10-K


  • Page 43

    PART I ITEM 1. Business Over the past few years, there has been heightened review by state addition to regularly recurring examinations of an insurer’s overall regulators of the claims handling practices within the disability and operations conducted by an individual state’s regulators. We were life insurance industry. This has resulted in an increase in coordinated, recently subject to such an examination. See Note 23 to the multi-state examinations that target specific market practices in Consolidated Financial Statements for additional information. Run-off Reinsurance Our reinsurance operations are an inactive business in run-off mode. future exposures, net of retrocessional arrangements in place at that time, up to a specified limit. For additional information regarding this In February 2013, we effectively exited the Run-off guaranteed reinsurance transaction, see Note 7 to the Consolidated Financial minimum death benefit (‘‘GMDB’’) and guaranteed minimum Statements. income benefit (‘‘GMIB’’) businesses by reinsuring 100% of our Other Operations Our Other Operations segment includes the following three Individual Life Insurance and Annuity and businesses: Retirement Benefits Businesses Corporate-owned Life Insurance (‘‘COLI’’) This business includes deferred gains recognized from the 1998 sale of the individual life insurance and annuity business and the 2004 sale of The principal products of the COLI business are permanent insurance the retirement benefits business. For more information regarding the contracts sold to corporations to provide coverage on the lives of sale of these businesses and the arrangements that secure our certain employees for the purpose of financing employer-paid future reinsurance recoverables for the retirement benefits business, see benefit obligations. Permanent life insurance provides coverage that, Note 7 of the Consolidated Financial Statements. when adequately funded, does not expire after a term of years. The contracts are primarily non-participating universal life policies. Fees for universal life insurance products consist primarily of mortality and Run-off Settlement Annuity Business administrative charges assessed against the policyholder’s fund Our settlement annuity business is a closed, run-off block of single balance. Interest credited and mortality charges for universal life and premium annuity contracts. These contracts are primarily liability mortality charges on variable universal life may be adjusted settlements with approximately 26% of the liabilities associated with prospectively to reflect expected interest and mortality experience. To payments that are guaranteed and not contingent on survivorship. For reduce our exposure to large individual and catastrophe losses, we contracts that involve non-guaranteed payments, such payments are purchase reinsurance from unaffiliated reinsurers. contingent on the survival of one or more parties involved in the settlement. Investments and Investment Income General Accounts We manage our investment portfolios to reflect the underlying characteristics of related insurance and contractholder liabilities and Our investment operations provide investment management and capital requirements, as well as regulatory and tax considerations related services for our corporate invested assets and the insurance- pertaining to those liabilities and state investment laws. Insurance and related invested assets in our General Account (‘‘General Account contractholder liabilities range from short duration health care Invested Assets’’). We acquire or originate, directly or through products to longer term obligations associated with disability and life intermediaries, a broad range of investments including private insurance products and the run-off settlement annuity business. placements and public securities, commercial mortgage loans, real Assets supporting these liabilities are managed in segregated estate, mezzanine, private equity partnerships and short-term investment portfolios to facilitate matching of asset durations and investments. Invested assets also include policy loans that are fully cash flows to those of corresponding liabilities. Investment strategy collateralized by insurance policy cash values. Invested Assets are and results are affected by the amount and timing of cash available for managed primarily by our subsidiaries and, to a lesser extent, external investment, competition for investments, economic conditions, managers with whom our subsidiaries contract. Net investment interest rates and asset allocation decisions. We routinely monitor and income is included as a component of segment earnings for each of evaluate the status of our investments, obtaining and analyzing our reporting segments and Corporate. Realized investment gains relevant investment-specific information and assessing current (losses) are reported by segment but excluded from segment earnings. economic conditions, trends in capital markets and other factors such For additional information about invested assets, see the ‘‘Investment as industry sector, geographic and/or property-specific information. Assets’’ section of the MD&A beginning on page 54 and Notes 10 to 14 of our Consolidated Financial Statements. CIGNA CORPORATION - 2013 Form 10-K 11


  • Page 44

    PART I ITEM 1. Business Separate Accounts • $3.4 billion in separate account assets that support Variable Universal Life products sold as a part of our corporate-owned life Our subsidiaries or external advisors manage Separate Account assets insurance business, as well as through our Global Supplemental on behalf of contractholders. These assets are legally segregated from Benefits segment; and our other businesses and are not included in General Account Invested Assets. Income, gains and losses generally accrue directly to • $1.1 billion in separate account assets that support primarily health the contractholders. As of December 31, 2013, our Separate Account care and other disability and life products. assets consisted of: • $3.8 billion in separate account assets that constitute a portion of the assets of the Cigna Pension Plan; Regulation The laws and regulations governing our business continue to increase increases our exposure to certain U.S. laws, such as the Foreign each year and are subject to frequent change. We have established Corrupt Practices Act of 1977 (‘‘FCPA’’). See page 15 for further policies and procedures to comply with applicable requirements. discussion of international regulations. Our insurance and HMO subsidiaries must be licensed by the The business of administering and insuring employee benefit jurisdictions in which they conduct business. These subsidiaries are programs, particularly health care programs, is heavily regulated by subject to numerous state, federal and international regulations state and federal laws and administrative agencies, such as state related to their business operations, including, but not limited to: departments of insurance and the federal departments of Labor, Health and Human Services, Treasury and Justice and the Internal • the form and content of customer contracts including benefit Revenue Service, as well as the courts. Health savings accounts, health mandates (including special requirements for small groups); reimbursement accounts and flexible spending accounts also are • premium rates and medical loss ratios; regulated by the U.S. Department of the Treasury and the Internal Revenue Service. • the content of agreements with participating providers of covered services; Our operations, accounts and other books and records are subject to examination at regular intervals by regulatory agencies, including state • producer appointment and compensation; insurance and health and welfare departments, state boards of • claims processing and appeals; pharmacy and the Centers for Medicare and Medicaid Services (‘‘CMS’’) to assess compliance with applicable laws and regulations. In • underwriting practices; addition, our current and past business practices are subject to review • reinsurance arrangements; by, and from time to time we receive subpoenas and other requests of information from, various state insurance and health care regulatory • unfair trade and claim practices; authorities, attorneys general, the Office of Inspector General, and • protecting the privacy and confidentiality of the information other state and federal authorities, including inquiries by, and received from customers; testimony before committees and subcommittees of the U.S. Congress regarding certain of its business practices. These • risk sharing arrangements with providers; examinations, reviews, subpoenas and requests may result in changes • reimbursement or payment levels for Medicare services; to or clarifications of our business practices, as well as fines, penalties or other sanctions. • advertising; and • the operation of consumer-directed plans (including health savings Regulatory and Legislative Developments accounts, health reimbursement accounts, flexible spending accounts and debit cards). The federal and state governments in the U.S. as well as governments in other countries where we do business continue to enact and In addition, our international subsidiaries comply with regulations in seriously consider many broad-based legislative and regulatory international jurisdictions where foreign insurers may be faced with proposals that could materially impact various aspects of our business. more onerous regulations than their domestic competitors. The broader regulatory environment may include anti-corruption laws, economic sanctions laws, various insurance, tax, tariff and trade laws Health Care Reform and regulations, corporate governance, employment, intellectual The Patient Protection and Affordable Care Act and the Health Care property and investment laws and regulation, discriminatory licensing and Education Reconciliation Act (collectively referred to as ‘‘Health procedures, compulsory cessions of reinsurance, required localization Care Reform’’) mandates broad changes affecting insured and of records and funds, higher premium and income taxes, and self-insured health benefit plans that impact our current business requirements for local participation in an insurer’s ownership. In model, including our relationship with current and future customers, addition, the expansion of our operations into foreign countries 12 CIGNA CORPORATION - 2013 Form 10-K


  • Page 45

    PART I ITEM 1. Business producers and health care providers, products, services, processes and required to pay a penalty to CMS and could be subject to additional technology. Certain of the law’s provisions became effective between sanctions if the MLR continues to be less than 85% for successive 2010 and 2013 and other provisions will take effect from 2014 to years. Through Health Care Reform and other federal legislation, 2018. Health Care Reform left many details to be established through funding for Medicare Advantage plans has been and may continue to regulations. While federal agencies have published proposed and final be altered. regulations with respect to most provisions, many issues remain Health Insurance Exchanges begin in 2014. Each state is required to uncertain. For the financial effects of these provisions, see the have either a state-based, a state and federal partnership, or federally Overview section of our MD&A beginning on page 31 of this facilitated health insurance exchange for individuals and small Form 10-K. employer groups to purchase insurance coverage. The enrollment Provisions that took effect from 2010-2013. Commercial process began on October 1, 2013. In the ten states where we minimum medical loss ratio requirements as prescribed by the currently offer individual coverage, most exchanges are federally Department of Health and Human Services (‘‘HHS’’) became facilitated. We are offering coverage on five public health insurance effective in January 2011 and require payment of premium rebates to exchanges (Arizona, Colorado, Florida, Tennessee, and Texas). We group and individual policyholders if certain annual minimum continue to sell individual and family plans off-exchange in all ten medical loss ratios (‘‘MLR’’) are not met in our commercial business. states where such coverage is currently offered. HHS issued guidance that provides transitional relief from certain Because individuals seeking to purchase health insurance coverage on Health Care Reform requirements for expatriate health coverage the exchanges are guaranteed to be issued a policy, Health Care (including the MLR requirements) through plan years ending on or Reform provides three programs designed to reduce the risk for before December 31, 2015. The adjustments allowed for calculating participating health insurance companies: the MLR for limited benefit plans are reduced each year through 2014 after which no adjustments are permitted. For the financial impact of • a three-year (2014-2016) reinsurance program for non-grandfathered the commercial MLR requirements on our results, see the ‘‘Overview’’ individual business sold either on or off the public exchanges section of our MD&A in this Form 10-K. beginning in 2014. This program is designed to provide reimbursement for high cost individual customers and will be Other provisions that have already taken effect include reduced funded by the per-customer reinsurance fee assessed against insurers Medicare premium rates beginning in 2011, the requirement to cover and self-insured group health plans; preventive services with no enrollee cost-sharing, banning the use of lifetime and annual limits on the dollar amount of essential health • a three-year (2014-2016) risk corridor program put in place to limit benefits, increasing restrictions on rescinding coverage and extending insurer gains and losses and protect against inaccurate rate setting at coverage of dependents to the age of 26. Health Care Reform also the outset of the new program; and changed certain tax laws that effectively limit the amount of certain • a permanent risk adjustment program that will transfer funds from employee compensation that is tax deductible by health insurers. lower risk to higher risk plans based on the relative health risk scores Provisions becoming effective in 2014-2018. Various fees, of plan participants. including the health insurance industry fee and the reinsurance fee, will We have implemented the provisions of Health Care Reform that are be assessed beginning in 2014. The health insurance industry fee, currently in effect (including the commercial minimum MLR totaling $8 billion for the industry in 2014 and increasing to requirements) and we continue our implementation planning for $13.9 billion by 2017, will not be tax deductible. Our share of this those provisions that take effect in the future. Management continues industry fee will be determined based on our proportion of premiums to closely monitor the implementation of Health Care Reform and is for both our commercial and government businesses to the industry actively engaged with regulators and policymakers with respect to total. Our effective tax rate is expected to increase beginning in 2014 rule-making. as a result of this fee. The reinsurance fee is a fixed dollar per customer levy on all commercial business, including ASO and is tax deductible. Dodd-Frank Act Our Medicare Advantage and Medicare Part D prescription drug plan businesses are also impacted by Health Care Reform in a variety of In 2010, Congress enacted the Dodd-Frank Wall Street Reform and additional ways beginning in 2014, including mandated minimum Consumer Protection Act (the ‘‘Dodd-Frank Act’’) that provides for a reductions to risk scores, transition of Medicare Advantage number of reforms and regulations in the corporate governance, ‘‘benchmark’’ rates to Medicare fee-for-service parity, reduced financial reporting and disclosure, investments, tax and enforcement enrollment periods and limitations on disenrollment, providing areas that affect us. The SEC and other regulatory authorities engaged ‘‘quality bonuses’’ for Medicare Advantage plans with a rating for four in rulemaking efforts under the Dodd-Frank Act throughout 2011, or five stars from CMS and mandated consumer discounts on brand 2012 and 2013, and additional rulemaking continues. The name and generic prescription drugs for Medicare Part D plan Dodd-Frank Act established a Federal Insurance Office that will participants in the coverage gap. Beginning in 2014, Health Care develop and coordinate federal policy on insurance matters. We are Reform requires Medicare Advantage and Medicare Part D plans to closely monitoring how these regulations impact the Company, meet a minimum MLR of 85%. Under the rules proposed by HHS, if however the full impact of the legislation may not be known for the MLR for a CMS contract is less than 85%, the contractor is several years until regulations become fully effective. CIGNA CORPORATION - 2013 Form 10-K 13


  • Page 46

    PART I ITEM 1. Business Regulation of Insurance Companies subsidiaries, were compliant with applicable RBC and non-U.S. surplus rules. Financial Reporting and Internal Control In September 2012, the National Association of Insurance Regulators closely monitor the financial condition of licensed Commissioners adopted the Risk Management and Own Risk and insurance companies and HMOs. States regulate the form and Solvency Assessment Model Act. The Act provides requirements and content of statutory financial statements, the type and concentration principles for maintaining a group solvency assessment and a risk of permitted investments, and corporate governance over financial management framework and reflects a broader and more prospective reporting. Our insurance and HMO subsidiaries are required to file approach to U.S. insurance regulation. The Act, which includes a periodic financial reports and schedules with regulators in most of the requirement to file an annual ORSA Summary Report in the lead jurisdictions in which they do business as well as annual financial state of domicile, now must be adopted into law by each state. Our statements audited by independent registered public accountants. insurance business in the U.S. will be subject to the requirements that Certain insurance and HMO subsidiaries are required to file an are expected to become effective in 2015. We will be prepared to file annual report of internal control over financial reporting with most an ORSA Summary Report with our lead state regulator consistent jurisdictions in which they do business. Insurance and HMO with the requirements. subsidiaries’ operations and accounts are subject to examination by such agencies. We expect states to expand the scope of regulations relating to corporate governance and internal control activities of its Holding Company Laws insurance and HMO subsidiaries as a result of the National Our domestic insurance companies and certain of our HMOs are Association of Insurance Commissioners’ (‘‘NAIC’’) amendment to subject to state laws regulating subsidiaries of insurance holding the Annual Financial Reporting Model Regulation to adopt elements companies. Under such laws, certain dividends, distributions and of corporate governance and internal control requirements similar to other transactions between an insurance or HMO subsidiary and its those under federal securities’ laws. affiliates may require notification to, or approval by, one or more state insurance commissioners. Guaranty Associations, Indemnity Funds, Risk Pools In December 2010, the NAIC adopted revisions to the Model and Administrative Funds Insurance Holding Company System Regulatory Act and Regulation. The revisions were designed to allow a better understanding of the Most states and certain non-U.S. jurisdictions require insurance risks and activities of non-insurance entities within a holding companies to support guaranty associations or indemnity funds that company system. The main focus of the revisions has been to are established to pay claims on behalf of insolvent insurance incorporate the concept of ‘‘enterprise risk’’ and to enact provisions companies. In the United States, these associations levy assessments designed to provide regulators with additional information and on member insurers licensed in a particular state to pay such claims. authority to manage this new concept. To date, approximately 20 Several states also require HMOs to participate in guaranty funds, states have taken action to adopt the amended Model Act and special risk pools and administrative funds. For additional Regulation. We continue to follow the states’ activity in this area and information about guaranty fund and other assessments, see Note 23 will amend its processes as necessary to comply with revised state laws. to our Consolidated Financial Statements. Some states also require health insurers and HMOs to participate in Marketing, Advertising and Products assigned risk plans, joint underwriting authorities, pools or other In most states, our insurance companies and HMO subsidiaries are residual market mechanisms to cover risks not acceptable under required to certify compliance with applicable advertising regulations normal underwriting standards. on an annual basis. Our insurance companies and HMO subsidiaries are also required in most states to file and secure regulatory approval of Solvency and Capital Requirements products prior to the marketing, advertising, and sale of such products. State and/or federal regulatory scrutiny of life and health Many states have adopted some form of the NAIC model solvency- insurance company and HMO marketing and advertising practices, related laws and risk-based capital rules (‘‘RBC rules’’) for life and including the adequacy of disclosure regarding products and their health insurance companies. The RBC rules recommend a minimum administration, may result in increased regulation. level of capital depending on the types and quality of investments held, the types of business written and the types of liabilities incurred. If the ratio of the insurer’s adjusted surplus to its risk-based capital falls Licensing Requirements below statutory required minimums, the insurer could be subject to Pharmacy Licensure Laws regulatory actions ranging from increased scrutiny to conservatorship. Certain of our subsidiaries are pharmacies that dispense prescription In addition, various non-U.S. jurisdictions prescribe minimum drugs to participants of benefit plans administered or insured by surplus requirements that are based upon solvency, liquidity and Cigna’s HMO and insurance company subsidiaries. These pharmacy- reserve coverage measures. During 2013, our HMOs and life and subsidiaries are subject to state licensing requirements and regulation health insurance subsidiaries, as well as non-U.S. insurance as well as U.S. Drug Enforcement Agency registration requirements. 14 CIGNA CORPORATION - 2013 Form 10-K


  • Page 47

    PART I ITEM 1. Business Other laws and regulation affecting our pharmacy-subsidiaries include operations, we may face investigations, prosecutions and other legal federal and state laws concerning labeling, packaging, advertising and proceedings and actions that could result in civil penalties, adulteration of prescription drugs and dispensing of controlled administrative remedies and criminal sanctions. See the Risk Factors substances. section beginning on page 18 for a discussion of the risks related to operating globally. International Licensure Laws Federal Regulations Our international subsidiaries are often required to be licensed when entering new markets or starting new operations in certain Employee Retirement Income Security Act and the jurisdictions. The licensure requirements for these subsidiaries vary by Public Health Service Act country and are subject to change. Our domestic subsidiaries sell most of their products and services to sponsors of employee benefit plans that are governed by the Employee Claim Administration, Utilization Review and Related Retirement Income Security Act of 1974, as amended (‘‘ERISA’’). Services ERISA is complex set of federal laws and regulations that is interpreted and enforced by the IRS, DOL and federal courts. Our Certain subsidiaries contract to provide claim administration, domestic subsidiaries are subject to requirements imposed by ERISA utilization management and other related services for the affecting claim and appeals procedures for individual health insurance administration of self-insured benefit plans. These subsidiaries may be and insured and self-insured group health plans and for the insured subject to state third-party administration and other licensing dental, disability, life and accident plans we administer. Our domestic requirements and regulation. subsidiaries may also contractually agree to comply with these requirements on behalf of the self-insured dental, disability, life and International Regulations accident plans they administer. Our operations outside the United States expose us to laws of multiple Many of the health insurance reform provisions of the Patient jurisdictions and the rules and regulations of various governing bodies Protection and Affordable Care Act impacting insured and and regulators, including those related to financial and other self-insured group health plans were incorporated in ERISA. The disclosures, corporate governance, privacy, data protection, data health insurance reform provisions under ERISA were also mining, data transfer, labor and employment, consumer protection incorporated into the Public Health Service Act and are directly and anti-corruption. The operations in countries outside the United applicable to health insurance issuers (i.e., health insurers and States: HMOs). • are subject to local regulations in the locations in which Cigna subsidiaries conduct business, Medicare Regulations • in some cases, are subject to regulations in the locations of Several of our subsidiaries engage in businesses that are subject to customers, and federal Medicare regulations such as: • in all cases, are subject to FCPA. • those offering individual and group Medicare Advantage (HMO) coverage; FCPA prohibits offering, promising, providing or authorizing others to give anything of value to a foreign government official to obtain or • those offering Medicare Pharmacy (Part D) products that are subject retain business or otherwise secure a business advantage. We are also to federal Medicare regulations; and subject to applicable anti-corruption laws in the jurisdictions in which • billing of Medicare Part B claims on behalf of providers with whom we operate. Additionally, in many countries outside of the U.S., we have contractual management agreements. health care professionals are employed by the government. Therefore, our dealings with them are subject to regulation under the FCPA. In our Medicare Advantage business, we contract with CMS to Violations of the FCPA and other anti-corruption laws may result in provide services to Medicare beneficiaries pursuant to the Medicare severe criminal and civil sanctions as well as other penalties and the program. As a result, our right to obtain payment (and the SEC and Department of Justice have increased their enforcement determination of the amount of such payments), enroll and retain activities with respect to FCPA. The UK Bribery Act of 2010, which members and expand into new service areas is subject to compliance went into effect in 2011, is an anti-corruption law that applies to all with CMS’ numerous and complex regulations and requirements that companies with a nexus to the United Kingdom and whose scope is are frequently modified and subject to administrative discretion. The even broader than the FCPA. Any voluntary disclosures of FCPA marketing and sales activities (including those of third-party brokers violations may be shared with the UK authorities, thus potentially and agents) are also heavily regulated by CMS and other exposing companies to liability and potential penalties in multiple governmental agencies, including applicable state departments of jurisdictions. We have internal control policies and procedures and insurance. We expect to continue to allocate significant resources to have implemented training and compliance programs for our our compliance, ethics and fraud, waste and abuse programs to employees to deter prohibited practices. However, if our employees or comply with the laws and regulations governing Medicare Advantage agents fail to comply with applicable laws governing our international and prescription drug plan programs. CIGNA CORPORATION - 2013 Form 10-K 15


  • Page 48

    PART I ITEM 1. Business Several of our subsidiaries are also subject to reporting requirements eligibility and claims. Federal regulations were issued requiring pursuant to Section 111 of the Medicare, Medicaid and SCHIP entities subject to HIPAA to update their transaction formats for Extension Act of 2007. electronic data interchange from HIPAA 4010 to version 5010 standards and convert from the ICD-9 diagnosis and procedure codes to the ICD-10 diagnosis and procedure codes. The ICD-10 Federal Audits of Government Sponsored Health Care conversion is required by October 1, 2014. Programs Participation in government sponsored health care programs subjects Other Confidentiality Requirements us to a variety of federal laws and regulations and risks associated with audits conducted under these programs. These audits may occur in The federal Gramm-Leach-Bliley Act generally places restrictions on years subsequent to our providing the relevant services under audit. the disclosure of non-public information to non-affiliated third These risks may include reimbursement claims as well as potential parties, and requires financial institutions, including insurers, to fines and penalties. For example, with respect to our Medicare provide customers with notice regarding how their non-public Advantage business, CMS and the Office of the Inspector General personal information is used, including an opportunity to ‘‘opt out’’ of perform audits to determine a health plan’s compliance with federal certain disclosures. State departments of insurance and certain federal regulations and contractual obligations, including compliance with agencies adopted implementing regulations as required by federal law. proper coding practices (sometimes referred to as Risk Adjustment Neither the HIPAA nor the Gramm-Leach-Bliley privacy regulations Data Validation Audits or RADV audits) and compliance with fraud preempt more stringent state laws and regulations that apply to us, and abuse enforcement practices through Recovery Audit Contractor and a number of states have adopted data security laws and (RAC) audits in which third-party contractors conduct post-payment regulations, regulating data security and requiring security breach reviews on a contingency fee basis to detect and correct improper notification that may apply to us in certain circumstances. payments. See ‘‘Business – Global Health Care’’ beginning on page 2 of this Form 10-K for additional information about our participation in government health-related programs. Antitrust Regulations Our subsidiaries also are engaged in activities that may be scrutinized The Federal government has made investigating and prosecuting under federal and state antitrust laws and regulations. These activities health care fraud and abuse a priority. Fraud and abuse prohibitions include the administration of strategic alliances with competitors, encompass a wide range of activities, including kickbacks for referral information sharing with competitors and provider contracting. of customers, billing for unnecessary medical services, improper marketing, and violation of patient privacy rights. The regulations and contractual requirements in this area are complex, are frequently Anti-Money Laundering Regulations modified, and are subject to administrative discretion. We expect to continue to allocate significant resources to comply with these Certain of our products (‘‘Covered Products’’ as defined in the Bank regulations and requirements and to maintain audit readiness. Secrecy Act) are subject to U.S. Department of the Treasury anti-money laundering regulations. We have implemented anti-money laundering policies designed to ensure that its Covered Health Insurance Portability and Accountability Act Products are underwritten and sold in compliance with these Regulations regulations. We may also be subject to anti-money laundering laws in non-U.S. jurisdictions where it operates. The federal Health Insurance Portability and Accountability Act of 1996 and its implementing regulations (‘‘HIPAA’’) impose requirements on health insurers, HMOs, health plans, health care Office of Foreign Assets Control providers and clearinghouses. Health insurers and HMOs are further subject to regulations related to guaranteed issuance (for groups with We are also subject to regulation put forth by the Office of Foreign 50 or fewer lives), guaranteed renewal, and portability of health Assets Control of the U.S. Department of the Treasury which insurance. administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign HIPAA also imposes minimum standards for the privacy and security countries and regimes, terrorists, international narcotics traffickers, of protected health information. HIPAA’s privacy and security those engaged in activities related to the proliferation of weapons of requirements were expanded by the Health Information Technology mass destruction, and other threats to the national security, foreign for Economic and Clinical Health Act (‘‘HITECH’’) that enhanced policy or economy of the United States. In addition, we may be penalties for HIPAA violations and requires regulated entities to subject to similar regulations in non-U.S. jurisdictions in which it provide notification to various parties in the event of a breach of operates. unsecured protected health information. Regulations pursuant to HITECH continue to be promulgated and are monitored and implemented as they are finalized. Investment-Related Regulations HIPAA also established rules that standardize the format and content Depending upon their nature, our investment management activities of certain electronic transactions, including, but not limited to, are subject to U.S. federal securities laws, ERISA, and other federal 16 CIGNA CORPORATION - 2013 Form 10-K


  • Page 49

    PART I ITEM 1. Business and state laws governing investment related activities. In many cases, insurance companies are subject to regulation by multiple the investment management activities and investments of individual jurisdictions. Miscellaneous Premiums and fees from CMS represented 22% of our total accept a fixed portion of the business submitted by independent consolidated revenues for the year ended December 31, 2013 under a brokers and agents, and generally all such business is subject to its number of contracts. We are not dependent on business from one or a approval and acceptance. few customers. Other than CMS, no one customer accounted for We had approximately 36,500 employees as of December 31, 2013; 10% or more of our consolidated revenues in 2013. We are not 35,800 employees as of December 31, 2012; and 31,400 employees as dependent on business from one or a few brokers or agents. In of December 31, 2011. addition, our insurance businesses are generally not committed to CIGNA CORPORATION - 2013 Form 10-K 17


  • Page 50

    PART I ITEM 1A. Risk Factors • increasing operating costs through the imposition of new or Item 1A. Risk Factors increased taxes and other financial assessments,; As a large company operating in a complex industry, we encounter a • restricting our ability to increase premium rates to meet costs variety of risks and uncertainties that could have a material adverse effect (including denial or delays in approval and implementation of those on our business, liquidity, results of operations or financial condition. You rates); should carefully consider each of the risks and uncertainties discussed • limiting the level of margin we can earn on premiums through below, in Management’s Discussion and Analysis of Results of Operations mandated minimum medical loss ratios; and and Financial Condition and information contained elsewhere in this Annual Report on Form 10-K. These risks and uncertainties are not the • significantly reducing the level of Medicare program payments. only ones we face. Additional risks and uncertainties not presently known Specifically, in the United States, significant changes are occurring in to us or that we currently believe to be immaterial may also adversely affect the health care system as a result of Health Care Reform. Certain of us. Health Care Reform’s provisions have already become effective and other significant provisions become effective in 2014. While federal Our business is subject to substantial government agencies have published interim and final regulations with respect to regulation, as well as new laws or regulations or certain requirements, many issues remain uncertain. It is difficult to predict the impact of Health Care Reform on our business due to the changes in existing laws or regulations that could law’s complexity, the political environment, the continuing have a material adverse effect on our business, results development of implementing regulations and interpretive guidance of operations, financial condition and liquidity. and possible future legislative changes. We are unable to predict how Our business is regulated at the federal, state, local and international these events will develop and what impact they will have on Health levels. The laws and rules governing our business and related Care Reform, and in turn, on our business including, but not limited interpretations, including, among others, those associated with to, our relationships with current and future customers, producers and Health Care Reform, are increasing in number and complexity, are health care providers, products, services, processes and technology. subject to frequent change and can be inconsistent or in conflict with Further, if we fail to effectively implement or adjust our strategic and each other. As a public company with global operations, we are subject operational initiatives, such as by reducing operating costs, adjusting to the laws of multiple jurisdictions and the rules and regulations of premium pricing or benefit design or transforming our business various governing bodies, such as those related to financial and other model, in response to Health Care Reform and any other future disclosures, corporate governance, privacy, data protection, labor and legislative or regulatory changes, this failure may have a material employment, consumer protection, tax and anti-corruption. adverse effect on our results of operations, financial condition and cash flows, including our ability to maintain the value of our goodwill We must identify, assess and respond to new trends in the legislative and other intangible assets. and regulatory environment, as well as comply with the various existing regulations applicable to our business. Existing or future laws, In addition to the regulation discussed above, we are required to rules, regulatory interpretations or judgments could force us to change obtain and maintain insurance and other regulatory approvals to how we conduct our business, restrict revenue and enrollment growth, market many of our products, increase prices for certain regulated increase health care, technology and administrative costs, including products and consummate some of our acquisitions and divestitures. capital requirements, and require enhancements to our compliance Delays in obtaining or failure to obtain or maintain these approvals infrastructure and internal controls environment. Existing or future could reduce our revenue or increase our costs. laws and rules also could require us to take other actions such as For further information on regulation, see ‘‘Business – Regulation’’ in changing our business practices, thereby increasing our liability in Part I, Item 1 of this Form 10-K. See also the description of Health federal and state courts for coverage determinations, contract Care Reform’s minimum medical loss ratio and customer rebate interpretation and other actions. requirements in the ‘‘Business – Global Health Care’’ section In the foreseeable future, the impact of existing regulations and future beginning on page 2 of this Form 10-K. regulatory and legislative changes could materially adversely affect our business, results of operations, financial condition and cash flows by, We face risks related to litigation, regulatory audits among other things: and investigations. • reducing the potential for growth in revenues and customers by We are routinely involved in numerous claims, lawsuits, regulatory disrupting the employer-based market (currently the primary audits, investigations and other legal matters arising in the ordinary market for our Commercial operating segment) if employers cease course of business, including that of administering and insuring to offer health care coverage for their employees; employee benefit programs. These could include benefit claims, • restricting revenue, premium and customer growth in certain breach of contract actions, tort claims, disputes regarding reinsurance products and markets or expansion into new markets; arrangements, employment and employment discrimination-related suits, employee benefit claims, wage and hour claims, tax, privacy, and • increasing health care or other benefit costs through enhanced or intellectual property and real estate related disputes. In addition, we guaranteed coverage requirements; have incurred and likely will continue to incur liability for claims 18 CIGNA CORPORATION - 2013 Form 10-K

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