Finacial Analysis

In a separate narrative please tell me why you chose the companies you selected, why you were doing this, talk about your analysis and what you found overall. Using the Fraser and Ormiston text, Understanding Financial Statements, as a reference, and what we have reviewed in RP1 to prepare, from the financial statements, a three-year ratio analysis for your company. While you can use the Fraser and Ormiston book as a framework I want you to tailor the ratios you use in your analysis to your own industry. Thus, I would expect that some of the ratios would be similar but I would also expect differences because of health care industry. Pick FIVE ratios that you feel are the most important and analyze these companies with these rations, tying your excel financial statements to the ratios (i.e., I need to see an excel sheet with all the financials included). You need to provide some narrative as to why you choose the ratios and explain differences in the ratios, and why one organization looks better or worse than the other

 

The 2 companies finacial are attached UHC and CIGNA

Table of contents
Part i 1
item 1 business ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 1
A. Description of Business …………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 1
B. Financial Information about Business Segments ………………………………………………………………………………………………………………………………………………………………. 1
C. Strategy …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 2
D. Health Care ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 3
E. Disability and Life …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 11
F. International ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….. 13
G. Run-off Reinsurance ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 15
H. Other Operations …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….. 16
I. Investments and Investment Income ………………………………………………………………………………………………………………………………………………………………………………………….. 17
J. Regulation ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 17
K. Miscellaneous ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….. 21
item 1a risk factors ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….. 22
item 1B unresolved Staff Comments …………………………………………………………………………………………………………………………………………………………………………………………………………………………… 30
item 2 properties ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 30
item 3 Legal proceedings …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….. 30
item 4 Mine Safety Disclosures ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 30
execUtiVe oFFicerS oF the regiStrant………………………………………………………………………………………………………………………………………………………………………………………………. 31
Part ii 32
item 5 Market for registrant’s Common equity, related Stockholder Matters
and issuer purchases of equity Securities ………………………………………………………………………………………………………………………………………………………………………………….. 32
item 6 Selected financial Data ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….. 33
item 7 Management’s Discussion and analysis of financial Condition and results of operations ………………….. 34
item 7a Quantitative and Qualitative Disclosures about Market risk ……………………………………………………………………………………………………………….. 67
item 8 financial Statements and Supplementary Data ………………………………………………………………………………………………………………………………………………………………. 68
item 9 Changes in and Disagreements With accountants on accounting and financial Disclosure…………..126
item 9a Controls and procedures ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………126
item 9B other information ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………126
Contents Q

29CIGNA CORpORATION – 2011 Form 10-K
Part i 
ITEM 1A Risk Factors
as of february 23, 2012, the insurance financial strength ratings were as follows for the Cigna subsidiaries, CgLiC and Life insurance Company
of north america (“Lina”):
cgLic
insurance ratings (1)
Lina
insurance ratings (1)
a.M. best a
(“excellent,” 3rd of 16)
a
(“excellent,” 3rd of 16)
Moody’s a2
(“good,” 6th of 21)
a2
(“good,” 6th of 21)
S&p a
(“Strong,” 6th of 21) (not rated)
fitch a
(“Strong,” 6th of 24)
a
(“Strong,” 6th of 24)
(1) Includes the rating assigned, the agency’s characterization of the rating and the position of the rating in the agency’s rating scale (e.g., CGLIC’s rating by A.M. Best is the 3rd highest
rating awarded in its scale of 16).
Global market, economic and geopolitical conditions
may cause fluctuations in equity market prices, interest
rates and credit spreads, which could impact the
Company’s ability to raise or deploy capital as well
as affect the Company’s overall liquidity.
if the equity markets and credit market experience extreme volatility
and disruption, there could be downward pressure on stock prices
and credit capacity for certain issuers without regard to those issuers’
underlying financial strength. extreme disruption in the credit markets
could adversely impact the Company’s availability and cost of credit in
the future. in addition, unpredictable or unstable market conditions
or continued pressure in the global or u.S. economy could result in
reduced opportunities to find suitable opportunities to raise capital.
in november 2011, Cigna issued $2.1 billion in aggregate principal
amount of senior notes to finance part of the cost for the healthSpring
acquisition, which increased the Company’s long-term debt to $5.0 billion
as of December 31, 2011. Cigna’s increased debt obligations could make
the Company more vulnerable to general adverse economic and industry
conditions and require the Company to dedicate increased cash flow
from operations to the payment of principal and interest on its debt,
thereby reducing the funds it has available for other purposes, such as
investments in ongoing businesses, acquisitions, dividends and stock
repurchases. in these circumstances, the Company’s ability to execute
on its strategy may be limited, its flexibility in planning for or reacting
to changes in its business and market conditions may be reduced, or
its access to capital markets may be limited such that additional capital
may not be available or may only be available on unfavorable terms.
Contents Q

32 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer purchases of Equity Securities
Part ii
ITEM 5 Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer purchases
of Equity Securities
The information under the caption “Quarterly financial Data-Stock and
Dividend Data” appears on page 124 and the number of shareholders of
record as of December 31, 2011 appears under the caption “highlights”
on page 33 of this form 10-K. Cigna’s common stock is listed with,
and trades on, the new York Stock exchange under the symbol “Ci”.
Issuer purchases of Equity Securities
The following table provides information about Cigna’s share repurchase activity for the quarter ended December 31, 2011:
Period
total # of shares
purchased (1)
average price paid
per share
total # of shares purchased as part of
publicly announced program (2)
approximate dollar value of shares
that may yet be purchased as part
of publicly announced program (3)
october 1-31, 2011 0 n/a 0 $ 522,328,439
november 1-30, 2011 12,829 $ 42.39 0 $ 522,328,439
December 1-31, 2011 670 $ 43.34 0 $ 522,328,439
totaL 13,499 $ 42.44 0 n/a
(1) Includes shares tendered by employees as payment of taxes withheld on the exercise of stock options and the vesting of restricted stock granted under the Company’s equity compensation
plans. Employees tendered 12,829 shares in November and 670 shares in December 2011.
(2) Cigna has had a repurchase program for many years, and has had varying levels of repurchase authority and activity under this program. The program has no expiration date.
Cigna suspends activity under this program from time to time and also removes such suspensions, generally without public announcement. Through February  23,  2012, the
Company had repurchased approximately 5.3 million shares for approximately $225 million. Remaining authorization under the program was approximately $522 million as of
December 31, 2011 and February 23, 2012.
(3) Approximate dollar value of shares is as of the last date of the applicable month.
Contents Q

33CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 6 Selected Financial Data
ITEM 6 Selected Financial Data
Highlights
(Dollars in millions, except per share amounts) 2011 2010 2009 2008 2007
revenues
premiums and fees and other revenues $ 19,343 $ 18,653 $ 16,161 $ 17,004 $ 15,376
net investment income 1,146 1,105 1,014 1,063 1,114
Mail order pharmacy revenues 1,447 1,420 1,282 1,204 1,118
realized investment gains (losses) 62 75 (43) (170) 16
totaL reVenUeS $ 21,998 $ 21,253 $ 18,414 $ 19,101 $ 17,624
results of operations:
health Care $ 991 $ 861 $ 731 $ 664 $ 679
Disability and Life 287 291 284 273 254
international 286 243 183 182 176
run-off reinsurance (183) 26 185 (646) (11)
other operations 89 85 86 87 109
Corporate (184) (211) (142) (162) (97)
realized investment gains (losses), net of taxes and
noncontrolling interest 41 50 (26) (110) 10
Shareholders’ income from continuing operations 1,327 1,345 1,301 288 1,120
income from continuing operations attributable to
noncontrolling interest 1 4 3 2 3
income from continuing operations 1,328 1,349 1,304 290 1,123
income (loss) from discontinued operations, net of taxes – – 1 4 (5)
net income $ 1,328 $ 1,349 $ 1,305 $ 294 $ 1,118
Shareholders’ income per share from continuing
operations:
basic $ 4.90 $ 4.93 $ 4.75 $ 1.04 $ 3.91
Diluted $ 4.84 $ 4.89 $ 4.73 $ 1.03 $ 3.86
Shareholders’ net income per share:
basic $ 4.90 $ 4.93 $ 4.75 $ 1.05 $ 3.89
Diluted $ 4.84 $ 4.89 $ 4.73 $ 1.05 $ 3.84
Common dividends declared per share $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04
total assets $ 51,047 $ 45,682 $ 43,013 $ 41,406 $ 40,065
Long-term debt $ 4,990 $ 2,288 $ 2,436 $ 2,090 $ 1,790
Shareholders’ equity $ 8,344 $ 6,645 $ 5,417 $ 3,592 $ 4,748
per share $ 29.22 $ 24.44 $ 19.75 $ 13.25 $ 16.98
Common shares outstanding (in thousands) 285,533 271,880 274,257 271,036 279,588
Shareholders of record 8,178 8,568 8,888 9,014 8,696
employees 31,400 30,600 29,300 30,300 26,600
Beginning in 2010, the Company began reporting the expense associated with its frozen pension plans in Corporate. Prior periods were not restated. The effect on prior periods was not
material.
In 2008, the Company recorded significant charges related to the guaranteed minimum income benefits and guaranteed minimum death benefits businesses as well as an after-tax litigation
charge of $52 million in Corporate related to the Cigna pension plan.
Contents Q

34 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7 Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Index
Introduction ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..34
Consolidated Results of Operations …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………38
Critical Accounting Estimates …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………41
Segment Reporting ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..45
Health Care Segment …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….45
Disability and Life Segment …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..48
International Segment ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….49
Run-off Reinsurance Segment …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….51
Other Operations Segment …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….54
Corporate……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………54
Liquidity and Capital Resources …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..55
Investment Assets ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….60
Market Risk …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………64
Cautionary Statement for purposes of the “Safe Harbor” provisions of the private Securities Litigation Reform Act of 1995 …………66
Introduction
Cigna Corporation is a holding company and is not an insurance
company. its subsidiaries conduct various businesses, that are
described in this annual report on form 10-K for the fiscal year
ended December 31, 2011 (“form 10-K”). as used in this document,
“Cigna” and the “Company” may refer to Cigna Corporation itself, one
or more of its subsidiaries, or Cigna Corporation and its consolidated
subsidiaries.
Cigna is a global health services organization with insurance subsidiaries
that are major providers of medical, dental, disability, life and accident
insurance and related products and services. in the u.S., the majority
of these products and services are offered through employers and other
groups (e.g. unions and associations) and, in selected international
markets, Cigna offers supplemental health, life and accident insurance
products and international health care coverage and services to businesses,
governmental and non-governmental organizations and individuals. in
addition to its ongoing operations described above, the Company also
has certain run-off operations, including a run-off reinsurance segment.
in this filing and in other marketplace communications, the Company
makes certain forward-looking statements relating to its financial
condition and results of operations, as well as to trends and assumptions
that may affect the Company. generally, forward-looking statements
can be identified through the use of predictive words (e.g. “outlook
for 2012”). actual results may differ from the Company’s predictions.
Some factors that could cause results to differ are discussed throughout
Management’s Discussion and analysis (“MD&a”), including in the
Cautionary Statement beginning on page 66. The forward-looking
statements contained in this filing represent management’s current
estimate as of the date of this filing. Management does not assume
any obligation to update these estimates.
The following discussion addresses the financial condition of the
Company as of December 31, 2011, compared with December 31, 2010,
and a comparison of results of operations for the years ended
December 31, 2011, 2010 and 2009.
unless otherwise indicated, financial information in the MD&a is
presented in accordance with accounting principles generally accepted
in the united States (“gaap”). Certain reclassifications have been
made to prior period amounts to conform to the presentation of 2011
amounts. See note 2 to the Consolidated financial Statements for
additional information.
Overview of 2011 Results
Summarized below are the key highlights for 2011. for additional
information, see the remaining sections of this MD&a, which discuss
both consolidated and segment results in more detail.
Contents Q

35CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Key Consolidated Financial Data
(Dollars in millions) 2011 2010 2009
revenues $ 21,998 $ 21,253 $ 18,414
Medical membership (in thousands) (1) 12,680 12,473 11,669
Shareholders’ income from continuing operations $ 1,327 $ 1,345 $ 1,301
adjusted income from operations (2) $ 1,428 $ 1,277 $ 1,097
Cash flows from operating activities $ 1,491 $ 1,743 $ 745
Shareholders’ equity $ 8,344 $ 6,645 $ 5,417
(1) Includes medical members of the Company’s Health Care segment as well as the International health care business, including global health benefits.
(2) For a definition of adjusted income from operations, see the “Consolidated Results of Operations” section of this MD&A beginning on page 38.
Consolidated Results of Operations
•• Revenues rose 4% in 2011, reflecting solid growth in the Company’s
strategically targeted domestic and international customer segments of
its ongoing health care, disability and life, and international businesses.
in addition, the increase in revenue reflects the effect of the programs
to hedge equity and growth interest rate exposures in the run-off
reinsurance operations. See the run-off reinsurance section of this
MD&a beginning on page 51 for additional information. These
increases were partially offset by the exit from certain non-strategic
markets, primarily the Medicare advantage individual private fee
for Service (“Medicare ipffS”) business.
•• Medical membership increased 2%, reflecting growth in targeted
markets, primarily the middle and select market segments domestically
as well as growth in the global health benefits business. These increases
were partially offset by exits from certain non-strategic markets,
primarily Medicare ipffS.
•• Shareholders’ income from continuing operations decreased 1% in
2011, reflecting higher losses in the gMib business substantially offset
by higher overall earnings from the Company’s ongoing businesses.
•• Adjusted income from operations increased 12% in 2011, continuing
to demonstrate the value of the Company’s diversified portfolio of
businesses, resulting in strong earnings contributions from each
of the Company’s ongoing businesses. These results were achieved
primarily as a result of continued growth, effective execution of the
Company’s business strategy and low medical services utilization
trend in the health care business.
•• Cash flows from operating activities in 2011 reflected the strong
earnings contributions from the ongoing businesses, partially offset
by pension plan contributions and claim run-out from the Medicare
ipffS business.
Liquidity and Financial Condition
During 2011, the Company entered into several transactions to
strengthen its liquidity and financial condition as well as to strategically
deploy its capital as follows:
•• entered into an agreement to acquire healthSpring,  inc.
(“healthSpring”) for approximately $3.8 billion in cash and Cigna
stock awards. The transaction closed on January 31, 2012;
•• the healthSpring acquisition was financed in part by the issuance
of $2.1 billion of debt and 15.2 million shares of common stock for
$650 million ($629 million, net of underwriting discount and fees) in
the fourth quarter of 2011. as a result of these transactions, cash at the
parent company was approximately $3.8 billion at December 31, 2011;
•• acquired firstassist for approximately $115 million in the fourth
quarter of 2011;
•• contributed $250 million to its domestic qualified pension plans;
•• repurchased 5.3 million shares of stock for $225 million; and
•• entered into a new five-year revolving credit and letter of credit
agreement for $1.5 billion, that permits up to $500 million to be
used for letters of credit. The credit agreement includes options to
increase the commitment amount to $2.0 billion and to extend the
term past June 2016.
Shareholders’ equity increased substantially during 2011, reflecting strong
shareholders’ net income, increased invested asset values (primarily fixed
maturities) reflecting lower market yields (largely due to lower interest
rates), and the impact of the fourth quarter common stock issuance.
Those favorable items were partially offset by the unfavorable effects
of the pension plan liability on shareholders’ equity due to a 100 basis
point decline in the discount rate and lower than expected asset returns.
Business Strategy
Cigna’s mission is to improve the health, well-being and sense of security
of the individuals it serves around the world. Key to our mission and
strategy is our customer-centric approach; we seek to engage our
u.S.-based and global customers in maintaining and improving their
health, well-being and sense of security by offering effective, easy-to-
understand insurance, health and wellness products and programs
that meet their unique individual needs. We do this by providing
access to relevant information to ensure informed buying decisions,
partnering with physicians and care providers in the u.S. and around
the world, and delivering a highly personalized customer experience.
This approach aims to deliver high quality care at lower costs for each
of our stakeholders: individuals, employers and government payors.
Cigna’s long-term growth strategy is based on: (1) repositioning the
portfolio for growth in targeted geographies, product lines, buying
segments and distribution channels; (2) improving its strategic and
financial flexibility; and (3) pursuing additional opportunities in high-
growth markets with particular focus on individuals.
our mission is carried out through our enterprise growth strategy,
which has the following three tenets:
•• go deeP: Cigna seeks to drive scale by increasing presence and
brand strength in key geographic areas, growing in targeted segments
or capabilities, and deepening its relationships with current customers.
•• go gLoBaL: Cigna delivers a range of differentiated products
and superior service to meet the distinct needs of a growing global
Contents Q

38 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
New Accounting pronouncement
Deferred acquisition cost
as discussed in note 2 to the Consolidated financial Statements, the
Company will implement the new requirements of aSu 2010-26 related
to deferred acquisition costs on January 1, 2012 through retrospective
adjustment of prior periods.
The Company’s deferred acquisition costs arise from sales and renewal
activities primarily in its international segment. because the new
requirements further restrict the types of costs that are deferrable,
more of the Company’s acquisition costs will be expensed as incurred.
The Company expects the cumulative effect of implementing this new
guidance to decrease shareholders’ equity as of January 1, 2011 by
approximately $250 million to $300 million. in addition, as a result of
acquisition costs no longer eligible for deferral under the new guidance,
the Company expects that full-year 2011 shareholders’ net income on a
retrospectively adjusted basis will decrease by approximately $70 million.
The reduction will primarily occur in the Company’s international
segment. The effect of the new guidance on shareholders’ net income
in 2012 is expected to be generally comparable to that estimated for
2011. implementation of this new guidance will have no impact on the
underlying economic value, revenues or cash flows of the Company’s
businesses, nor will it impact the Company’s liquidity or the statutory
surplus of its insurance subsidiaries.
Consolidated Results of Operations
The Company measures the financial results of its segments using
“segment earnings (loss)”, which is defined as shareholders’ income
(loss) from continuing operations before after-tax realized investment
results. adjusted income from operations is defined as consolidated
segment earnings (loss) excluding special items (defined below) and
the results of the gMib business. adjusted income from operations is
another measure of profitability used by the Company’s management
because it presents the underlying results of operations of the Company’s
businesses and permits analysis of trends in underlying revenue, expenses
and shareholders’ net income. This measure is not determined in
accordance with gaap and should not be viewed as a substitute for
the most directly comparable gaap measure, which is shareholders’
income from continuing operations.
Summarized below is a reconciliation between shareholders’ income
from continuing operations and adjusted income from operations.
Financial Summary
(In millions) 2011 2010 2009
premiums and fees $ 19,089 $ 18,393 $ 16,041
net investment income 1,146 1,105 1,014
Mail order pharmacy revenues 1,447 1,420 1,282
other revenues 254 260 120
realized investment gains (losses) 62 75 (43)
total revenues 21,998 21,253 18,414
benefits and expenses 20,030 19,383 16,516
income from continuing operations before taxes 1,968 1,870 1,898
income taxes 640 521 594
income from continuing operations 1,328 1,349 1,304
Less: income from continuing operations attributable to noncontrolling interest 1 4 3
Shareholders’ income from continuing operations 1,327 1,345 1,301
Less: realized investment gains (losses), net of taxes 41 50 (26)
Segment earningS 1,286 1,295 1,327
Less: adjustments to reconcile to adjusted income from operations:
results of gMib business (after-tax): (135) (24) 209
Special items (after-tax):
Costs associated with acquisitions (31) – –
resolution of a federal tax matter (See note 19 to the Consolidated financial Statements) – 101 –
Loss on early extinguishment of debt (See note 15 to the Consolidated financial Statements) – (39) –
Loss on reinsurance transaction (See note 3 to the Consolidated financial Statements) – (20) –
Curtailment gain (See note 9 to the Consolidated financial Statements) – – 30
Cost reduction charges – – (29)
Completion of irS examination (See note 19 to the Consolidated financial Statements) 24 – 20
adjUSted income From oPerationS $ 1,428 $ 1,277 $ 1,097
Contents Q

39CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Summarized below is adjusted income from operations by segment:
adjusted income (Loss) From operations
(In millions) 2011 2010 2009
health Care $ 990 $ 861 $ 729
Disability and Life 282 291 279
international 289 243 182
run-off reinsurance (48) (27) (24)
other operations 85 85 85
Corporate (170) (176) (154)
totaL $ 1,428 $ 1,277 $ 1,097
Overview of 2011 Consolidated Results
of Operations
Shareholders’ income from continuing operations decreased 1% in
2011 compared with 2010, due to significantly higher gMib losses
principally reflecting lower interest rates, substantially offset by higher
adjusted income from operations as explained further below. See the
run-off reinsurance section of the MD&a beginning on page 51 for
additional information on gMib results.
adjusted income from operations increased 12% in 2011 compared
with 2010 primarily due to higher earnings contributions from the
Company’s health Care and international segments. These results
reflect solid business growth in strategically targeted markets and
continued low medical services utilization trend. See the individual
segment sections of this MD&a for further discussion.
Overview of 2010 Consolidated Results
of Operations
Shareholders’ income from continuing operations increased 3% in
2010 compared with 2009, reflecting strong growth in adjusted
income from operations as well as significant improvement in realized
investment results, partially offset by a loss in the gMib business in
2010 compared with a significant gain in 2009.
adjusted income from operations increased 16% in 2010 compared
with 2009 primarily due to strong earnings growth in the ongoing
business segments (health Care, Disability and Life and international),
reflecting focused execution of the Company’s strategy, which includes
a growing global customer base as well as higher net investment income
reflecting improved economic conditions and asset growth.
Special Items and GMIB
Management does not believe that the special items noted in the
table above are representative of the Company’s underlying results
of operations. accordingly, the Company excluded these special
items from adjusted income from operations in order to facilitate an
understanding and comparison of results of operations and permit
analysis of trends in underlying revenue, expenses and shareholders’
income from continuing operations.
Special items for 2011 included:
•• after-tax costs incurred in the fourth quarter of 2011 associated with
the January 2012 acquisition of healthSpring and the november 2011
acquisition of firstassist; and
•• tax benefits associated with the completion of the 2007 and 2008 irS
examinations (see note 19 to the Consolidated financial Statements
for additional information regarding this special item).
Special items for 2010 included:
•• a gain resulting from the resolution of a federal income tax matter,
consisting of a $97 million release of a deferred tax valuation allowance
and $4 million of accrued interest. See note 19 to the Consolidated
financial Statements for further information;
•• a loss on the extinguishment of debt resulting from the decision of
certain holders of the Company’s 8.5% notes due 2019 and 6.35%
notes due 2018 to accept the Company’s tender offer to redeem these
notes for cash. See note 15 to the Consolidated financial Statements
for further information; and
•• a loss on reinsurance of the run-off workers’ compensation and
personal accident reinsurance businesses to enstar. See note 3 to the
Consolidated financial Statements for further information.
Special items for 2009 included a curtailment gain resulting from the
decision to freeze the pension plan (see note 9 to the Consolidated
financial Statements for additional information), cost reduction charges
related to the 2008 cost reduction program, and benefits resulting from
the completion of the 2005 and 2006 irS examinations (see note 19
to the Consolidated financial Statements for additional information).
The Company also excludes the results of the gMib business, including
the results of the related hedges starting in 2011, from adjusted income
from operations because the fair value of gMib assets and liabilities
must be recalculated each quarter using updated capital market
assumptions. The resulting changes in fair value, which are reported
in shareholders’ net income, are volatile and unpredictable. See the
Critical accounting estimates section of the MD&a beginning on
page 41 of the Company’s 2011 form 10-K for more information on
the effects of capital market assumption changes on shareholders’ net
income. because of this volatility, and since the gMib business is in
run-off, management does not believe that its results are meaningful
in assessing underlying results of operations.
Outlook for 2012
The Company expects 2012 consolidated adjusted income from
operations to be higher than 2011 results. This outlook reflects strong
organic growth, an expected increase in medical services utilization
and contributions from the healthSpring acquisition. This outlook
assumes break-even results for gMDb (also known as “VaDbe”) for
2012, which assumes that actual experience, including capital market
Contents Q

45CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Segment Reporting
operating segments generally reflect groups of related products,
but the international segment is generally based on geography. The
Company measures the financial results of its segments using “segment
earnings (loss)”, which is defined as shareholders’ income (loss) from
continuing operations excluding after-tax realized investment gains
and losses. “adjusted income from operations” for each segment is
defined as segment earnings excluding special items and the results of
the Company’s gMib business. adjusted income from operations is
another measure of profitability used by the Company’s management
because it presents the underlying results of operations of the segment
and permits analysis of trends. This measure is not determined in
accordance with gaap and should not be viewed as a substitute for the
most directly comparable gaap measure, which is segment earnings.
each segment provides a reconciliation between segment earnings and
adjusted income from operations.
beginning in 2010, the Company began reporting the expense associated
with its frozen pension plans in Corporate. prior periods were not
restated; the effect on prior periods is not material.
Health Care Segment
Segment Description
The health Care segment offers insured and self-insured medical,
dental, behavioral health, vision, and prescription drug benefit plans,
health advocacy programs and other products and services that may
be integrated to provide comprehensive health care benefit programs.
Cigna healthCare companies offer these products and services in
all 50 states, the District of Columbia and the u.S. Virgin islands.
These products and services are offered through a variety of funding
arrangements such as guaranteed cost, retrospectively experience-rated
and administrative services only (“aSo”) arrangements.
The Company measures the operating effectiveness of the health Care
segment using the following key factors:
•• segment earnings and adjusted income from operations;
•• membership growth;
•• sales of specialty products to core medical customers;
•• operating expenses as a percentage of segment revenues (operating
expense ratio);
•• changes in operating expenses per member; and
•• medical expense as a percentage of premiums (medical care ratio) in
the guaranteed cost business.
Results of Operations
Financial Summary
(In millions) 2011 2010 2009
premiums and fees $ 13,181 $ 13,319 $ 11,384
net investment income 274 243 181
Mail order pharmacy revenues 1,447 1,420 1,282
other revenues 234 266 262
Segment revenues 15,136 15,248 13,109
Mail order pharmacy cost of goods sold 1,203 1,169 1,036
benefits and other operating expenses 12,386 12,742 10,943
benefits and expenses 13,589 13,911 11,979
income before taxes 1,547 1,337 1,130
income taxes 556 476 399
Segment earningS 991 861 731
Less: special items (after-tax) included in segment earnings:
Curtailment gain (See note 9 to the Consolidated financial Statements) – – 25
Cost reduction charge – – (24)
Completion of irS examination (See note 19 to the Consolidated financial Statements) 1 – 1
adjUSted income From oPerationS $ 990 $ 861 $ 729
realized investment gains (losses), net of taxes $ 24 $ 26 $ (19)
The health Care segment’s adjusted income from operations increased
15% in 2011, as compared with 2010 reflecting:
•• growth in premiums and fees of 6% in 2011, excluding the impact of
exiting the Medicare ipffS business, primarily due to higher average
membership in the guaranteed cost and aSo businesses, particularly
in the targeted market segments: Middle, Select and individual, and
growth in specialty revenues as well as rate increases on most products
consistent with underlying trend;
•• a lower guaranteed cost medical care ratio and higher experience-rated
margins driven by low medical services utilization trend, as well as
favorable prior year development, partially offset by the estimated
cost of premium rebates calculated under the minimum medical loss
ratio requirements of health Care reform; and
•• higher net investment income of 13% in 2011, primarily reflecting
increased average asset levels driven by membership growth, as well
as higher income from partnership investments.
Contents Q

46 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
The health Care segment’s adjusted income from operations increased
18% in 2010, as compared with 2009 reflecting:
•• revenue growth in the commercial risk businesses, particularly in
the targeted market segments, as evidenced by a 15% increase in
commercial risk membership. in addition, adjusted income from
operations was favorably impacted by increased penetration of the
Company’s specialty products;
•• a lower guaranteed cost medical care ratio driven by lower medical
cost trend, reflecting lower utilization levels, as well as favorable prior
year development; and
•• higher investment income due to higher security partnership results,
higher real estate income and increased assets driven by membership
growth.
Revenues
The table below shows premiums and fees for the health Care segment:
(In millions) 2011 2010 2009
Medical:
guaranteed cost  (1) (2) $ 4,176 $ 3,929 $ 3,380
experience-rated (2) (3) 1,934 1,823 1,699
Stop loss 1,451 1,287 1,274
Dental 894 804 731
Medicare 489 1,470 595
Medicare part D 624 558 342
other (4) 600 543 515
total medical 10,168 10,414 8,536
Life and other non-medical 77 103 179
total premiums 10,245 10,517 8,715
fees (2) (5) 2,936 2,802 2,669
totaL PremiUmS and FeeS 13,181 13,319 11,384
Less: Medicare ipffS – 827 –
premiums and fees, excluding Medicare ipffS $ 13,181 $ 12,492 $ 11,384
(1) Includes guaranteed cost premiums primarily associated with open access and commercial HMO, as well as other risk-related products.
(2) Premiums and/or fees associated with certain specialty products are also included.
(3) Includes minimum premium arrangements with a risk profile similar to experience-rated funding arrangements. The risk portion of minimum premium revenue is reported in
experience-rated medical premium whereas the self funding portion of minimum premium revenue is recorded in fees.
Also, includes certain non-participating cases for which special customer level reporting of experience is required.
(4) Other medical premiums include risk revenue and specialty products.
(5) Represents administrative service fees for medical members and related specialty product fees for non-medical members as well as fees related to Medicare Part D of $61 million in
2011, $57 million in 2010 and $41 million in 2009.
Premiums and fees decreased 1% in 2011, compared with 2010.
excluding the impact of exiting the Medicare ipffS business, premiums
and fees were up 6% in 2011, compared with 2010, primarily due to
membership growth in the administrative services business, and higher
average membership in guaranteed cost, driven by strong retention
and sales in targeted market segments, as well as rate increases on
most products consistent with underlying trend. higher penetration
of specialty products also contributed to the increase in fees.
premiums and fees increased 17% in 2010, compared with 2009.
excluding the impact of Medicare ipffS business, premiums and
fees were up 10% in 2010 compared with 2009, primarily reflecting
membership growth in most risk-based products, including Medicare,
and to a lesser extent rate increases. The membership growth was driven
by strong retention and new sales in targeted market segments. The
increase in fees primarily reflects growth in specialty products.
excluding the impact of the Medicare ipffS business, the increases in
premiums and fees in 2011 and 2010 reflect the Company’s sustained
success in delivering differentiated value to its customers with a focus
on providing cost-effective products and services that expand access
and provide superior clinical outcomes.
Net investment income increased 13% in 2011 compared with 2010
benefiting from increased average asset levels driven by membership
growth and higher income from partnership investments. net investment
income increased 34% in 2010 compared with 2009 primarily reflecting
higher security partnership results, higher real estate income and
increased invested assets driven by business growth.
Other revenues for the health Care segment consist of revenues
earned on direct channel sales of certain specialty products, including
behavioral health and disease management. other revenues decreased
12% in 2011 compared with 2010 mostly due to the sale of the Cigna
government Services business in the second quarter of 2011, as well
as declines in certain stand-alone medical cost management business.
Contents Q

47CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Benefits and Expenses
health Care segment benefits and expenses consist of the following:
(In millions) 2011 2010 2009
Medical claims expense – excluding Medicare ipffS $ 8,201 $ 7,798 $ 6,927
Medical claims expense – Medicare ipffS (19) 772 –
Medical claims expense 8,182 8,570 6,927
other benefit expenses 83 100 169
Mail order pharmacy cost of goods sold 1,203 1,169 1,036
other operating expenses:
Medical operating expenses 2,757 2,739 2,723
operating expenses (excluding Medicare ipffS) 1,364 1,251 1,124
other operating expenses (excluding Medicare ipffS) 4,121 3,990 3,847
operating expenses – Medicare ipffS – 82 –
total other operating expenses 4,121 4,072 3,847
totaL BeneFitS and exPenSeS $ 13,589 $ 13,911 $ 11,979
Medical claims expense decreased 5% in 2011 compared with 2010.
excluding the impact of exiting the Medicare ipffS business, medical
claims expense increased 5% in 2011 compared with 2010, largely due
to medical cost inflation, tempered by low medical services utilization
trend in commercial risk businesses.
Medical claims expense increased 24% in 2010 compared with 2009.
excluding the impact of Medicare ipffS business, medical claims
expenses increased 13% in 2010 compared with 2009 largely due
to higher medical membership, particularly in the commercial risk
business. The increase also reflects medical cost inflation.
Other operating expenses. one measure of the segment’s overall operating
efficiency is the operating expense ratio calculated as total operating
expenses divided by segment revenues. This measure can be significantly
influenced by the mix of business between fully-insured and fee-based
business, since the expense ratio on fee-based business, which comprises
most of the segment’s business is higher than the corresponding ratio
for fully-insured business. The ratio is also influenced by the level of
fixed versus variable expenses. The segment’s variable expenses include
premium taxes and commissions, while the fixed component consists
primarily of infrastructure costs and certain strategic investments.
The variable component fluctuates due to changes in revenue, mix of
business, and other items.
excluding the impact of the Medicare ipffS business, the operating
expense ratio improved from 27.7% in 2010 to 27.2% in 2011,
driven largely by continued focus on expense management. on a
reported basis, the operating expense ratio increased from 26.7%
in 2010 to 27.2% in 2011 primarily driven by a change in business
mix resulting from the Company’s decision to exit the non-strategic
Medicare ipffS business, that was a fully-insured business. because
fully-insured businesses collect premium revenue (compared with a
relatively lower administrative fee for aSo business), they typically
have a lower expense ratio than the Company’s current business mix
that is more heavily weighted toward fee-based products.
excluding the impact of the Medicare ipffS business, the operating
expense ratio improved from 29.3% in 2009 to 27.7% in 2010, driven
largely by continued focus on cost reduction initiatives including
staffing, real estate and pension changes, as well as strong revenue
growth in the commercial risk businesses. These favorable effects were
partially offset by investment in segment expansion, compliance and
higher management incentive compensation. on a reported basis, the
operating expense ratio decreased from 29.3% in 2009 to 26.7% in
2010 primarily due to the significant revenue growth in the Medicare
ipffS business in 2010. Since Medicare ipffS was a fully-insured
business, it had a lower expense ratio than the business mix in 2009
that was more heavily weighted toward fee-based products.
Other Items Affecting Health Care Results
Health Care Medical Claims Payable
Medical claims payable decreased by 12% in 2011, primarily reflecting
the run-out of the Medicare ipffS business that the Company exited
in 2011. Medical claims payable increased 35% for the year ended
December 31, 2010 largely driven by medical membership growth,
particularly in the Medicare ipffS and commercial risk businesses.
See note 5 to the Consolidated financial Statements for additional
information regarding the health Care Medical Claims payable.
Medical Membership
a medical member reported within the health Care segment (excluding
members in the international and Disability and Life segments) is
defined as a person who falls within one of the following categories:
•• is covered under an insurance policy or service agreement issued by
the Company;
•• has access to the Company’s provider network for covered services
under their medical plan;
•• has medical claims that are administered by the Company; or
•• is covered under an insurance policy that is (i) marketed by the
Company and (ii) for which the Company assumes reinsurance of
at least 50%.
Contents Q

48 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
as of December 31, estimated medical membership was as follows:
(In thousands) 2011 2010 2009
guaranteed cost (1) 1,091 1,177 1,001
experience-rated (2) 798 849 761
total commercial risk 1,889 2,026 1,762
Medicare 44 145 52
total risk 1,933 2,171 1,814
Service 9,550 9,266 9,226
totaL medicaL memBerShiP (3) 11,483 11,437 11,040
(1) Includes members primarily associated with open access, commercial HMO and voluntary/limited benefits as well as other risk-related products.
(2) Includes minimum premium members, who have a risk profile similar to experience-rated members. Also, includes certain non-participating cases for which special customer level
reporting of experience is required.
(3) Excludes members in the International and Disability and Life Segments.
the health Care segment’s overall medical membership as
of December 31, 2011 increased 1.2% when compared with
December 31, 2010, excluding the impact of exiting the Medicare
ipffS business. This increase primarily reflects new business sales and
growth in aSo in the targeted Middle and Select market segments,
as well as growth in the individual market segment, that is sold under
the guaranteed cost funding arrangement. excluding the impact of
the Medicare ipffS business, the health Care segment’s medical
membership increased 2.8% as of December 31, 2010 when compared
with December 31, 2009. The increase was primarily driven by
new business sales in targeted market segments: Middle, Select and
individual, as well as improved persistency in the risk businesses and
lower disenrollment across all funding arrangements.
Disability and Life Segment
Segment Description
The Disability and Life segment includes group disability, life, accident
and specialty insurance.
Key factors for this segment are:
•• premium growth, including new business and customer retention;
•• net investment income;
•• benefits expense as a percentage of earned premium (loss ratio); and
•• other operating expense as a percentage of earned premiums and
fees (expense ratio).
Results of Operations
Financial Summary
(In millions) 2011 2010 2009
premiums and fees $ 2,780 $ 2,667 $ 2,634
net investment income 267 261 244
other revenues – 123 113
Segment revenues 3,047 3,051 2,991
benefits and expenses 2,651 2,640 2,598
income before taxes 396 411 393
income taxes 109 120 109
Segment earningS 287 291 284
Less: special items (after-tax) included in segment earnings:
Curtailment gain (See note 9 to the Consolidated financial Statements) – – 4
Cost reduction charge – – (4)
Completion of irS examination (See note 19 to the Consolidated financial Statements) 5 – 5
adjUSted income From oPerationS $ 282 $ 291 $ 279
realized investment gains (losses), net of taxes $ 6 $ 12 $ (1)
Segment earnings decreased 1% in 2011 compared with 2010 reflecting
3% lower adjusted income from operations offset by a $5 million
favorable special item related to the completion of the 2007 and 2008
irS examinations. adjusted income from operations decreased as a
result of:
•• the absence of the $11 million after-tax gain on the sale of the workers’
compensation and case management business in 2010;
•• higher disability claims incidence rates, mitigated in part by higher
resolution rates reflecting the sustained strong performance of the
Company’s disability claims management process;
•• a higher expense ratio, driven by strategic investments; and
•• an after-tax charge of $7 million for litigation matters.
offsetting these factors were more favorable life and accident claims
experience and higher net investment income.
Contents Q

49CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Segment earnings increased 2% in 2010 compared to 2009 reflecting
4% higher adjusted income from operations partially offset by the
absence of a $5 million favorable special item related to the completion
of the 2005 and 2006 irS examinations. adjusted income from
operations increased as a result of higher net investment income and
the $11 million after-tax gain on the sale of the workers’ compensation
and case management business.
Largely offsetting these factors were:
•• less favorable claims experience in the disability insurance business,
primarily related to lower short-term disability underwriting margins.
These results include the favorable after-tax impact of disability reserve
studies of $29 million in 2010 compared with $20 million in 2009,
which reflect continued strong disability claims management programs;
•• slightly less favorable accident claims experience including the less
favorable after-tax impact of reserve studies of $3 million in 2010
compared with $5 million in 2009; and
•• lower earnings in specialty products largely due to the sale of the
student and participant accident business.
Revenues
Premiums and fees increased 4% in 2011 compared with 2010 reflecting
disability and life sales growth and continued solid persistency partially
offset by the impact of the Company’s exit from a large, low-margin
assumed government life insurance program. excluding the impact
of this item, premiums and fees increased 6%. Disability premiums
and fees grew by 9%.
premiums and fees increased 1% in 2010 compared with 2009 as a
result of disability and life sales growth combined with solid persistency,
largely offset by the Company’s exit from two large, non-strategic
assumed government life insurance programs and the sale of the renewal
rights for the student and participant accident business. excluding the
impact of these items, premiums and fees increased 7%.
Net investment income increased 2% in 2011 compared with 2010
due to higher average assets reflecting business growth and higher
prepayment fees partially offset by lower yields. net investment income
increased by 7% in 2010 reflecting higher income from security and
real estate partnerships and higher assets.
Other revenues. The absence of other revenues in 2011 reflects the
sale of the workers’ compensation and case management business that
was completed during the fourth quarter of 2010. other revenues in
2010 include the $18 million pre-tax gain on the sale of the workers’
compensation and case management business in 2010.
Benefits and Expenses
benefits and expenses were essentially flat in 2011 as compared with
2010 reflecting disability and life business growth, less favorable
disability claims experience and a higher operating expense ratio,
largely offset by the absence of operating expenses associated with the
workers’ compensation and case management business that was sold
in 2010 and favorable life and accident claims experience. benefits and
expenses include the favorable before tax impact of reserve studies of
$59 million in 2011 as compared with $55 million in 2010.
benefits and expenses increased 2% in 2010 compared with 2009,
primarily reflecting disability and life business growth and less favorable
short-term disability claims experience. benefits and expenses include the
favorable before tax impact of disability reserve studies of $43 million
in 2010 as compared with $29 million in 2009, largely driven by
continued strong disability claims management programs. These factors
were partially offset by the Company’s exit from two large, non-strategic
assumed government life insurance programs and the sale of the renewal
rights for the student and participant accident business.
International Segment
Segment Description
The international segment includes supplemental health, life and
accident insurance products and international health care products
and services, including those offered to individuals and globally mobile
employees of multinational corporations and organizations.
The key factors for this segment are:
•• premium growth, including new business and customer retention;
•• benefits expense as a percentage of earned premium (loss ratio);
•• operating expense as a percentage of earned premium (expense
ratio); and
•• impact of foreign currency movements.
Contents Q

50 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Financial Summary
(In millions) 2011 2010 2009
premiums and fees $ 2,990 $ 2,268 $ 1,882
net investment income 96 82 69
other revenues 27 31 22
Segment revenues 3,113 2,381 1,973
benefits and expenses 2,701 2,039 1,717
income before taxes 412 342 256
income taxes 125 95 70
income attributable to noncontrolling interest 1 4 3
Segment earningS 286 243 183
Less: special items (after-tax) included in segment earnings:
Costs associated with the acquisition of firstassist (3) – –
Cost reduction charge – – (1)
Curtailment gain (See note 9 to the Consolidated financial Statements) – – 1
Completion of irS examination (See note 19 to the Consolidated financial Statements) – – 1
adjUSted income From oPerationS $ 289 $ 243 $ 182
impact of foreign currency movements using 2010 rates $ 11 –
impact of foreign currency movements using 2009 rates $ 13
realized investment gains, net of taxes $ 1 $ 2 $ 2
international segment earnings increased 18% in 2011 compared
with 2010. excluding the impact of the tax adjustments discussed
below, foreign currency movements and the special items (presented
in the table above), the international segment’s adjusted income from
operations increased 17% in 2011 compared with 2010. The increases
in both segment earnings and adjusted income from operations were
primarily due to revenue growth, including the acquisition of Vanbreda
international in august 2010, higher persistency in the supplemental
health, life and accident business, particularly in South Korea, and
higher net investment income, partially offset by higher loss ratios,
primarily in the global health benefits business due to less favorable
claims experience and the addition of a few large accounts with higher
loss ratios. The increase was also partially offset by a higher effective tax
rate primarily due to unfavorable changes in foreign tax law.
international segment earnings increased 33% in 2010, compared with
2009. excluding the impact of the tax adjustments discussed below
and foreign currency movements (presented in the table above), the
international segment’s adjusted income from operations increased
34% for 2010, compared with 2009. The increases in both segment
earnings and adjusted income from operations were primarily due to
strong revenue growth and higher persistency in the supplemental
health, life and accident insurance business, particularly in South Korea,
as well as favorable loss ratios and membership growth in the global
health benefits business and higher net investment income, partially
offset by higher administrative expenses. The increase also reflects a
lower effective tax rate in 2010 as a result of the capital management
strategy discussed below.
During the first quarter of 2010, the Company’s international segment
implemented a capital management strategy to permanently invest
the prospective earnings of its hong Kong operations overseas, which
resulted in an increase to segment earnings of $5 million. The Company
implemented a similar strategy for its South Korean operation in 2009,
which resulted in an increase to segment earnings of $14 million. These
permanently invested earnings are generally deployed in these countries,
and where possible, other foreign jurisdictions, in support of the liquidity
and capital needs of the Company’s foreign operations. This strategy
does not materially limit the Company’s ability to meet its liquidity
and capital needs in the united States. as of December 31, 2011 the
Company’s cash and cash equivalents in its foreign operations were
$461 million, and permanently reinvested earnings were approximately
$375 million. repatriation of foreign cash via a dividend of the
previously-designated permanently reinvested earnings would result
in a charge representing the u.S. taxes due on the repatriation.
Throughout this discussion, the impact of foreign currency movements
was calculated by comparing the reported results to what the results
would have been had the exchange rates remained constant with the
prior year’s comparable period exchange rates. The favorable impacts in
2011 using 2010 rates, as well as 2010 using 2009 rates, primarily reflects
the movement between the u.S. dollar and the South Korean won.
Revenues
Premiums and fees. excluding the effect of foreign currency movements,
premiums and fees were $2.9 billion in 2011 compared with reported
premiums and fees of $2.3 billion in 2010, an increase of 28%. The
increase is primarily attributable to higher membership from new
sales, rate increases and the acquisition of Vanbreda international in
the global health benefits business as well as new sales growth in the
supplemental health, life and accident business, particularly in South
Korea and taiwan.
excluding the effect of foreign currency movements, premiums and fees
were $2.2 billion in 2010 compared with reported premiums and fees
of $1.9 billion in 2009, an increase of 16%. The increase was primarily
attributable to new sales growth in the supplemental health, life and
accident insurance operations, particularly in South Korea, and rate
increases and membership growth in the global health benefits business.
Contents Q

52 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Financial Summary
(In millions) 2011 2010 2009
premiums and fees $ 24 $ 25 $ 29
net investment income 103 114 113
other revenues (4) (158) (283)
Segment revenues 123 (19) (141)
benefits and expenses 405 91 (419)
income (loss) before income taxes (benefits) (282) (110) 278
income taxes (benefits) (99) (136) 93
Segment earningS (LoSS) (183) 26 185
Less: special items (after-tax) included in segment earnings:
resolution of federal tax matters (See note 19 to the Consolidated financial Statements) – 97 –
Loss on reinsurance transaction (See note 3 to the Consolidated financial Statements) – (20) –
Less: results of gMib business (135) (24) 209
adjUSted LoSS From oPerationS $ (48) $ (27) $ (24)
realized investment gains (losses), net of taxes $ 4 $ 5 $ (2)
Segment results in 2011 reflected higher losses for the gMib and
gMDb businesses compared to 2010 due to the significant declines
in interest rates, periods of high volatility, and less favorable equity
market conditions during 2011. in addition, segment results in 2010
reflect the favorable effect of resolving a federal tax matter.
Segment earnings declined significantly in 2010 compared with 2009,
primarily due to the reduction in earnings from the gMib business,
partially offset by the gain resulting from the resolution of a federal
tax matter and reduced charges in 2010 to strengthen gMDb reserves
($34 million after-tax for 2010, compared to $47 million after-tax
for 2009).
for additional discussion of gMib results, see “benefits and expenses”
below.
Other Revenues
other revenues consisted of gains and losses from futures contracts
used in the gMDb equity hedge program for all years, and beginning
in 2011, for the gMib equity hedge program. other revenues in 2011
also included gains and losses from interest rate futures and Libor
swap contracts used in the gMDb and gMib hedge programs (see
note 12 to the Consolidated financial Statements). The components
were as follows:
(In millions) 2011 2010 2009
gMDb – equity hedge program $ (45) $ (157) $ (282)
gMDb – growth interest rate hedge program 31 – –
other, including gMib hedge programs 10 (1) (1)
totaL other reVenUeS $ (4) $ (158) $ (283)
The hedging programs generally produce losses when equity markets
and interest rates are rising and gains when equity markets and interest
rates are falling. higher levels of equity market volatility resulted in losses
in 2011, even though equity market levels were flat to slightly lower.
amounts reflecting related changes in liabilities for gMDb contracts
were included in benefits and expenses consistent with gaap when
a premium deficiency exists, resulting in no effect on shareholders’
net income (see below “other benefits and expenses”). Changes in
liabilities for gMib contracts, including the portion covered by the
hedges, are recorded in gMib fair value (gain) loss.
Benefits and Expenses
benefits and expenses were comprised of the following:
(In millions) 2011 2010 2009
gMib fair value (gain) loss $ 234 $ 55 $ (304)
other benefits and expenses 171 36 (115)
BeneFitS and exPenSeS $ 405 $ 91 $ (419)
GMIB fair value (gain) loss. under the gaap guidance for fair value
measurements, the Company’s results of operations are expected to be
volatile in future periods because capital market assumptions needed
to estimate the assets and liabilities for the gMib business are based
largely on market-observable inputs at the close of each reporting
period including interest rates (Libor swap curve) and market-implied
volatilities. See note 10 to the Consolidated financial Statements
for additional information about assumptions and asset and liability
balances related to gMib.
gMib fair value losses of $234 million for 2011, were primarily due
to a decline in both the interest rate used for projecting claim exposure
(7-year treasury rates) and the rate used for projecting market returns
and discounting (Libor swap curve).
Contents Q

53CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
gMib fair value losses of $55 million for 2010, were primarily due
to declining interest rates, partially offset by increases in underlying
account values resulting from favorable equity and bond fund returns.
gMib fair value gains of $304 million for 2009, were primarily due
to increases in interest rates and increases in underlying account values
in the period resulting from favorable equity market and bond fund
returns. These favorable effects were partially offset by increases to
the annuitization assumption and updates to the lapse assumptions.
The gMib liabilities and related assets are calculated using an internal
model and assumptions from the viewpoint of a hypothetical market
participant. This resulting liability (and related asset) is higher than the
Company believes will ultimately be required to settle claims primarily
because the Company does not believe that the market-observable
interest rates used to project growth in account values of the underlying
mutual funds reflect actual growth expected over the next 15 to 20 years
(the time period over which gMib claims are expected to occur).
however, the Company’s expectation that gMib claim payments
will be lower than the liability recorded at fair value may not be fully
realized under certain circumstances. for example, significant declines
in mutual fund values that underlie the contracts together with declines
in the 7-year treasury rates (used to determine claim payments)
similar to what occurred periodically during the last few years would
increase the expected amount of claims that would be paid out for
contractholders who choose to annuitize. it is also possible that such
unfavorable market conditions would have an impact on the level of
contractholder annuitizations, particularly if these unfavorable market
conditions persisted for an extended period.
Other Benefits and Expenses are comprised of the following:
(In millions) 2011 2010 2009
results of gMDb equity and growth interest rate hedging programs $ (14) $ (157) $ (282)
gMDb reserve strengthening 70 52 73
other gMDb, primarily accretion of discount 82 85 87
gMDb benefit expense (income) 138 (20) (122)
Loss on reinsurance of workers’ compensation and personal accident business – 31 –
other, including operating expenses 33 25 7
other BeneFitS and exPenSeS (income) $ 171 $ 36 $ (115)
Other Benefits and Expenses
Capital market movements
The increase in benefits expense in 2011 reflects significantly more
unfavorable equity market conditions in 2011 compared to 2010
and 2009. Due to the additional growth interest rate hedge in 2011,
the expense included additional amounts due to declines in interest
rates for the liability that is subject to the growth interest rate hedge.
as explained in other revenues above, these changes do not affect
shareholders’ net income because they are offset by gains or losses on
futures contracts used to hedge equity market performance.
GMDB reserve strengthening
The following highlights the impacts of gMDb reserve strengthening:
The 2011 reserve strengthening was primarily driven by:
•• adverse impacts due to volatile equity market conditions. Volatility
risk is not covered by the hedging programs. also, the equity market
volatility reduced the effectiveness of the hedging program for equity
market exposures, in part because the market does not offer futures
contracts that exactly match the diverse mix of equity fund investments
held by contractholders.
•• adverse interest rate impacts reflecting management’s consideration
of the anticipated impact of continuing low current short-term
interest rates. This evaluation also led management to lower the
mean investment performance assumption for equity funds from
5% to 4.75% for those funds not subject to the growth interest rate
hedge program.
•• adverse impacts of overall market declines in the third quarter of 2011
that include an increase in the provision for expected future partial
surrenders and declines in the value of contractholders’ non-equity
investments such as bond funds, neither of which are included in
the hedge programs.
The 2010 reserve strengthening primarily reflects management’s
consideration of the anticipated impact of the continued low level of
current short-term interest rates and, to a lesser extent, a reduction
in assumed lapse rates for policies that have taken or are assumed to
take significant partial withdrawals. The 2009 reserve strengthening
was primarily due to an increase in the provision for future partial
surrenders due to overall market declines in the first quarter, adverse
volatility-related impacts due to turbulent equity market conditions
and adverse interest rate impacts.
See note 6 to the Consolidated financial Statements for additional
information about assumptions and reserve balances related to gMDb.
Other, including operating expenses
The increase in 2011 compared with 2010 was due to the reduced
favorable impacts of reserve studies, and the increase in 2010 compared
to 2009 was due to the reduced impact of favorable settlements and
commutations on business that was ceded to enstar group Limited
on December 31, 2010.
Segment Summary
The Company’s payment obligations for underlying reinsurance exposures
assumed by the Company under these contracts are based on ceding
companies’ claim payments. for gMDb and gMib, claim payments
vary because of changes in equity markets and interest rates, as well
as mortality and policyholder behavior. any of these claim payments
can extend many years into the future, and the amount of the ceding
companies’ ultimate claims, and therefore the amount of the Company’s
Contents Q

54 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
ultimate payment obligations and corresponding ultimate collection
from retrocessionaires may not be known with certainty for some time.
The Company’s reserves for underlying reinsurance exposures assumed by
the Company, as well as for amounts recoverable from retrocessionaires,
are considered appropriate as of December 31, 2011, based on current
information. however, it is possible that future developments, which
could include but are not limited to worse than expected claim experience
and higher than expected volatility, could have a material adverse effect
on the Company’s consolidated results of operations and financial
condition. The Company bears the risk of loss if its payment obligations
to cedents increase or if its retrocessionaires are unable to meet, or
successfully challenge, their reinsurance obligations to the Company.
Other Operations Segment
Segment Description
Cigna’s other operations segment includes the results of the following
businesses:
•• corporate-owned life insurance (“CoLi”);
•• deferred gains recognized from the 1998 sale of the individual life
insurance and annuity business and the 2004 sale of the retirement
benefits business; and
•• run-off settlement annuity business.
CoLi has contributed the majority of earnings in other operations
for the periods presented. The CoLi regulatory environment continues
to evolve, with various federal budget related proposals recommending
changes in policyholder tax treatment. although regulatory and
legislative activity could adversely impact our business and policyholders,
management does not expect the impact to materially affect the
Company’s results of operations, financial condition or liquidity.
Results of Operations
Financial Summary
(In millions) 2011 2010 2009
premiums and fees $ 114 $ 114 $ 112
net investment income 400 404 407
other revenues 55 60 64
Segment revenues 569 578 583
benefits and expenses 451 454 466
income before taxes 118 124 117
income taxes 29 39 31
Segment earningS 89 85 86
Completion of irS examination (See note 19 to the Consolidated financial Statements) 4 – 1
adjUSted income From oPerationS $ 85 $ 85 $ 85
realized investment gains (losses), net of taxes $ 6 $ 5 $ (6)
Segment earnings increased in 2011 compared with 2010, reflecting a
$4 million increase to earnings due to the completion of the Company’s
2007 and 2008 irS examination during the first quarter of 2011.
adjusted income from operations were flat in 2011 compared with
2010, reflecting higher CoLi earnings due to higher interest margins,
offset by lower earnings associated with the sold businesses due to the
continued decline in deferred gain amortization.
Segment earnings and adjusted income from operations were flat in
2010 compared with 2009, reflecting an increase in CoLi earnings
driven by higher investment income and favorable mortality, primarily
offset by the continued decline in deferred gain amortization associated
with the sold businesses.
Revenues
Premiums and fees reflect fees charged primarily on universal life
insurance policies in the CoLi business. Such amounts were relatively
flat reflecting a stable block of business.
Net investment income decreased 1% in 2011 compared with 2010,
and decreased 1% in 2010 compared with 2009 due to lower portfolio
yields partially offset by higher average invested assets.
Other revenues decreased 8% in 2011 compared with 2010 and
decreased 6% in 2010 compared with 2009 primarily due to lower
deferred gain amortization related to the sold retirement benefits and
individual life insurance and annuity businesses.
for more information regarding the sale of these businesses see note 7
of the Consolidated financial Statements beginning on page 84 of
this form 10-K.
Corporate
Description
Corporate reflects amounts not allocated to other segments, such as net
interest expense (defined as interest on corporate debt less net investment
income on investments not supporting segment operations), interest
on uncertain tax positions, certain litigation matters, intersegment
eliminations, compensation cost for stock options and certain corporate
overhead expenses such as directors’ expenses and, beginning in 2010,
pension expense related to the Company’s frozen pension plans.
Contents Q

55CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Financial Summary
(In millions) 2011 2010 2009
Segment LoSS $ (184) $ (211) $ (142)
Less: special items (after-tax) included in segment loss:
Cost associated with healthSpring acquisition (28) – –
resolution of federal tax Matter (See note 19 to the Consolidated financial Statements) – 4 –
Loss on early extinguishment of debt (See note 15 to the Consolidated financial Statements) – (39) –
Completion of irS examination (See note 19 to the Consolidated financial Statements) 14 – 12
adjUSted LoSS From oPerationS $ (170) $ (176) $ (154)
Corporate’s segment loss was lower in 2011 compared with 2010
primarily reflecting a tax benefit from completing the irS examination
and absence of the 2010 loss on debt extinguishment, partially offset
by costs associated with the healthSpring acquisition, all of which
were reported as special items.
Corporate’s adjusted loss from operations was lower in 2011 compared
with 2010 primarily reflecting decreased pension expense and lower
tax adjustments related to postretirement benefits and compensation
resulting from health Care reform. These factors were partially offset
by increased net interest expense due to higher average borrowings
outstanding in 2011.
Corporate’s segment loss and adjusted loss from operations were higher
in 2010 compared with 2009 primarily reflecting:
•• higher net interest expense, primarily driven by a higher long-term
debt balance;
•• tax adjustments related to postretirement benefits and compensation
resulting from health care reform;
•• pension expense related to the Company’s frozen pension plans which
was reported in Corporate beginning in 2010; and
•• for the segment loss, the after-tax loss on early extinguishment of
debt of $39 million.
These unfavorable effects were partially offset by lower spending on
strategic initiatives and lower directors’ deferred compensation expense.
Liquidity and Capital Resources
Financial Summary
(In millions) 2011 2010 2009
Short-term investments $ 225 $ 174 $ 493
Cash and cash equivalents $ 4,690 $ 1,605 $ 924
Short-term debt $ 104 $ 552 $ 104
Long-term debt $ 4,990 $ 2,288 $ 2,436
Shareholders’ equity $ 8,344 $ 6,645 $ 5,417
Liquidity
The Company maintains liquidity at two levels: the subsidiary level
and the parent company level.
Liquidity requirements at the subsidiary level generally consist of:
•• claim and benefit payments to policyholders;
•• operating expense requirements, primarily for employee compensation
and benefits; and
•• federal tax payments to the parent company under an intercompany
tax sharing agreement.
The Company’s subsidiaries normally meet their operating requirements by:
•• maintaining appropriate levels of cash, cash equivalents and short-
term investments;
•• using cash flows from operating activities;
•• selling investments;
•• matching investment durations to those estimated for the related
insurance and contractholder liabilities; and
•• borrowing from its parent company.
Liquidity requirements at the parent level generally consist of:
•• debt service and dividend payments to shareholders;
•• pension plan funding; and
•• federal tax payments.
The parent normally meets its liquidity requirements by:
•• maintaining appropriate levels of cash, cash equivalents and short-
term investments;
•• collecting dividends and federal tax payments from its subsidiaries;
•• using proceeds from issuance of debt and equity securities; and
•• borrowing from its subsidiaries.
Contents Q

56 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cash flows for the years ended December 31, were as follows:
(In millions) 2011 2010 2009
operating activities $ 1,491 $ 1,743 $ 745
investing activities $ (1,270) $ (1,342) $ (1,485)
financing activities $ 2,867 $ 274 $ 307
Cash flows from operating activities consist of cash receipts and
disbursements for premiums and fees, mail order pharmacy and other
revenues, gains (losses) recognized in connection with the Company’s
gMDb equity hedge program, investment income, taxes, and benefits
and expenses.
because certain income and expense transactions do not generate cash,
and because cash transactions related to revenue and expenses may
occur in periods different from when those revenues and expenses are
recognized in shareholders’ net income, cash flows from operating
activities can be significantly different from shareholders’ net income.
Cash flows from investing activities generally consist of net investment
purchases or sales and net purchases of property and equipment, which
includes capitalized software, as well as cash used to acquire businesses.
Cash flows from financing activities are generally comprised of issuances
and re-payment of debt at the parent level, proceeds on the issuance
of common stock in the open market and resulting from stock option
exercises, and stock repurchases. in addition, the subsidiaries report
net deposits/withdrawals to/from investment contract liabilities (that
include universal life insurance liabilities) because such liabilities are
considered financing activities with policyholders.
2011:
Operating activities
for the year ended December 31, 2011, cash flows from operating
activities were greater than net income by $163 million. net income
contains certain pre-tax income and expense items that neither provide
nor use operating cash flow, including:
•• gMib fair value loss of $ 234 million;
•• net charges related to special items of $40 million;
•• tax benefits related to resolution of a federal tax matter of $33 million;
•• depreciation and amortization charges of $ 345 million; and
•• realized investment gains of $ 62 million.
Cash flows from operating activities were lower than net income
excluding the items noted above by $361 million. excluding cash
outflows of $45 million associated with the gMDb equity hedge
program (which did not affect shareholders’ net income), cash flows
from operating activities were lower than net income by $316 million.
This result primarily reflects domestic qualified pension contributions
of $250 million as well as significant claim run-out from the Medicare
ipffS business, that the Company exited in 2011.
Cash flows from operating activities decreased by $252 million in 2011
compared with 2010. excluding the results of the gMDb equity hedge
program (that did not affect net income), cash flows from operating
activities decreased by $364 million. This decrease in 2011 primarily
reflects higher management compensation, income tax and pension
payments in 2011 compared with 2010 and unfavorable operating
cash flows in the Medicare ipffS business in 2011 due to significant
claim run-out compared to significant favorable operating cash flows
from the growth of this business in 2010. operating cash flows were
favorably affected in 2010 because paid claims on this business growth
lagged premium collections.
Investing activities
Cash used in investing activities was $1.3 billion. This use of cash
primarily consisted of net purchases of investments of $746 million,
cash used to fund acquisitions (net of cash acquired) of $114 million,
and net purchases of property and equipment of $422 million.
Financing activities
Cash provided from financing activities primarily consisted of net
proceeds from the issuance of long-term debt of $2.7 billion and
proceeds on issuances of common stock of $734 million, primarily used
to fund the acquisition of healthspring, inc. See the Capital resources
section for further information. financing activities also included net
deposits to contractholder deposit funds of $145 million. These inflows
were partially offset by scheduled payments of debt of $451 million
and common stock repurchases of $225 million.
2010:
Operating activities
for the year ended December 31, 2010, cash flows from operating
activities were greater than net income by $394 million. net income
contains certain income and expense items that neither provide nor
use operating cash flow, including:
•• gMib fair value loss of $ 55 million;
•• a pre-tax loss on the transfer of the workers’ compensation and
personal accident business of $31 million;
•• tax benefits related to the resolution of a federal tax matter of
$101 million;
•• depreciation and amortization charges of $ 292 million; and
•• realized investment gains of $ 75 million.
Cash flows from operating activities were greater than net income
excluding the items noted above by $192 million. excluding cash
outflows of $157 million associated with the gMDb equity hedge
program, (that did not affect shareholders’ net income) cash flows from
operating activities were higher than net income by $349 million. This
result primarily reflects premium growth in the health Care segment’s
risk businesses due to significant new business in 2010 and tax payments
lower than expense due to favorable effects of benefit plans (primarily
pension) and deferred foreign earnings, partially offset by pension
contributions of $212 million.
Contents Q

59CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
significantly change from the Company’s planned funding targets, since
discount rates used for funding purposes are based on a 24-month moving
average that is less susceptible to volatility than the rate required to be
used to compute the liability for the financial statements.
Solvency II
Cigna’s businesses in the european union will be subject to the directive
on insurance regulation and solvency requirements known as Solvency
ii. This directive will impose economic risk-based solvency requirements
and supervisory rules and is expected to become effective in January 2014,
although certain regulators are requiring companies to demonstrate
technical capability and comply with increased capital levels in advance of
the effective date. Cigna’s european insurance companies are capitalized
at levels consistent with projected Solvency ii requirements and in
compliance with anticipated technical capability requirements.
Guarantees and Contractual Obligations
The Company is contingently liable for various contractual obligations entered into in the ordinary course of business. The maturities of the
Company’s primary contractual cash obligations, as of December 31, 2011, are estimated to be as follows:
(In millions, on an undiscounted basis) total Less than 1 year 1‑3 years 4‑5 years after 5 years
on‑Balance Sheet:
insurance liabilities:
Contractholder deposit funds $ 7,251 $ 724 $ 943 $ 807 $ 4,777
future policy benefits 11,149 462 1,031 943 8,713
health Care medical claims payable 1,095 1,071 15 1 8
unpaid claims and claims expenses 4,617 1,466 869 598 1,684
Short-term debt 104 104 – – –
Long-term debt 9,202 247 555 1,125 7,275
other long-term liabilities 1,337 546 237 146 408
off‑Balance Sheet:
purchase obligations 1,117 596 296 49 176
operating leases 547 108 180 119 140
totaL $ 36,419 $ 5,324 $ 4,126 $ 3,788 $ 23,181
On-Balance Sheet
•• Insurance liabilities. Contractual cash obligations for insurance
liabilities, excluding unearned premiums and fees, represent estimated
net benefit payments for health, life and disability insurance policies
and annuity contracts. recorded contractholder deposit funds
reflect current fund balances primarily from universal life customers.
Contractual cash obligations for these universal life contracts are
estimated by projecting future payments using assumptions for lapse,
withdrawal and mortality. These projected future payments include
estimated future interest crediting on current fund balances based on
current investment yields less the estimated cost of insurance charges
and mortality and administrative fees. actual obligations in any single
year will vary based on actual morbidity, mortality, lapse, withdrawal,
investment and premium experience. The sum of the obligations
presented above exceeds the corresponding insurance and contractholder
liabilities of $17 billion recorded on the balance sheet because the
recorded insurance liabilities reflect discounting for interest and the
recorded contractholder liabilities exclude future interest crediting,
charges and fees. The Company manages its investment portfolios
to generate cash flows needed to satisfy contractual obligations. any
shortfall from expected investment yields could result in increases
to recorded reserves and adversely impact results of operations. The
amounts associated with the sold retirement benefits and individual
life insurance and annuity businesses, as well as the reinsured workers’
compensation and personal accident businesses, are excluded from the
table above as net cash flows associated with them are not expected
to impact the Company. The total amount of these reinsured reserves
excluded is approximately $6 billion.
•• Short-term debt represents commercial paper, current maturities of
long-term debt, and current obligations under capital leases.
•• Long-term debt includes scheduled interest payments. Capital
leases are included in long-term debt and represent obligations for
software licenses.
•• Other long-term liabilities. These items are presented in accounts
payable, accrued expenses and other liabilities in the Company’s
Consolidated balance Sheets. This table includes estimated payments for
gMib contracts, pension and other postretirement and postemployment
benefit obligations, supplemental and deferred compensation plans,
interest rate and foreign currency swap contracts, and certain tax and
reinsurance liabilities.
estimated payments of $94 million for deferred compensation, non-
qualified and international pension plans and other postretirement
and postemployment benefit plans are expected to be paid in less than
one year. The Company’s best estimate is that contributions to the
qualified domestic pension plans during 2012 will be approximately
$250 million. The Company expects to make payments subsequent to
2012 for these obligations, however subsequent payments have been
excluded from the table as their timing is based on plan assumptions
which may materially differ from actual activities (see note 9 to the
Contents Q

60 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Consolidated financial Statements for further information on pension
and other postretirement benefit obligations).
The above table also does not contain $52 million of gross liabilities
for uncertain tax positions because the Company cannot reasonably
estimate the timing of their resolution with the respective taxing
authorities. See note 19 to the Consolidated financial Statements
for the year ended December 31, 2011 for further information.
Off-Balance Sheet:
•• Purchase obligations. as of December 31, 2011, purchase obligations consisted of estimated payments required under contractual arrangements
for future services and investment commitments as follows:
(In millions)
fixed maturities $ 16
Commercial mortgage loans 162
real estate 9
Limited liability entities (other long-term investments) 407
total investment commitments 594
future service commitments 523
totaL PUrchaSe oBLigationS $ 1,117
The Company had commitments to invest in limited liability entities
that hold real estate, loans to real estate entities or securities. See
note 11(D) to the Consolidated financial Statements for additional
information.
future service commitments include an agreement with ibM for
various information technology (it) infrastructure services. The
Company’s remaining commitment under this contract is approximately
$162 million over the next 2 years. The Company has the ability to
terminate this agreement with 90 days notice, subject to termination
fees.
The Company’s remaining estimated future service commitments
primarily represent contracts for certain outsourced business processes
and it maintenance and support. The Company generally has the
ability to terminate these agreements, but does not anticipate doing so
at this time. purchase obligations exclude contracts that are cancelable
without penalty and those that do not specify minimum levels of
goods or services to be purchased.
•• Operating leases. for additional information, see note 21 to the
Consolidated financial Statements.
Guarantees
The Company, through its subsidiaries, is contingently liable for
various financial and other guarantees provided in the ordinary course
of business. See note 23 to the Consolidated financial Statements for
additional information on guarantees.
Investment Assets
The Company’s investment assets do not include separate account
assets. additional information regarding the Company’s investment
assets and related accounting policies is included in notes 2, 10, 11,
12, 13, 14 and 17 to the Consolidated financial Statements.
Fixed Maturities
investments in fixed maturities include publicly traded and privately
placed debt securities, mortgage and other asset-backed securities,
preferred stocks redeemable by the investor, hybrid and trading securities.
fair values are based on quoted market prices when available. When
market prices are not available, fair value is generally estimated using
discounted cash flow analyses, incorporating current market inputs for
similar financial instruments with comparable terms and credit quality.
in instances where there is little or no market activity for the same or
similar instruments, the Company estimates fair value using methods,
models and assumptions that the Company believes a hypothetical
market participant would use to determine a current transaction price.
The prices the Company used to value investment assets are representative
of prices that would be received to sell the assets at the measurement
date (exit prices) and are classified appropriately in the fair value
hierarchy. The Company performs ongoing analyses of prices used
to value invested assets to determine that they represent appropriate
estimates of fair value. This process involves quantitative and qualitative
analysis that is overseen by the Company’s investment professionals,
including reviews of pricing methodologies, judgments of valuation
inputs, and assessments of the significance of any unobservable inputs,
pricing statistics and trends. These reviews are also designed to ensure
prices do not become stale, have reasonable explanations as to why
they have changed from prior valuations, or require additional review
of other anomalies. The Company also performs sample testing of sales
values to confirm the accuracy of prior fair value estimates. exceptions
identified during these processes indicate that adjustments to prices
are infrequent and result in immaterial adjustments to the valuations.
The Company’s fixed maturity portfolio continues to be diversified by
issuer and industry type, with no single industry constituting more
than 10% of total invested assets as of December 31, 2011.
Contents Q

61CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
(In millions) 2011 2010
federal government and agency $ 958 $ 687
State and local government 2,456 2,467
foreign government 1,274 1,154
Corporate 10,513 9,444
federal agency mortgage-backed 9 10
other mortgage-backed 80 88
other asset-backed 927 859
totaL $ 16,217 $ 14,709
as of December 31, 2011, $14.9 billion, or 92%, of the fixed maturities
in the Company’s investment portfolio were investment grade (baa
and above, or equivalent), and the remaining $1.3 billion were below
investment grade. The majority of the bonds that are below investment
grade are rated at the higher end of the non-investment grade spectrum.
These quality characteristics have not materially changed during the year.
The net appreciation of the Company’s fixed maturity portfolio increased
$696 million during 2011, driven by a decline in market yields. although
asset values are well in excess of amortized cost, there are specific
securities with amortized cost in excess of fair value by approximately
$65 million as of December 31, 2011. See note 11 to the Consolidated
financial Statements for further information.
Corporate fixed maturities includes private placement investments of
$5.8 billion, which are generally less marketable than publicly-traded
bonds, but yields on these investments tend to be higher than yields
on publicly-traded bonds with comparable credit risk. The Company
performs a credit analysis of each issuer, diversifies investments by
industry and issuer and requires financial and other covenants that allow
the Company to monitor issuers for deteriorating financial strength
and pursue remedial actions, if warranted. also included in corporate
fixed maturities are investments in companies that are domiciled or
have significant business interests in european countries with the most
significant political or economic concerns (portugal, italy, ireland, greece,
and Spain). fixed maturity investments in these companies represent
approximately $350 million at December 31, 2011, have an average
quality rating of baa and are diversified by industry sector. financial
institutions comprised less than 5% of investments in these companies.
The Company invests in high quality foreign government obligations,
with an average quality rating of aa as of December 31, 2011. These
investments are primarily concentrated in asia consistent with the
geographic distribution of the international business operations, including
government obligations of South Korea, indonesia, taiwan and hong
Kong. foreign government obligations also include $136 million of
investments in european sovereign debt, including $8 million in
countries with the most significant political or economic concerns
(portugal, italy, ireland, greece, and Spain).
The Company’s investment in state and local government securities is
diversified by issuer and geography with no single exposure greater than
$35 million. The Company assesses each issuer’s credit quality based on
a fundamental analysis of underlying financial information and does
not rely solely on statistical rating organizations or monoline insurer
guarantees. as of December 31, 2011, 97% of the Company’s investments
in these securities were rated a3 or better excluding guarantees by
monoline bond insurers, consistent with December 31, 2010. as of
December 31, 2011, approximately 64% or $1,564 million of the
Company’s total investments in state and local government securities
were guaranteed by monoline bond insurers, providing additional
credit quality support. The quality ratings of these investments with
and without this guaranteed support as of December 31, 2011 were
as follows:
(In millions) Quality rating
as of december 31, 2011
Fair Value
with guarantee without guarantee
State and local governments aaa $ 129 $ 129
aa1-aa3 1,157 1,101
a1-a3 237 290
baa1-baa3 41 21
ba1-ba3 – 21
not available – 2
totaL State and LocaL goVernmentS $ 1,564 $ 1,564
as of December 31, 2011, the Company’s investments in other asset and mortgage-backed securities totaling $1,016 million included $520 million
of investment grade private placement securities guaranteed by monoline bond insurers. Quality ratings without considering the guarantees for
these other asset-backed securities were not available.
Contents Q

62 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
as of December 31, 2011, the Company had no direct investments in monoline bond insurers. guarantees provided by various monoline bond
insurers for certain of the Company’s investments in state and local governments and other asset-backed securities as of December 31, 2011 were:
guarantor
(In millions)
as of december 31, 2011
indirect exposure
national public finance guarantee $ 1,261
assured guaranty Municipal Corp 610
aMbaC 174
financial guaranty insurance Co. 39
totaL $ 2,084
Commercial Mortgage Loans
The Company’s commercial mortgage loans are fixed rate loans,
diversified by property type, location and borrower to reduce exposure
to potential losses. Loans are secured by high quality commercial
properties and are generally made at less than 75% of the property’s
value at origination of the loan. in addition to property value, debt
service coverage, building tenancy and stability of cash flows are all
important financial underwriting considerations. property type, location,
quality, and borrower are all important underwriting considerations
as well. The Company holds no direct residential mortgage loans and
does not securitize or service mortgage loans.
The Company completed its annual in depth review of its commercial
mortgage loan portfolio during the second quarter of 2011. This review
included an analysis of each property’s year-end 2010 financial statements,
rent rolls, operating plans and budgets for 2011, a physical inspection of
the property and other pertinent factors. based on property values and
cash flows estimated as part of this review, and considering updates for
loans where material changes were subsequently identified, the overall
health of the portfolio improved from 2010, consistent with recovery
in many of the commercial real estate markets.
based on this review and subsequent portfolio activity, the average
loan-to-value ratio improved to 70% and the debt service coverage ratio
was estimated to be 1.40 at December 31, 2011. The average loan-to-
value ratio decreased from 74% as of December 31, 2010, and the debt
service coverage ratio increased from 1.38 as of December 31, 2010.
The decrease in average loan-to-value ratio generally reflects increased
valuations for the majority of the underlying properties. Valuation
changes varied by property type as apartments and hotels demonstrated
the strongest recovery, retail and office properties showed modest
improvement and industrial properties exhibited a slight decline. The
slight increase in debt service coverage ratio reflects greater demand
for apartments and hotels, partially offset by slower recovery in leasing
rates on industrial properties and ongoing portfolio activity.
Commercial real estate capital markets remain most active for well
leased, quality commercial real estate located in strong institutional
investment markets. The vast majority of properties securing the
mortgages in Cigna’s mortgage portfolio possess these characteristics.
While commercial real estate fundamentals continued to improve in
2011, the improvement has varied across geographies and property
types. a broad recovery is dependent on continued improvement in
the national economy.
The following table reflects the commercial mortgage loan portfolio as
of December 31, 2011 summarized by loan-to-value ratio primarily
based on the annual loan review completed during the second quarter
of 2011.
LOAN-TO-vALUE DISTRIBUTION
Loan‑to‑Value ratios
amortized cost
% of mortgage LoansSenior Subordinated total
below 50% $ 299 $ 43 $ 342 10%
50% to 59% 537 33 570 17%
60% to 69% 854 51 905 28%
70% to 79% 517 44 561 17%
80% to 89% 397 5 402 12%
90% to 99% 275 – 275 8%
100% or above 246 – 246 8%
totaLS $ 3,125 $ 176 $ 3,301 100%
as summarized above, $176 million or 5% of the commercial mortgage
loan portfolio is comprised of subordinated notes which were fully
underwritten and originated by the Company using its standard
underwriting procedures and are secured by first mortgage loans. Senior
interests in these first mortgage loans were then sold to other institutional
investors. This strategy allowed the Company to effectively utilize its
origination capabilities to underwrite high quality loans with strong
borrower sponsorship, limit individual loan exposures, and achieve
attractive risk adjusted yields. in the event of a default, the Company
would pursue remedies up to and including foreclosure jointly with
the holders of the senior interests, but would receive repayment only
after satisfaction of the senior interest.
in the table above, there are four loans in the “100% or above” category
with an aggregate carrying value of $84 million that exceeds the value
of their underlying properties by $6 million. all of these loans have a
current debt service coverage of 1.0 or greater, along with significant
borrower commitment.
Contents Q

63CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
The commercial mortgage portfolio contains approximately 165 loans,
including four impaired loans, totaling $195 million, that are classified
as problem loans, resulting in an aggregate default rate of 5.9%. all
of the remaining loans continue to perform under their contractual
terms. The Company has $529 million of loans maturing in the next
twelve months. given the quality and diversity of the underlying real
estate, positive debt service coverage and significant borrower cash
investment averaging nearly 30%, the Company remains confident
that the vast majority of borrowers will continue to perform as expected
under the contract terms.
Other Long-Term Investments
The Company’s other long-term investments include $963 million in
security partnership and real estate funds as well as direct investments
in real estate joint ventures. The funds typically invest in mezzanine
debt or equity of privately held companies (securities partnerships)
and equity real estate. given its subordinate position in the capital
structure of these underlying entities, the Company assumes a higher
level of risk for higher expected returns. to mitigate risk, investments
are diversified across approximately 70 separate partnerships, and
approximately 45 general partners who manage one or more of these
partnerships. also, the funds’ underlying investments are diversified
by industry sector or property type, and geographic region. no single
partnership investment exceeds 8% of the Company’s securities and
real estate partnership portfolio.
although the total fair values of investments exceeded their carrying
values as of December 31, 2011, the fair value of the Company’s
ownership interest in certain funds that are carried at cost was less
than carrying value by $44 million. fund investment values continued
to improve, but remained at depressed levels reflecting the impact of
declines in value experienced predominantly during 2008 and 2009
due to economic weakness and disruption in the capital markets,
particularly in the commercial real estate market. The Company expects
to recover its carrying value over the average remaining life of these
investments of approximately 6 years. given the current economic
environment, future impairments are possible; however, management
does not expect those losses to have a material effect on the Company’s
results of operations, financial condition or liquidity.
problem and potential problem Investments
“problem” bonds and commercial mortgage loans are either delinquent
by 60 days or more or have been restructured as to terms, which could
include concessions by the Company for modification of interest rate,
principal payment or maturity date. “potential problem” bonds and
commercial mortgage loans are considered current (no payment more
than 59 days past due), but management believes they have certain
characteristics that increase the likelihood that they may become
problems. The characteristics management considers include, but are
not limited to, the following:
•• request from the borrower for restructuring;
•• principal or interest payments past due by more than 30 but fewer
than 60 days;
•• downgrade in credit rating;
•• collateral losses on asset-backed securities; and
•• for commercial mortgages, deterioration of debt service coverage
below 1.0 or value declines resulting in estimated loan-to-value ratios
increasing to 100% or more.
The Company recognizes interest income on problem bonds and
commercial mortgage loans only when payment is actually received
because of the risk profile of the underlying investment. The amount
that would have been reflected in net income if interest on non-accrual
investments had been recognized in accordance with the original terms
was not significant for 2011 or 2010.
The following table shows problem and potential problem investments
at amortized cost, net of valuation reserves and write-downs:
(In millions)
december 31, 2011 december 31, 2010
gross reserve net gross reserve net
problem bonds $ 40 $ (13) $ 27 $ 86 $ (39) $ 47
problem commercial mortgage loans (1) 224 (19) 205 90 (4) 86
foreclosed real estate 34 – 34 59 – 59
totaL ProBLem inVeStmentS $ 298 $ (32) $ 266 $ 235 $ (43) $ 192
potential problem bonds $ 36 $ (10) $ 26 $ 40 $ (10) $ 30
potential problem commercial mortgage loans 141 – 141 305 (8) 297
totaL PotentiaL ProBLem
inVeStmentS $ 177 $ (10) $ 167 $ 345 $ (18) $ 327
(1) At December 31, 2011, includes a $10 million restructured loan classified in Other long-term investments that was previously reported in commercial mortgage loans.
net problem investments represent 1.3% of total investments excluding
policy loans at December 31, 2011. net problem investments increased
by $74 million during 2011 due primarily to deterioration of commercial
mortgage loans previously considered in good standing or reclassified
from potential problem loans, partially offset by the partial sale of a
foreclosed real estate property.
net potential problem investments represent .8% of total investments
excluding policy loans at December 31, 2011. net potential problem
investments decreased by $160 million during 2011, reflecting results
from the annual in-depth commercial mortgage loan portfolio review
and loan modification, payoff, and refinancing activity.
During the second quarter 2011, the Company restructured a $65 million
potential problem mortgage loan into two loans, including a $55 million
loan at current market terms and a $10 million loan at a below market
interest rate. This restructure resulted in a $65 million reduction to
potential problem mortgage loans and a $10 million increase to problem
mortgage loans. See note 11 to the Consolidated financial Statements
for further information.
Contents Q

65CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
•• Use of derivatives. The Company generally uses derivative financial
instruments to minimize certain market risks.
See notes 2(C) and 12 to the Consolidated financial Statements for
additional information about financial instruments, including derivative
financial instruments.
Effect of Market Fluctuations on the Company
The examples that follow illustrate the adverse effect of hypothetical
changes in market rates or prices on the fair value of certain financial
instruments including:
•• a hypothetical increase in market interest rates, primarily for fixed
maturities and commercial mortgage loans, partially offset by liabilities
for long-term debt and gMib contracts;
•• a hypothetical strengthening of the u.S. dollar to foreign currencies,
primarily for the net assets of foreign subsidiaries denominated in a
foreign currency; and
•• a hypothetical decrease in market prices for equity exposures, primarily
for equity securities and gMib contracts.
in addition, the hypothetical adverse effects of an increase in equity
indices and foreign exchange rates are presented separately for futures
contracts used in the gMDb equity hedge program because their risk
of loss occurs when equity markets rise.
Management believes that actual results could differ materially from
these examples because:
•• these examples were developed using estimates and assumptions;
•• changes in the fair values of all insurance-related assets and liabilities
have been excluded because their primary risks are insurance rather
than market risk;
•• changes in the fair values of investments recorded using the
equity method of accounting and liabilities for pension and other
postretirement and postemployment benefit plans (and related assets)
have been excluded, consistent with the disclosure guidance; and
•• changes in the fair values of other significant assets and liabilities
such as goodwill, deferred policy acquisition costs, taxes, and various
accrued liabilities have been excluded; because they are not financial
instruments, their primary risks are other than market risk.
The effects of hypothetical changes in market rates or prices on the fair
values of certain of the Company’s financial instruments, subject to
the exclusions noted above (particularly insurance liabilities), would
have been as follows as of December 31:
market scenario for certain non‑insurance financial instruments (in millions)
Loss in fair value
2011 2010
100 basis point increase in interest rates $ 575 $ 700
10% strengthening in u.S. dollar to foreign currencies $ 220 $ 190
10% decrease in market prices for equity exposures $ 40 $ 50
The effect of a hypothetical increase in interest rates was determined
by estimating the present value of future cash flows using various
models, primarily duration modeling and, for gMib contracts,
stochastic modeling. The impact of a hypothetical increase to interest
rates at December 31, 2011 was less than that at December 31, 2010
reflecting an increase in the fair value of long-term debt, primarily
due to $2.1 billion of new borrowings in november 2011, partially
offset by an increase to the fair value of the Company’s fixed-income
investments.
The effect of a hypothetical strengthening of the u.S. dollar relative
to the foreign currencies held by the Company was estimated to be
10% of the u.S. dollar equivalent fair value. The Company’s foreign
operations hold investment assets, such as fixed maturities, that are
generally invested in the currency of the related liabilities. Due to
the increase in the fair value of these investments in 2011, which
are primarily denominated in the South Korean won, the effect of a
hypothetical 10% strengthening in u.S. dollar to foreign currencies at
December 31, 2011 was greater than that effect at December 31, 2010.
The effect of a hypothetical decrease in the market prices of equity
exposures was estimated based on a 10% decrease in the equity mutual
fund values underlying gMib reinsured by the Company, in the equity
futures contracts used to partially hedge the gMib equity exposures,
and in the value of equity securities held by the Company. See note 10
to the Consolidated financial Statements for additional information.
The Company uses futures contracts as part of a gMDb equity hedge
program to substantially reduce the effect of equity market changes on
certain reinsurance contracts that guarantee minimum death benefits
based on unfavorable changes in underlying variable annuity account
values. The hypothetical effect of a 10% increase in the S&p 500,
S&p 400, russell 2000, naSDaQ, topiX (Japanese), euroStoXX
and ftSe (british) equity indices and a 10% weakening in the u.S.
dollar to the Japanese yen, british pound and euro would have been
a decrease of approximately $90 million in the fair value of the futures
contracts outstanding under this program as of December 31, 2011.
a corresponding decrease in liabilities for gMDb contracts would
result from the hypothetical 10% increase in these equity indices and
10% weakening in the u.S. dollar. See note 6 to the Consolidated
financial Statements for further discussion of this program and related
gMDb contracts.
as noted above, the Company manages its exposures to market risk by
matching investment characteristics to its obligations.
Stock Market performance
The performance of equity markets can have a significant effect on the
Company’s businesses, including on:
•• risks and exposures associated with gMDb (see note 6 to the
Consolidated financial Statements) and gMib contracts (see note 10
to the Consolidated financial Statements); and
•• pension liabilities since equity securities comprise a significant portion
of the assets of the Company’s employee pension plans.
Contents Q

68 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
ITEM 8 Financial Statements and Supplementary Data
Cigna Corporation
Consolidated Statements of Income
For the years ended december 31,
(In millions, except per share amounts) 2011 2010 2009
revenues
premiums and fees $ 19,089 $ 18,393 $ 16,041
net investment income 1,146 1,105 1,014
Mail order pharmacy revenues 1,447 1,420 1,282
other revenues 254 260 120
realized investment gains (losses)
other-than-temporary impairments on fixed maturities, net (26) (1) (47)
other realized investment gains 88 76 4
total realized investment gains (losses) 62 75 (43)
totaL reVenUeS 21,998 21,253 18,414
Benefits and expenses
health Care medical claims expense 8,182 8,570 6,927
other benefit expenses 4,308 3,663 3,407
Mail order pharmacy cost of goods sold 1,203 1,169 1,036
gMib fair value (gain) loss 234 55 (304)
other operating expenses 6,103 5,926 5,450
totaL BeneFitS and exPenSeS 20,030 19,383 16,516
income from continuing operations before income taxes 1,968 1,870 1,898
income taxes:
Current 398 331 275
Deferred 242 190 319
totaL taxeS 640 521 594
income from continuing operations 1,328 1,349 1,304
income from discontinued operations, net of taxes – – 1
net income 1,328 1,349 1,305
Less: net income attributable to noncontrolling interest 1 4 3
SharehoLderS’ net income $ 1,327 $ 1,345 $ 1,302
Basic earnings Per Share:
Shareholders’ income from continuing operations $ 4.90 $ 4.93 $ 4.75
Shareholders’ income from discontinued operations – – –
SharehoLderS’ net income $ 4.90 $ 4.93 $ 4.75
diluted earnings Per Share:
Shareholders’ income from continuing operations $ 4.84 $ 4.89 $ 4.73
Shareholders’ income from discontinued operations – – –
SharehoLderS’ net income $ 4.84 $ 4.89 $ 4.73
Dividends Declared per Share $ 0.04 $ 0.04 $ 0.04
amounts attributable to cigna:
Shareholders’ income from continuing operations $ 1,327 $ 1,345 $ 1,301
Shareholders’ income from discontinued operations – – 1
SharehoLderS’ net income $ 1,327 $ 1,345 $ 1,302
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
Contents Q

69CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
Cigna Corporation
Consolidated Balance Sheets
as of december 31,
(In millions, except per share amounts) 2011 2010
ASSETS
investments:
fixed maturities, at fair value (amortized cost, $14,257; $13,445) $ 16,217 $ 14,709
equity securities, at fair value (cost, $124; $144) 100 127
Commercial mortgage loans 3,301 3,486
policy loans 1,502 1,581
real estate 87 112
other long-term investments 1,058 759
Short-term investments 225 174
total investments 22,490 20,948
Cash and cash equivalents 4,690 1,605
accrued investment income 252 235
premiums, accounts and notes receivable, net 1,358 1,318
reinsurance recoverables 6,256 6,495
Deferred policy acquisition costs 1,312 1,122
property and equipment 1,024 912
Deferred income taxes, net 632 782
goodwill 3,164 3,119
other assets, including other intangibles 1,776 1,238
Separate account assets 8,093 7,908
totaL aSSetS $ 51,047 $ 45,682
LIABILITIES
Contractholder deposit funds $ 8,553 $ 8,509
future policy benefits 8,593 8,147
unpaid claims and claim expenses 4,146 4,017
health Care medical claims payable 1,095 1,246
unearned premiums and fees 502 416
total insurance and contractholder liabilities 22,889 22,335
accounts payable, accrued expenses and other liabilities 6,627 5,936
Short-term debt 104 552
Long-term debt 4,990 2,288
Separate account liabilities 8,093 7,908
totaL LiaBiLitieS 42,703 39,019
contingencies — note 23
SHAREHOLDERS’ EQUITy
Common stock (par value per share, $0.25; shares issued, 366; 351; authorized, 600) 92 88
additional paid-in capital 3,188 2,534
net unrealized appreciation, fixed maturities 739 529
net unrealized appreciation, equity securities 1 3
net unrealized depreciation, derivatives (23) (24)
net translation of foreign currencies (3) 25
postretirement benefits liability adjustment (1,507) (1,147)
accumulated other comprehensive loss (793) (614)
retained earnings 11,143 9,879
Less: treasury stock, at cost (5,286) (5,242)
totaL SharehoLderS’ eQUitY 8,344 6,645
noncontrolling interest – 18
totaL eQUitY 8,344 6,663
total liabilities and equity $ 51,047 $ 45,682
SharehoLderS’ eQUitY Per Share $ 29.22 $ 24.44
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
Contents Q

70 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
Cigna Corporation
Consolidated Statements of Comprehensive Income
and Changes in Total Equity
For the years ended december 31,
(In millions, except per share amounts)
2011 2010 2009
comprehensive
income
total
equity
comprehensive
income
total
equity
comprehensive
income
total
equity
common Stock, beginning of year $ 88 $ 88 $ 88
issuance of common stock 4 –  – 
common Stock, end of year 92 88 88
additional Paid‑in capital, beginning of year 2,534 2,514 2,502
effect of issuance of stock for employee benefit plans 27 20 12
effects of acquisition of noncontrolling interest 2 –  – 
issuance of common stock 625 –  – 
additional Paid‑in capital, end of year 3,188 2,534 2,514
accumulated other comprehensive Loss, beginning of year (614) (618) (1,074)
implementation effect of updated guidance on other-than-temporary
impairments (see note 2) –  –  (18)
net unrealized appreciation, fixed maturities $ 210 210 $ 151 151 $ 543 543
net unrealized depreciation, equity securities (2) (2) (1) (1) (3) (3)
net unrealized appreciation on securities 208 150 540
net unrealized appreciation (depreciation), derivatives 1 1 6 6 (17) (17)
net translation of foreign currencies (28) (28) 37 37 48 48
postretirement benefits liability adjustment (360) (360) (189) (189) (97) (97)
other comprehensive income (loss) (179) 4 474
accumulated other comprehensive Loss, end of year (793) (614) (618)
retained earnings, beginning of year 9,879 8,625 7,374
implementation effect of updated guidance on other-than-temporary
impairments (see note 2) –  –  18
Shareholders’ net income 1,327 1,327 1,345 1,345 1,302 1,302
effect of issuance of stock for employee benefit plans (53) (80) (58)
Common dividends declared (per share: $0.04; $0.04; $0.04) (10) (11) (11)
retained earnings, end of year 11,143 9,879 8,625
treasury Stock, beginning of year (5,242) (5,192) (5,298)
repurchase of common stock (225) (201) –
other, primarily issuance of treasury stock for employee benefit plans 181 151 106
treasury Stock, end of year (5,286) (5,242) (5,192)
Shareholders’ comprehensive income (Loss) and Shareholders’ equity 1,148 8,344 1,349 6,645 1,776 5,417
noncontrolling interest, beginning of year 18 12 6
net income attributable to noncontrolling interest 1 1 4 4 3 3
accumulated other comprehensive income attributable
to noncontrolling interest –  –  2 2 3 3
acquisition of noncontrolling interest (19)
noncontrolling interest, end of year 1 ‑  6 18 6 12
totaL comPrehenSiVe income and totaL eQUitY $ 1,149 $ 8,344 $ 1,355 $ 6,663 $ 1,782 $ 5,429
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
Contents Q

71CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
Cigna Corporation
Consolidated Statements of Cash Flows
For the years ended december 31,
(In millions) 2011 2010 2009
cash Flows from operating activities
net income $ 1,328 $ 1,349 $ 1,305
adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 345 292 268
realized investment (gains) losses (62) (75) 43
Deferred income taxes 242 190 319
gains on sales of businesses (excluding discontinued operations) (25) (13) (32)
(income) from discontinued operations –  –  (1)
net changes in assets and liabilities, net of non-operating effects:
premiums, accounts and notes receivable (50) 62 49
reinsurance recoverables 19 37 30
Deferred policy acquisition costs (211) (156) (109)
other assets (317) (3) 452
insurance liabilities 154 325 (357)
accounts payable, accrued expenses and other liabilities 344 (272) (1,321)
Current income taxes (246) 2 55
other, net (30) 5 44
net caSh ProVided BY oPerating actiVitieS 1,491 1,743 745
cash Flows from investing activities
proceeds from investments sold:
fixed maturities 830 822 927
equity securities 46 4 22
Commercial mortgage loans 253 63 61
other (primarily short-term and other long-term investments) 1,915 1,102 910
investment maturities and repayments:
fixed maturities 1,265 1,084 1,100
Commercial mortgage loans 385 70 94
investments purchased:
fixed maturities (2,877) (2,587) (2,916)
equity securities (20) (12) (14)
Commercial mortgage loans (487) (239) (175)
other (primarily short-term and other long-term investments) (2,056) (810) (1,187)
property and equipment purchases (422) (300) (307)
acquisitions and dispositions, net of cash acquired (102) (539) – 
net caSh USed in inVeSting actiVitieS (1,270) (1,342) (1,485)
cash Flows from Financing activities
Deposits and interest credited to contractholder deposit funds 1,323 1,295 1,312
Withdrawals and benefit payments from contractholder deposit funds (1,178) (1,205) (1,223)
Change in cash overdraft position (1) 59 53
repayment of debt (451) (270) (200)
net proceeds on issuance of long-term debt 2,676 543 346
repurchase of common stock (225) (201) – 
issuance of common stock 734 64 30
Common dividends paid (11) (11) (11)
net caSh ProVided BY Financing actiVitieS 2,867 274 307
effect of foreign currency rate changes on cash and cash equivalents (3) 6 15
net increase (decrease) in cash and cash equivalents 3,085 681 (418)
Cash and cash equivalents, beginning of year 1,605 924 1,342
Cash and cash equivalents, end of year $ 4,690 $ 1,605 $ 924
Supplemental disclosure of cash information:
income taxes paid, net of refunds $ 633 $ 326 $ 220
interest paid $ 185 $ 180 $ 158
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
Contents Q

72 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
Notes to the Consolidated Financial Statements
NOTE 1 Description of Business
Cigna Corporation is a holding company and is not an insurance
company. its subsidiaries conduct various businesses, that are
described in this annual report on form 10-K for the fiscal year
ended December 31, 2011 (“form 10-K”). as used in this document,
“Cigna” and the “Company” may refer to Cigna Corporation itself, one
or more of its subsidiaries, or Cigna Corporation and its consolidated
subsidiaries.
The Company is a global health services organization with insurance
subsidiaries that are major providers of medical, dental, disability,
life and accident insurance and related products and services. in the
u.S., the majority of these products and services are offered through
employers and other groups (e.g. unions and associations) and, in
selected international markets, Cigna offers supplemental health, life
and accident insurance products and international health care coverage
and services to businesses, governmental and non-governmental
organizations and individuals. in addition to its ongoing operations
described above, the Company also has certain run-off operations,
including a run-off reinsurance segment.
NOTE 2 Summary of Significant Accounting policies
A. Basis of presentation
The Consolidated financial Statements include the accounts of Cigna
Corporation and its significant subsidiaries. intercompany transactions
and accounts have been eliminated in consolidation.
These Consolidated financial Statements were prepared in conformity
with accounting principles generally accepted in the united States of
america (“gaap”). amounts recorded in the Consolidated financial
Statements necessarily reflect management’s estimates and assumptions
about medical costs, investment valuation, interest rates and other
factors. Significant estimates are discussed throughout these notes;
however, actual results could differ from those estimates. The impact
of a change in estimate is generally included in earnings in the period
of adjustment.
in preparing these Consolidated financial Statements, the Company
has evaluated events that occurred between the balance sheet date and
february 23, 2012 and determined that, with the exception of the
January 31, 2012 acquisition of healthSpring, inc., that is disclosed
in note 3, there were no other items to disclose.
Certain reclassifications have been made to prior period amounts to
conform to the current presentation. in addition, certain amounts
have been restated as a result of the adoption of new accounting
pronouncements.
variable interest entities
as of December 31, 2011 and 2010 the Company determined it was
not a primary beneficiary in any variable interest entities.
B. Changes in Accounting pronouncements
Deferred acquisition costs
in october 2010, the financial accounting Standards board (“faSb”)
amended guidance (aSu 2010-26) for the accounting of costs to
acquire or renew insurance contracts to require costs such as certain sales
compensation or telemarketing costs that are related to unsuccessful
efforts to acquire or retain business and any indirect costs to be expensed
as incurred. This new guidance must be implemented on January 1, 2012
and any changes to the Company’s Consolidated financial Statements
may be recognized prospectively for acquisition costs incurred beginning
in 2012 or through retrospective adjustment of comparative prior periods.
the Company expects to implement the new requirements on
January 1, 2012 through retrospective adjustment of prior periods.
The Company’s deferred acquisition costs arise from sales and renewal
activities primarily in its international segment. because the new
requirements further restrict the types of costs that are deferrable,
more of the Company’s acquisition costs will be expensed as incurred.
The Company expects the cumulative effect of implementing this
new guidance to decrease shareholders’ equity as of January 1, 2011
by a range of $250 million to $300 million. in addition, as certain
acquisition costs will no longer be eligible for deferral under the new
guidance, the Company expects that full-year 2011 shareholders’ net
income on a retrospectively adjusted basis will decrease by approximately
$70 million primarily in its international segment. The Company expects
the effect of the new guidance on shareholders’ net income in 2012 to
be generally comparable to that estimated for 2011. implementation
of this new guidance will have no impact on the underlying economic
value, revenues or cash flows of the Company’s businesses, nor will it
impact the Company’s liquidity or the statutory surplus of its insurance
subsidiaries.
Contents Q

75CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
D. Cash and Cash Equivalents
Cash equivalents consist of short-term investments with maturities of
three months or less from the time of purchase that are classified as held
to maturity and carried at amortized cost. The Company reclassifies
cash overdraft positions to accounts payable, accrued expenses and
other liabilities when the legal right of offset does not exist.
E. premiums, Accounts
and Notes Receivable and Reinsurance
Recoverables
premiums, accounts and notes receivable are reported net of an allowance
for doubtful accounts of $45 million as of December 31, 2011 and
$49 million as of December 31, 2010. reinsurance recoverables are
estimates of amounts that the Company will receive from reinsurers
and are recorded net of an allowance for unrecoverable reinsurance
of $5 million as of December 31, 2011 and $10 million as of
December 31, 2010. The Company estimates these allowances for
doubtful accounts for premiums, accounts and notes receivable, as
well as for reinsurance recoverables, using management’s best estimate
of collectibility, taking into consideration the aging of these amounts,
historical collection patterns and other economic factors.
F. Deferred policy Acquisition Costs
acquisition costs include sales compensation, commissions, direct
response marketing, telemarketing, premium taxes and other costs that
the Company incurs in connection with new and renewal business.
Depending on the product line they relate to, the Company records
acquisition costs in different ways. acquisition costs for:
•• Universal life products are deferred and amortized in proportion to
the present value of total estimated gross profits over the expected
lives of the contracts.
•• Supplemental health, life and accident insurance (primarily individual
international products) and group health and accident insurance
products are deferred and amortized, generally in proportion to the
ratio of periodic revenue to the estimated total revenues over the
contract periods.
•• Other products are expensed as incurred.
for universal life and other individual products, management estimates
the present value of future revenues less expected payments. for group
health and accident insurance products, management estimates the
sum of unearned premiums and anticipated net investment income
less future expected claims and related costs. if management’s estimates
of these sums are less than the deferred costs, the Company reduces
deferred policy acquisition costs and records an expense. The Company
recorded amortization for policy acquisition costs of $334 million
in 2011, $312 million in 2010 and $299 million in 2009 in other
operating expenses. There are no deferred policy acquisition costs
attributable to the sold individual life insurance and annuity and
retirement businesses or the run-off reinsurance and settlement annuity
operations. The accounting for acquisition costs will change in 2012.
See recent accounting pronouncements for additional information.
G. property and Equipment
property and equipment is carried at cost less accumulated depreciation.
When applicable, cost includes interest, real estate taxes and other costs
incurred during construction. also included in this category is internal-use
software that is acquired, developed or modified solely to meet the Company’s
internal needs, with no plan to market externally. Costs directly related to
acquiring, developing or modifying internal-use software are capitalized.
The Company calculates depreciation and amortization principally using
the straight-line method generally based on the estimated useful life
of each asset as follows: buildings and improvements, 10 to 40 years;
purchased software, one to five years; internally developed software,
three to seven years; and furniture and equipment (including computer
equipment), three to 10 years. improvements to leased facilities are
depreciated over the remaining lease term or the estimated life of the
improvement. The Company considers events and circumstances that
would indicate the carrying value of property, equipment or capitalized
software might not be recoverable. if the Company determines the
carrying value of a long-lived asset is not recoverable, an impairment
charge is recorded. See note 8 for additional information.
H. Goodwill
goodwill represents the excess of the cost of businesses acquired over
the fair value of their net assets. goodwill primarily relates to the health
Care segment ($2.9 billion) and, to a lesser extent, the international
segment ($290 million). The Company evaluates goodwill for impairment
at least annually during the third quarter at the reporting unit level,
based on discounted cash flow analyses and writes it down through
results of operations if impaired. Consistent with prior years, the
Company’s evaluations of goodwill associated with the health Care and
international segments used the best information available at the time,
including reasonable assumptions and projections consistent with those
used in its annual planning process. The discounted cash flow analyses
used a range of discount rates that correspond with the Company’s,
or, in the case of international, the reporting unit’s weighted average
cost of capital, consistent with that used for investment decisions
considering the specific and detailed operating plans and strategies
within the segment or reporting unit. The resulting discounted cash
flow analysis indicated an estimated fair value for the health Care
segment and international’s reporting unit exceeding their carrying
values, including goodwill and other intangibles. finally, the Company
determined that no events or circumstances occurred subsequent to the
annual evaluation of goodwill that would more likely than not reduce
the fair value of the health Care segment or international’s reporting
unit below their carrying values. See note 8 for additional information.
I. Other Assets, including Other Intangibles
other assets consist of various insurance-related assets and the gain position of
certain derivatives, primarily gMib assets. The Company’s other intangible
assets include purchased customer and producer relationships, provider
networks, and trademarks. The Company amortizes other intangibles
on an accelerated or straight-line basis over periods from 1 to 30 years.
Management revises amortization periods if it believes there has been a
change in the length of time that an intangible asset will continue to have
value. Costs incurred to renew or extend the terms of these intangible assets
are generally expensed as incurred. See note 8 for additional information.
Contents Q

76 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
J. Separate Account Assets and Liabilities
Separate account assets and liabilities are contractholder funds maintained
in accounts with specific investment objectives. The assets of these
accounts are legally segregated and are not subject to claims that arise
out of any of the Company’s other businesses. These separate account
assets are carried at fair value with equal amounts for related separate
account liabilities. The investment income, gains and losses of these
accounts generally accrue to the contractholders and, together with
their deposits and withdrawals, are excluded from the Company’s
Consolidated Statements of income and Cash flows. fees earned for
asset management services are reported in premiums and fees.
K. Contractholder Deposit Funds
Liabilities for contractholder deposit funds primarily include deposits
received from customers for investment-related and universal life products
and investment earnings on their fund balances. These liabilities are
adjusted to reflect administrative charges and, for universal life fund
balances, mortality charges. in addition, this caption includes premium
stabilization reserves that are insurance experience refunds for group
contracts that are left with the Company to pay future premiums, deposit
administration funds that are used to fund nonpension retiree insurance
programs, retained asset accounts and annuities or supplementary
contracts without significant life contingencies. interest credited on
these funds is accrued ratably over the contract period.
L. Future policy Benefits
future policy benefits are liabilities for the present value of estimated
future obligations under long-term life and supplemental health insurance
policies and annuity products currently in force. These obligations are
estimated using actuarial methods and primarily consist of reserves for
annuity contracts, life insurance benefits, guaranteed minimum death
benefit (“gMDb”) contracts and certain life, accident and health
insurance products in our international operations.
obligations for annuities represent specified periodic benefits to be
paid to an individual or groups of individuals over their remaining
lives. obligations for life insurance policies represent benefits to
be paid to policyholders, net of future premiums to be received.
Management estimates these obligations based on assumptions as to
premiums, interest rates, mortality and surrenders, allowing for adverse
deviation. Mortality, morbidity, and surrender assumptions are based
on either the Company’s own experience or actuarial tables. interest
rate assumptions are based on management’s judgment considering the
Company’s experience and future expectations, and range from 1% to
10%. obligations for the run-off settlement annuity business include
adjustments for investment returns consistent with requirements of
gaap when a premium deficiency exists.
Certain reinsurance contracts contain gMDb under variable annuities
issued by other insurance companies. These obligations represent the
guaranteed death benefit in excess of the contractholder’s account values
(based on underlying equity and bond mutual fund investments). These
obligations are estimated based on assumptions regarding lapse, partial
surrenders, mortality, interest rates (mean investment performance
and discount rate), market volatility as well as investment returns and
premiums, consistent with the requirements of gaap when a premium
deficiency exists. Lapse, partial surrenders, mortality, interest rates
and volatility are based on management’s judgment considering the
Company’s experience and future expectations. The results of futures
and swap contracts used in the gMDb equity and growth interest rate
hedge programs are reflected in the liability calculation as a component
of investment returns. See also note 6 for additional information.
M. Unpaid Claims and Claims Expenses
Liabilities for unpaid claims and claim expenses are estimates of payments
to be made under insurance coverages (primarily long-term disability,
workers’ compensation and life and health) for reported claims and
for losses incurred but not yet reported.
The Company develops these estimates for losses incurred but not yet
reported using actuarial principles and assumptions based on historical
and projected claim incidence patterns, claim size, subrogation recoveries
and the length of time over which payments are expected to be made.
The Company consistently applies these actuarial principles and
assumptions each reporting period, with consideration given to the
variability of these factors, and recognizes the actuarial best estimate
of the ultimate liability within a level of confidence, as required by
actuarial standards of practice, which require that the liabilities be
adequate under moderately adverse conditions.
The Company’s estimate of the liability for disability claims reported
but not yet paid is primarily calculated as the present value of expected
benefit payments to be made over the estimated time period that a
policyholder remains disabled. The Company estimates the expected
time period that a policyholder may be disabled by analyzing the rate at
which an open claim is expected to close (claim resolution rate). Claim
resolution rates may vary based upon the length of time a policyholder
is disabled, the covered benefit period, cause of disability, benefit design
and the policyholder’s age, gender and income level. The Company uses
historical resolution rates combined with an analysis of current trends
and operational factors to develop current estimates of resolution rates.
The reserve for the gross monthly disability benefits due to a policyholder
is reduced (offset) by the income that the policyholder receives under
other benefit programs, such as Social Security Disability income,
workers’ compensation, statutory disability or other group disability
benefit plans. for awards of such offsets that have not been finalized,
the Company estimates the probability and amount of the offset based
on the Company’s experience over the past three to five years.
The Company discounts certain claim liabilities related to group long-
term disability and workers’ compensation because benefit payments may
be made over extended periods. Discount rate assumptions are based
on projected investment returns for the asset portfolios that support
these liabilities and range from 3.80% to 6.25%. When estimates
change, the Company records the adjustment in benefits and expenses
in the period in which the change in estimate is identified. Discounted
liabilities associated with the long-term disability and certain workers’
compensation businesses were $3.2 billion at December 31, 2011 and
$3.1 billion at December 31, 2010.
Contents Q

77CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
N. Health Care Medical Claims payable
Medical claims payable for the health Care segment include both
reported claims and estimates for losses incurred but not yet reported.
The Company develops estimates for health Care medical claims
payable using actuarial principles and assumptions consistently applied
each reporting period, and recognizes the actuarial best estimate of the
ultimate liability within a level of confidence, as required by actuarial
standards of practice, which require that the liabilities be adequate
under moderately adverse conditions.
The liability is primarily calculated using “completion factors” (a measure
of the time to process claims), which are developed by comparing the
date claims were incurred, generally the date services were provided,
to the date claims were paid. The Company uses historical completion
factors combined with an analysis of current trends and operational
factors to develop current estimates of completion factors. The Company
estimates the liability for claims incurred in each month by applying
the current estimates of completion factors to the current paid claims
data. This approach implicitly assumes that historical completion rates
will be a useful indicator for the current period. it is possible that the
actual completion rates for the current period will develop differently
from historical patterns, which could have a material impact on the
Company’s medical claims payable and shareholders’ net income.
Completion factors are impacted by several key items including changes
in: 1) electronic (auto-adjudication) versus manual claim processing,
2) provider claims submission rates, 3) membership and 4) the mix of
products. as noted, the Company uses historical completion factors
combined with an analysis of current trends and operational factors
to develop current estimates of completion factors.
in addition, for the more recent months, the Company also relies on
medical cost trend analysis, which reflects expected claim payment
patterns and other relevant operational considerations. Medical cost
trend is primarily impacted by medical service utilization and unit costs,
which are affected by changes in the level and mix of medical benefits
offered, including inpatient, outpatient and pharmacy, the impact of
copays and deductibles, changes in provider practices and changes in
consumer demographics and consumption behavior.
Despite reflecting both historical and emerging trends in setting reserves,
it is possible that the actual medical trend for the current period will
develop differently from expectations, which could have a material
impact on the Company’s medical claims payable and shareholders’
net income.
for each reporting period, the Company evaluates key assumptions
by comparing the assumptions used in establishing the medical claims
payable to actual experience. When actual experience differs from the
assumptions used in establishing the liability, medical claims payable are
increased or decreased through current period shareholders’ net income.
additionally, the Company evaluates expected future developments and
emerging trends which may impact key assumptions. The estimation
process involves considerable judgment, reflecting the variability inherent
in forecasting future claim payments. These estimates are highly sensitive
to changes in the Company’s key assumptions, specifically completion
factors, and medical cost trends.
O. Unearned premiums and Fees
premiums for life, accident and health insurance are recognized as
revenue on a pro rata basis over the contract period. fees for mortality
and contract administration of universal life products are recognized
ratably over the coverage period. The unrecognized portion of these
amounts received is recorded as unearned premiums and fees.
p. Accounts payable, Accrued Expenses
and Other Liabilities
accounts payable, accrued expenses and other liabilities consist principally
of liabilities for pension, other postretirement and postemployment
benefits (see note 9), self-insured exposures, management compensation
and various insurance-related items, including experience rated refunds,
the minimum medical loss ratio rebate accrual under health Care
reform, amounts related to reinsurance contracts and insurance-related
assessments that management can reasonably estimate. accounts payable,
accrued expenses and other liabilities also include certain overdraft
positions and the loss position of certain derivatives, primarily for gMib
contracts (see note 12). Legal costs to defend the Company’s litigation
and arbitration matters are expensed when incurred in cases that the
Company cannot reasonably estimate the ultimate cost to defend. in
cases that the Company can reasonably estimate the cost to defend,
these costs are recognized when the claim is reported.
Q. Translation of Foreign Currencies
The Company generally conducts its international business through foreign
operating entities that maintain assets and liabilities in local currencies,
which are generally their functional currencies. The Company uses
exchange rates as of the balance sheet date to translate assets and liabilities
into u.S. dollars. translation gains or losses on functional currencies, net
of applicable taxes, are recorded in accumulated other comprehensive
income (loss). The Company uses average monthly exchange rates during
the year to translate revenues and expenses into u.S. dollars.
R. premiums and Fees, Revenues
and Related Expenses
premiums for group life, accident and health insurance and managed
care coverages are recognized as revenue on a pro rata basis over the
contract period. benefits and expenses are recognized when incurred.
premiums and fees include revenue from experience-rated contracts
that is based on the estimated ultimate claim, and in some cases,
administrative cost experience of the contract. for these contracts,
premium revenue includes an adjustment for experience-rated refunds
which is calculated according to contract terms and using the customer’s
experience (including estimates of incurred but not reported claims).
beginning in 2011, premium revenue also includes an adjustment
to reflect the estimated effect of rebates due to customers under the
minimum medical loss ratio provisions of health Care reform.
premiums for individual life, accident and health insurance and annuity
products, excluding universal life and investment-related products, are
recognized as revenue when due. benefits and expenses are matched
with premiums.
Contents Q

78 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
premiums and fees received for the Company’s Medicare advantage
plans and Medicare part D products from customers and the Centers
for Medicare and Medicaid Services (CMS) are recognized as revenue
ratably over the contract period. CMS provides risk adjusted premium
payments for the Medicare advantage plans and Medicare part D
products, based on the demographics and health severity of enrollees.
The Company recognizes periodic changes to risk adjusted premiums
as revenue when the amounts are determinable and collection is
reasonably assured. additionally, Medicare part D includes payments
from CMS for risk sharing adjustments. The risk sharing adjustments,
that are estimated quarterly based on claim experience, compare actual
incurred drug benefit costs to estimated costs submitted in original
contracts and may result in more or less revenue from CMS. final
revenue adjustments are determined through an annual settlement
with CMS that occurs after the contract year.
revenue for investment-related products is recognized as follows:
•• net investment income on assets supporting investment-related
products is recognized as earned.
•• Contract fees, which are based upon related administrative expenses,
are recognized in premiums and fees as they are earned ratably over
the contract period.
benefits and expenses for investment-related products consist primarily of
income credited to policyholders in accordance with contract provisions.
revenue for universal life products is recognized as follows:
•• net investment income on assets supporting universal life products
is recognized as earned.
•• fees for mortality and surrender charges are recognized as assessed,
which is as earned.
•• administration fees are recognized as services are provided.
benefits and expenses for universal life products consist of benefit claims
in excess of policyholder account balances. expenses are recognized
when claims are submitted, and income is credited to policyholders
in accordance with contract provisions.
Contract fees and expenses for administrative services only programs
and pharmacy programs and services are recognized as services are
provided. Mail order pharmacy revenues and cost of goods sold are
recognized as each prescription is shipped.
S. Stock Compensation
The Company records compensation expense for stock awards and
options over their vesting periods primarily based on the estimated fair
value at the grant date. Compensation expense is recorded for stock
options over their vesting period based on fair value at the grant date
which is calculated using an option-pricing model. Compensation
expense is recorded for restricted stock grants and units over their
vesting periods based on fair value, which is equal to the market price
of the Company’s common stock on the date of grant. Compensation
expense for strategic performance shares is recorded over the performance
period. for strategic performance shares with payment dependent on
market condition, fair value is determined at the grant date using a
Monte Carlo simulation model and not subsequently adjusted regardless
of the final outcome. for strategic performance shares with payment
dependent on performance conditions, expense is initially accrued based
on the most likely outcome, but evaluated for adjustment each period
for updates in the expected outcome. at the end of the performance
period, expense is adjusted to the actual outcome (number of shares
awarded times the share price at the grant date).
T. participating Business
The Company’s participating life insurance policies entitle policyholders
to earn dividends that represent a portion of the earnings of the
Company’s life insurance subsidiaries. participating insurance accounted
for approximately 1% of the Company’s total life insurance in force at
the end of 2011, 2010 and 2009.
U. Income Taxes
The Company and its domestic subsidiaries file a consolidated
united States federal income tax return. The Company’s foreign
subsidiaries file tax returns in accordance with foreign law. u.S. taxation
of these foreign subsidiaries may differ in timing and amount from
taxation under foreign laws. reportable amounts, including credits
for foreign tax paid by these subsidiaries, are reflected in the u.S. tax
return of the affiliates’ domestic parent.
The Company recognizes deferred income taxes when the financial
statement and tax-based carrying values of assets and liabilities are
different and recognizes deferred income tax liabilities on the unremitted
earnings of foreign subsidiaries that are not permanently invested
overseas. for subsidiaries whose earnings are considered permanently
invested overseas, income taxes are accrued at the local foreign tax rate.
The Company establishes valuation allowances against deferred tax
assets if it is more likely than not that the deferred tax asset will not be
realized. The need for a valuation allowance is determined based on the
evaluation of various factors, including expectations of future earnings
and management’s judgment. note 19 contains detailed information
about the Company’s income taxes.
The Company recognizes interim period income taxes by estimating
an annual effective tax rate and applying it to year-to-date results. The
estimated annual effective tax rate is periodically updated throughout
the year based on actual results to date and an updated projection of
full year income. although the effective tax rate approach is generally
used for interim periods, taxes on significant, unusual and infrequent
items are recognized at the statutory tax rate entirely in the period the
amounts are realized.
v. Earnings per Share
The Company computes basic earnings per share using the weighted-
average number of unrestricted common and deferred shares outstanding.
Diluted earnings per share also includes the dilutive effect of outstanding
employee stock options and unvested restricted stock granted after
2009 using the treasury stock method and the effect of strategic
performance shares.
Contents Q

79CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
NOTE 3 Acquisitions and Dispositions
The Company may from time to time acquire or dispose of assets,
subsidiaries or lines of business. Significant transactions are described below.
A. Acquisition of HealthSpring, Inc.
on January 31, 2012 the Company acquired all of the outstanding
shares of healthSpring, inc. (“healthSpring”) for $55 per share in cash
and Cigna stock awards, representing an estimated cost of approximately
$3.8 billion. healthSpring provides Medicare advantage coverage in
11 states and the District of Columbia, as well as a large, national
stand-alone Medicare prescription drug business. The Company
funded the acquisition with internal cash resources, including cash
generated from the issuance of commercial paper in 2012, as well as
$2.1 billion of additional debt and $650 million of new equity issued
during the fourth quarter of 2011 ($629 million net of underwriting
discount and fees).
B. Acquisition of FirstAssist
in november 2011, the Company acquired firstassist group holdings
Limited (“firstassist”) for approximately $115 million, using available
cash on hand. firstassist is based in the united Kingdom and provides
travel and protection insurance services that the Company expects will
enhance its individual business in the u.K. and around the world.
in accordance with gaap, the total purchase price has been allocated to
the tangible and intangible net assets acquired based on management’s
preliminary estimates of their fair values and may change when appraisals
are finalized and as additional information becomes available over
the next several months. accordingly, approximately $58 million was
allocated to intangible assets, while $56 million has been allocated to
goodwill and is reported in the international segment.
The results of firstassist are included in the Company’s Consolidated
financial Statements from the date of acquisition. The pro forma effect
on total revenues and net income assuming the acquisition had occurred
as of January 1, 2010 were not material to the Company’s total revenues
and shareholders’ net income for the years ended December 31, 2011
and 2010.
C. Reinsurance of Run-off Workers’
Compensation and personal Accident
Business
on December 31, 2010, the Company essentially exited from its
workers’ compensation and personal accident reinsurance business
by purchasing retrocessional coverage from a bermuda subsidiary of
enstar group Limited and transferring administration of this business
to the reinsurer. under the reinsurance agreement, Cigna is indemnified
for liabilities with respect to its workers’ compensation and personal
accident reinsurance business to the extent that these liabilities do not
exceed 190% of the December 31, 2010 net reserves. The Company
believes that the risk of loss beyond this maximum aggregate is remote.
The reinsurance arrangement is secured by assets held in trust. Cash
consideration paid to the reinsurer was $190 million. The net effect
of this transaction was an after-tax loss of $20 million ($31 million
pre-tax), primarily reported in other operating expenses in the run-off
reinsurance segment.
D. Sale of Workers’ Compensation and Case
Management Business
on December 1, 2010 the Company completed the sale of its workers’
compensation and case management business to geneX holdings, inc.
The Company recognized an after-tax gain on sale of $11 million
($18 million pre-tax) which was reported in other revenues in the
Disability and Life segment. proceeds of the sale were received in
preferred stock of geneX holdings, inc., resulting in the Company
becoming a minority shareholder in geneX holdings, inc. This
investment is classified in other long-term investments and accounted
for using the equity method of accounting.
E. Acquisition of vanbreda International
on august 31, 2010, the Company acquired 100% of the voting stock
of Vanbreda international nV (Vanbreda international), based in
antwerp, belgium for a cash purchase price of $412 million. Vanbreda
international specializes in providing worldwide medical insurance
and employee benefits to intergovernmental and non-governmental
organizations, including international humanitarian operations, as well
as corporate clients. Vanbreda international’s market leadership in the
intergovernmental segment complements the Company’s position in
providing global health benefits primarily to multinational companies
and organizations and their globally mobile employees in north america,
europe, the Middle east and asia.
Contents Q

80 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
in accordance with gaap, the total purchase price has been allocated to the tangible and intangible net assets acquired based on management’s
estimates of their fair values. accordingly, approximately $210 million was allocated to intangible assets, primarily customer relationships. The
weighted average amortization period is 15 years. The condensed balance sheet at the acquisition date was as follows:
(In millions)
investments $ 39
Cash and cash equivalents 73
premiums, accounts and notes receivable 22
property and equipment 1
Deferred income taxes (71)
goodwill 229
other assets, including other intangibles 220
total assets acquired 513
accounts payable, accrued expenses and other liabilities 101
total liabilities acquired 101
net assets acquired $ 412
goodwill was allocated to the international segment. for foreign tax
purposes, the acquisition of Vanbreda international was treated as a
stock purchase. accordingly, goodwill and other intangible assets will
not be amortized for foreign tax purposes but may reduce the taxability
of earnings repatriated to the u.S. by Vanbreda international.
The results of Vanbreda international are included in the Company’s
Consolidated financial Statements from the date of acquisition.
The pro forma effect on total revenues and net income assuming the
acquisition had occurred as of January 1, 2009 was not material to the
Company’s total revenues and shareholders’ net income for the years
ended December 31, 2010 or 2009.
NOTE 4 Earnings per Share
basic and diluted earnings per share were computed as follows:
(Dollars in millions, except per share amounts) Basic effect of dilution diluted
2011
Shareholders’ income from continuing operations $ 1,327 $ – $ 1,327
Shares (in thousands):
Weighted average 270,691 – 270,691
Common stock equivalents 3,558 3,558
total shares 270,691 3,558 274,249
epS $ 4.90 $ (0.06) $ 4.84
2010
Shareholders’ income from continuing operations $ 1,345 $ – $ 1,345
Shares (in thousands):
Weighted average 272,866 – 272,866
Common stock equivalents 2,421 2,421
total shares 272,866 2,421 275,287
epS $ 4.93 $ (0.04) $ 4.89
2009
Shareholders’ income from continuing operations $ 1,301 $ – $ 1,301
Shares (in thousands):
Weighted average 274,058 – 274,058
Common stock equivalents 1,299 1,299
total shares 274,058 1,299 275,357
epS $ 4.75 $ (0.02) $ 4.73
The following outstanding employee stock options were not included in the computation of diluted earnings per share because their effect would
have increased diluted earnings per share (antidilutive) as their exercise price was greater than the average share price of the Company’s common
stock for the period.
(In millions) 2011 2010 2009
antidilutive options 3.7 6.3 8.8
Contents Q

81CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
NOTE 5 Health Care Medical Claims payable
Medical claims payable for the health Care segment reflects estimates of the ultimate cost of claims that have been incurred but not yet reported,
those which have been reported but not yet paid (reported claims in process) and other medical expense payable, which primarily comprises
accruals for provider incentives and other amounts payable to providers. incurred but not yet reported comprises the majority of the reserve
balance as follows:
(In millions) 2011 2010
incurred but not yet reported $ 952 $ 1,067
reported claims in process 129 164
other medical expense payable 14 15
medicaL cLaimS PaYaBLe $ 1,095 $ 1,246
activity in medical claims payable was as follows:
(In millions) 2011 2010 2009
balance at January 1, $ 1,246 $ 921 $ 924
Less: reinsurance and other amounts recoverable 236 206 211
balance at January 1, net 1,010 715 713
incurred claims related to:
Current year 8,308 8,663 6,970
prior years (126) (93) (43)
total incurred 8,182 8,570 6,927
paid claims related to:
Current year 7,450 7,682 6,278
prior years 841 593 647
total paid 8,291 8,275 6,925
balance at December 31, net 901 1,010 715
add: reinsurance and other amounts recoverable 194 236 206
balance at December 31, $ 1,095 $ 1,246 $ 921
reinsurance and other amounts recoverable reflect amounts due
from reinsurers and policyholders to cover incurred but not reported
and pending claims for minimum premium products and certain
administrative services only business where the right of offset does
not exist. See note 7 for additional information on reinsurance. for
the year ended December 31, 2011, actual experience differed from
the Company’s key assumptions resulting in favorable incurred claims
related to prior years’ medical claims payable of $126 million, or 1.5%
of the current year incurred claims as reported for the year ended
December 31, 2010. actual completion factors resulted in a reduction
in medical claims payable of $87 million, or 1.0% of the current year
incurred claims as reported for the year ended December 31, 2010
for the insured book of business. actual medical cost trend resulted
in a reduction in medical claims payable of $39 million, or 0.5%
of the current year incurred claims as reported for the year ended
December 31, 2010 for the insured book of business.
for the year ended December 31, 2010, actual experience differed
from the Company’s key assumptions, resulting in favorable incurred
claims related to prior years’ medical claims payable of $93 million, or
1.3% of the current year incurred claims as reported for the year ended
December 31, 2009. actual completion factors resulted in a reduction
of the medical claims payable of $51 million, or 0.7% of the current
year incurred claims as reported for the year ended December 31, 2009
for the insured book of business. actual medical cost trend resulted
in a reduction of the medical claims payable of $42 million, or 0.6%
of the current year incurred claims as reported for the year ended
December 31, 2009 for the insured book of business.
The corresponding impact of prior year development on shareholders’
net income was $53 million for the year ended December 31, 2011
compared with $26 million for the year ended December 31, 2010.
The favorable effects of prior year development on net income in 2011
and 2010 primarily reflect low medical services utilization trend. The
change in the amount of the incurred claims related to prior years in
the medical claims payable liability does not directly correspond to
an increase or decrease in the Company’s shareholders’ net income
recognized for the following reasons:
first, the Company consistently recognizes the actuarial best estimate
of the ultimate liability within a level of confidence, as required by
actuarial standards of practice, which require that the liabilities be
adequate under moderately adverse conditions. as the Company
establishes the liability for each incurral year, the Company ensures that
its assumptions appropriately consider moderately adverse conditions.
When a portion of the development related to the prior year incurred
claims is offset by an increase determined appropriate to address
moderately adverse conditions for the current year incurred claims, the
Company does not consider that offset amount as having any impact
on shareholders’ net income.
Second, while changes in reserves for the Company’s guaranteed
cost products do directly affect shareholders’ net income, changes in
reserves for the Company’s retrospectively experience-rated business
do not always impact shareholders’ net income. for the Company’s
retrospectively experience-rated business only adjustments to medical
claims payable on accounts in deficit affect shareholders’ net income.
an increase or decrease to medical claims payable on accounts in deficit,
Contents Q

82 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
in effect, accrues to the Company and directly impacts shareholders’
net income. an account is in deficit when the accumulated medical
costs and administrative charges, including profit charges, exceed the
accumulated premium received. adjustments to medical claims payable
on accounts in surplus accrue directly to the policyholder with no impact
on the Company’s shareholders’ net income. an account is in surplus
when the accumulated premium received exceeds the accumulated
medical costs and administrative charges, including profit charges.
NOTE 6 Guaranteed Minimum Death Benefit Contracts
The Company’s reinsurance operations, which were discontinued in
2000 and are now an inactive business in run-off mode, reinsured a
guaranteed minimum death benefit (“gMDb”), also known as variable
annuity death benefits (“VaDbe”), under certain variable annuities
issued by other insurance companies. These variable annuities are
essentially investments in mutual funds combined with a death benefit.
The Company has equity and other market exposures as a result of this
product. in periods of declining equity markets and in periods of flat
equity markets following a decline, the Company’s liabilities for these
guaranteed minimum death benefits increase. Conversely, in periods
of rising equity markets, the Company’s liabilities for these guaranteed
minimum death benefits decrease.
in 2000, the Company determined that the gMDb reinsurance
business was premium deficient because the recorded future policy
benefit reserve was less than the expected present value of future claims
and expenses less the expected present value of future premiums and
investment income using revised assumptions based on actual and
expected experience. The Company tests for premium deficiency by
reviewing its reserve each quarter using current market conditions and
its long-term assumptions. under premium deficiency accounting,
if the recorded reserve is determined insufficient, an increase to the
reserve is reflected as a charge to current period income. Consistent with
gaap, the Company does not recognize gains on premium deficient
long duration products.
See note 12 for further information on the Company’s dynamic
hedge programs that are used to reduce certain equity and interest
rate exposures associated with this business.
The Company had future policy benefit reserves for gMDb contracts
of $1.2 billion as of December 31, 2011, and $1.1 billion as of
December 31, 2010. The determination of liabilities for gMDb requires
the Company to make critical accounting estimates. The Company
estimates its liabilities for gMDb exposures using an internal model
run using many scenarios and based on assumptions regarding lapse,
future partial surrenders, claim mortality (deaths that result in claims),
interest rates (mean investment performance and discount rate) and
volatility. Lapse refers to the full surrender of an annuity prior to a
contractholder’s death. future partial surrender refers to the fact that
most contractholders have the ability to withdraw substantially all of
their mutual fund investments while retaining the death benefit coverage
in effect at the time of the withdrawal. Mean investment performance
for underlying equity mutual funds refers to market rates expected
to be earned on the hedging instruments over the life of the gMDb
equity hedge program, and for underlying fixed income mutual funds
refers to the expected market return over the life of the contracts.
Market volatility refers to market fluctuation. These assumptions are
based on the Company’s experience and future expectations over the
long-term period, consistent with the long-term nature of this product.
The Company regularly evaluates these assumptions and changes its
estimates if actual experience or other evidence suggests that assumptions
should be revised. if actual experience differs from the assumptions
(including lapse, future partial surrenders, claim mortality, interest
rates and volatility) used in estimating these liabilities, the result could
have a material adverse effect on the Company’s consolidated results
of operations, and in certain situations, could have a material adverse
effect on the Company’s financial condition.
The following provides information about the Company’s reserving
methodology and assumptions for gMDb as of December 31, 2011:
•• The reserves represent estimates of the present value of net amounts
expected to be paid, less the present value of net future premiums.
included in net amounts expected to be paid is the excess of the
guaranteed death benefits over the values of the contractholders’ accounts
(based on underlying equity and bond mutual fund investments).
•• The reserves include an estimate for partial surrenders that essentially
lock in the death benefit for a particular policy based on annual election
rates that vary from 0% to 15% depending on the net amount at risk
for each policy and whether surrender charges apply.
•• The assumed mean investment performance (“growth interest rate”)
for the underlying equity mutual funds for the portion of the liability
that is covered by the Company’s growth interest rate hedge program
is based on the market-observable Libor swap curve. The assumed
mean investment performance for the remainder of the underlying
equity mutual funds considers the Company’s gMDb equity hedge
program using futures contracts, and is based on the Company’s view
that short-term interest rates will average 4.75% over future periods,
but considers that current short-term rates are less than 4.75%.
The mean investment performance assumption for the underlying
fixed income mutual funds (bonds and money market) is 5% based
on a review of historical returns. The investment performance for
underlying equity and fixed income mutual funds is reduced by fund
fees ranging from 1% to 3% across all funds.
•• The volatility assumption is based on a review of historical monthly
returns for each key index (e.g. S&p 500) over a period of at least
ten years. Volatility represents the dispersion of historical returns
compared to the average historical return (standard deviation) for
each index. The assumption is 16% to 25%, varying by equity fund
type; 4% to 10%, varying by bond fund type; and 2% for money
market funds. These volatility assumptions are used along with the
mean investment performance assumption to project future return
scenarios.
•• The discount rate is 5.75%, which is determined based on the
underlying and projected yield of the portfolio of assets supporting
the gMDb liability.
•• The claim mortality assumption is 65% to 89% of the 1994 group
annuity Mortality table, with 1% annual improvement beginning
January 1, 2000. The assumption reflects that for certain contracts,
a spousal beneficiary is allowed to elect to continue a contract by
becoming its new owner, thereby postponing the death claim rather
than receiving the death benefit currently. for certain issuers of these
Contents Q

83CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
contracts, the claim mortality assumption depends on age, gender,
and net amount at risk for the policy.
•• The lapse rate assumption is 0% to 24%, depending on contract type,
policy duration and the ratio of the net amount at risk to account value.
During 2011, the Company completed its normal review of reserves
(including assumptions) and recorded additional other benefit expenses
of $70 million ($45 million after-tax) to strengthen gMDb reserves.
The reserve strengthening was driven primarily by:
•• adverse impacts of $34 million ($22 million after-tax) due to volatile
equity market conditions. Volatility risk is not covered by the hedging
programs. also, the equity market volatility reduced the effectiveness
of the hedging program for equity market exposures, in part because
the market does not offer futures contracts that exactly match the
diverse mix of equity fund investments held by contractholders.
•• adverse interest rate impacts of $23 million ($15 million after-tax)
reflecting management’s consideration of the anticipated impact of
continuing low current short-term interest rates. This evaluation
also led management to lower the mean investment performance
assumption for equity funds from 5% to 4.75% for those funds not
subject to the growth interest rate hedge program.
•• adverse impacts of overall market declines in the third quarter of
$13 million ($8 million after-tax), that include an increase in the
provision for expected future partial surrenders and declines in the
value of contractholders’ non-equity investments such as bond funds,
neither of which are included in the hedge programs.
During 2010, the Company performed its periodic review of assumptions
resulting in a charge of $52 million pre-tax ($34 million after-tax) to
strengthen gMDb reserves. During 2010 current short-term interest
rates had declined from the level anticipated at December 31, 2009,
leading the Company to increase reserves. This interest rate risk was
not even partially hedged at that time. The Company also updated
the lapse assumption for policies that have already taken or may take
a significant partial withdrawal, which had a lesser reserve impact.
During 2009, the Company reported a charge of $73 million pre-tax
($47 million after-tax) to strengthen gMDb reserves. The reserve
strengthening primarily reflected an increase in the provision for future
partial surrenders due to market declines, adverse volatility-related impacts
due to turbulent equity market conditions, and interest rate impacts.
activity in future policy benefit reserves for these gMDb contracts
was as follows:
(In millions) 2011 2010 2009
balance at January 1, $ 1,138 $ 1,285 $ 1,609
add: unpaid claims 37 36 34
Less: reinsurance and other amounts recoverable 51 53 83
balance at January 1, net 1,124 1,268 1,560
add: incurred benefits 138 (20) (122)
Less: paid benefits 105 124 170
ending balance, net 1,157 1,124 1,268
Less: unpaid claims 40 37 36
add: reinsurance and other amounts recoverable 53 51 53
balance at December 31, $ 1,170 $ 1,138 $ 1,285
benefits paid and incurred are net of ceded amounts. incurred benefits
reflect the (favorable) or unfavorable impact of a rising or falling equity
market on the liability, and include the charges discussed above. Losses
or gains have been recorded in other revenues as a result of the gMDb
equity and growth interest rate hedge programs to reduce equity market
and certain interest rate exposures.
The majority of the Company’s exposure arises under annuities that
guarantee that the benefit received at death will be no less than the highest
historical account value of the related mutual fund investments on a
contractholder’s anniversary date. under this type of death benefit, the
Company is liable to the extent the highest historical anniversary account
value exceeds the fair value of the related mutual fund investments at
the time of a contractholder’s death. other annuity designs that the
Company reinsured guarantee that the benefit received at death will be:
•• the contractholder’s account value as of the last anniversary date
(anniversary reset); or
•• no less than net deposits paid into the contract accumulated at a
specified rate or net deposits paid into the contract.
Contents Q

84 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
The table below presents the account value, net amount at risk and average attained age of underlying contractholders for guarantees in the event
of death, by type of benefit as of December 31. The net amount at risk is the death benefit coverage in force or the amount that the Company
would have to pay if all contractholders died as of the specified date, and represents the excess of the guaranteed benefit amount over the fair
value of the underlying mutual fund investments.
(Dollars in millions) 2011 2010
highest anniversary annuity value
account value $ 10,801 $ 13,336
net amount at risk $ 4,487 $ 4,372
average attained age of contractholders (weighted by exposure) 71 70
anniversary value reset
account value $ 1,184 $ 1,396
net amount at risk $ 56 $ 52
average attained age of contractholders (weighted by exposure) 63 63
other
account value $ 1,768 $ 1,864
net amount at risk $ 834 $ 755
average attained age of contractholders (weighted by exposure) 70 69
total
account value $ 13,753 $ 16,596
net amount at risk $ 5,377 $ 5,179
average attained age of contractholders (weighted by exposure) 71 70
number of contractholders (approx.) 480,000 530,000
The Company has also written reinsurance contracts with issuers of variable annuity contracts that provide annuitants with certain guarantees
related to minimum income benefits. all reinsured gMib policies also have a gMDb benefit reinsured by the Company. See note 10 for further
information.
NOTE 7 Reinsurance
The Company’s insurance subsidiaries enter into agreements with other
insurance companies to assume and cede reinsurance. reinsurance is
ceded primarily to limit losses from large exposures and to permit recovery
of a portion of direct losses. reinsurance is also used in acquisition
and disposition transactions where the underwriting company is not
being acquired. reinsurance does not relieve the originating insurer of
liability. The Company regularly evaluates the financial condition of
its reinsurers and monitors its concentrations of credit risk.
Retirement benefits business
The Company had reinsurance recoverables of $1.6 billion as of
December 31, 2011, and $1.7 billion as of December 31, 2010 from
prudential retirement insurance and annuity Company resulting
from the 2004 sale of the retirement benefits business, which was
primarily in the form of a reinsurance arrangement. The reinsurance
recoverable, that is reduced as the Company’s reinsured liabilities are
paid or directly assumed by the reinsurer, is secured primarily by fixed
maturities equal to or greater than 100% of the reinsured liabilities.
These fixed maturities are held in a trust established for the benefit of
the Company. as of December 31, 2011, the fair value of trust assets
exceeded the reinsurance recoverable.
Individual life and annuity reinsurance
The Company had reinsurance recoverables of $4.2 billion as of
December 31, 2011 and $4.3 billion as of December 31, 2010 from
The Lincoln national Life insurance Company and Lincoln Life &
annuity of new York resulting from the 1998 sale of the Company’s
individual life insurance and annuity business through indemnity
reinsurance arrangements. The Lincoln national Life insurance Company
and Lincoln Life & annuity of new York must maintain a specified
minimum credit or claims paying rating or they will be required to fully
secure the outstanding recoverable balance. as of December 31, 2011,
both companies had ratings sufficient to avoid triggering a contractual
obligation.
Other Ceded and Assumed Reinsurance
Ceded Reinsurance: Ongoing operations
The Company’s insurance subsidiaries have reinsurance recoverables
from various reinsurance arrangements in the ordinary course of business
for its health Care, Disability and Life, and international segments
as well as the corporate-owned life insurance business. reinsurance
recoverables of $277 million as of December 31, 2011 are expected
to be collected from more than 70 reinsurers. The highest balance that
a single reinsurer carried as of December 31, 2011 was $57 million.
no other single reinsurer’s balance amounted to more than 12% of
the total recoverable for ongoing operations.
The Company reviews its reinsurance arrangements and establishes
reserves against the recoverables in the event that recovery is not
considered probable. as of December 31, 2011, the Company’s
recoverables related to these segments were net of a reserve of $4 million.
Contents Q

85CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
Assumed and Ceded reinsurance: Run-off Reinsurance
segment
The Company’s run-off reinsurance operations assumed risks related
to gMDb contracts, gMib contracts, workers’ compensation, and
personal accident business. The run-off reinsurance operations also
purchased retrocessional coverage to reduce the risk of loss on these
contracts. in December 2010, the Company entered into reinsurance
arrangements to transfer the remaining liabilities and administration
of the workers’ compensation and personal accident businesses to a
subsidiary of enstar group Limited. under this arrangement, the new
reinsurer also assumes the future risk of collection from prior reinsurers.
See note 3 for further details regarding this arrangement.
Liabilities related to gMDb, workers’ compensation and personal
accident are included in future policy benefits and unpaid claims.
because the gMib contracts are treated as derivatives under gaap,
the asset related to gMib is recorded in the other assets, including
other intangibles caption and the liability related to gMib is recorded
in accounts payable, accrued expenses, and other liabilities on the
Company’s Consolidated balance Sheets (see notes 10 and 23 for
additional discussion of the gMib assets and liabilities).
The reinsurance recoverables for gMDb, workers’ compensation,
and personal accident total $252 million as of December 31, 2011.
of this amount, approximately 93% are secured by assets in trust or
letters of credit.
The Company reviews its reinsurance arrangements and establishes
reserves against the recoverables in the event that recovery is not
considered probable. as of December 31, 2011, the Company’s
recoverables related to this segment were net of a reserve of $1 million.
The Company’s payment obligations for underlying reinsurance
exposures assumed by the Company under these contracts are based on
the ceding companies’ claim payments. for gMDb, claim payments
vary because of changes in equity markets and interest rates, as well as
mortality and contractholder behavior. any of these claim payments
can extend many years into the future, and the amount of the ceding
companies’ ultimate claims, and therefore, the amount of the Company’s
ultimate payment obligations and corresponding ultimate collection
from retrocessionaires, may not be known with certainty for some time.
Summary
The Company’s reserves for underlying reinsurance exposures assumed
by the Company, as well as for amounts recoverable from reinsurers/
retrocessionaires for both ongoing operations and the run-off reinsurance
operation, are considered appropriate as of December 31, 2011, based
on current information. however, it is possible that future developments
could have a material adverse effect on the Company’s consolidated results
of operations and, in certain situations, such as if actual experience differs
from the assumptions used in estimating reserves for gMDb, could
have a material adverse effect on the Company’s financial condition. The
Company bears the risk of loss if its retrocessionaires do not meet or
are unable to meet their reinsurance obligations to the Company.
in the Company’s Consolidated income Statements, premiums and fees
were presented net of ceded premiums, and total benefits and expenses
were presented net of reinsurance recoveries, in the following amounts:
(In millions) 2011 2010 2009
Premiums and Fees
Short-duration contracts:
Direct $ 17,423 $ 16,611 $ 13,886
assumed 158 496 1,076
Ceded (185) (187) (192)
17,396 16,920 14,770
Long-duration contracts:
Direct 1,919 1,687 1,499
assumed 36 36 33
Ceded:
individual life insurance and annuity business sold (203) (195) (209)
other (59) (55) (52)
1,693 1,473 1,271
totaL $ 19,089 $ 18,393 $ 16,041
reinsurance recoveries
individual life insurance and annuity business sold $ 310 $ 321 $ 322
other 213 156 178
totaL $ 523 $ 477 $ 500
The decrease in assumed premiums in 2011 as compared to 2010
primarily reflects the effect of the Company’s exit from a large, low-
margin assumed government life insurance program. The decrease in
assumed premiums in 2010 as compared to 2009 primarily reflects
the effect of the Company’s exit from two large, non-strategic assumed
government life insurance programs as well as the transfer of policies
assumed in the acquisition of great-West healthcare directly to one of
the Company’s insurance subsidiaries in 2010. The effects of reinsurance
on written premiums and fees for short-duration contracts were not
materially different from the recognized premium and fee amounts
shown in the table above.
Contents Q

86 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
NOTE 8 Goodwill, Other Intangibles, and property and Equipment
goodwill primarily relates to the health Care segment ($2.9 billion)
and, to a lesser extent, the international segment ($290 million) and
increased by $45 million during 2011 primarily as a result of the
acquisition of firstassist. The fair values of the Company’s health Care
segment and international’s reporting unit are substantially in excess of
their carrying values therefore the risk for future impairment is unlikely.
other intangible assets were comprised of the following at December 31:
(Dollars in millions) cost
accumulated
amortization
net carrying
Value
weighted
average
amortization
Period (Years)
2011
Customer relationships $ 583 $ 313 $ 270 13
other 127 27 100 12
total reported in other assets, including other intangibles 710 340 370
internal-use software reported in property and equipment 1,600 1,054 546 5
totaL other intangiBLe aSSetS $ 2,310 $ 1,394 $ 916
2010
Customer relationships $ 587 $ 277 $ 310 12
other 70 22 48 14
total reported in other assets, including other intangibles 657 299 358
internal-use software reported in property and equipment 1,379 875 504 5
totaL other intangiBLe aSSetS $ 2,036 $ 1,174 $ 862
The increase in intangible assets in 2011 primarily relates to the acquisition of firstassist.
property and equipment was comprised of the following as of December 31:
(Dollars in millions) cost
accumulated
amortization
net carrying
Value
2011
internal-use software $ 1,600 $ 1,054 $ 546
other property and equipment 1,285 807 478
totaL ProPertY and eQUiPment $ 2,885 $ 1,861 $ 1,024
2010
internal-use software $ 1,379 $ 875 $ 504
other property and equipment 1,190 782 408
totaL ProPertY and eQUiPment $ 2,569 $ 1,657 $ 912
Depreciation and amortization was comprised of the following for the years ended December 31:
(Dollars in millions) 2011 2010 2009
internal-use software $ 187 $ 161 $ 147
other property and equipment 117 99 91
Depreciation and amortization of property and equipment 304 260 238
other intangibles 41 32 30
totaL dePreciation and amortization $ 345 $ 292 $ 268
The Company estimates annual pre-tax amortization for intangible assets, including internal-use software, over the next five calendar years to be
as follows: $231 million in 2012, $186 million in 2013, $139 million in 2014, $83 million in 2015, and $68 million in 2016.
Contents Q

87CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
NOTE 9 pension and Other postretirement Benefit plans
A. pension and Other postretirement Benefit
plans
The Company and certain of its subsidiaries provide pension, health
care and life insurance defined benefits to eligible retired employees,
spouses and other eligible dependents through various domestic and
foreign plans. The effect of its foreign pension and other postretirement
benefit plans is immaterial to the Company’s results of operations,
liquidity and financial position. effective July 1, 2009, the Company
froze its primary domestic defined benefit pension plans. a curtailment
of benefits occurred as a result of this action since it eliminated the
accrual of benefits for the future service of active employees enrolled in
these domestic pension plans. accordingly, the Company recognized a
pre-tax curtailment gain of $46 million ($30 million after-tax) in 2009.
The Company measures the assets and liabilities of its domestic pension
and other postretirement benefit plans as of December 31. The following
table summarizes the projected benefit obligations and assets related
to the Company’s domestic and international pension and other
postretirement benefit plans as of, and for the year ended, December 31:
(In millions)
Pension Benefits other Postretirement Benefits
2011 2010 2011 2010
change in benefit obligation
benefit obligation, January 1 $ 4,691 $ 4,363 $ 444 $ 419
Service cost 2 2 2 1
interest cost 228 240 20 22
Loss from past experience 453 379 16 36
benefits paid from plan assets (273) (258) (2) (2)
benefits paid – other (34) (35) (28) (32)
benefit obligation, December 31 5,067 4,691 452 444
change in plan assets
fair value of plan assets, January 1 3,163 2,850 23 24
actual return on plan assets 156 357 1 1
benefits paid (273) (258) (2) (2)
Contributions 252 214 – –
fair value of plan assets, December 31 3,298 3,163 22 23
funded Status $ (1,769) $ (1,528) $ (430) $ (421)
The postretirement benefits liability adjustment included in accumulated other comprehensive loss consisted of the following as of December 31:
(In millions)
Pension Benefits other Postretirement Benefits
2011 2010 2011 2010
unrecognized net gain (loss) $ (2,331) $ (1,805) $ (30) $ (14)
unrecognized prior service cost (5) (5) 35 51
PoStretirement BeneFitS LiaBiLitY adjUStment $ (2,336) $ (1,810) $ 5 $ 37
During 2011, the Company’s postretirement benefits liability adjustment increased by $558 million pre-tax ($360 million after-tax) resulting in
a decrease to shareholders’ equity. The increase in the liability was primarily due to a decrease in the discount rate and actual investment returns
significantly less than expected in 2011.
pension benefits
The Company’s pension plans were underfunded by $1.8 billion in
2011 and $1.5 billion in 2010 and had related accumulated benefit
obligations of $5.1 billion as of December 31, 2011 and $4.7 billion
as of December 31, 2010.
The Company funds its qualified pension plans at least at the minimum
amount required by the employee retirement income Security act of
1974 and the pension protection act of 2006. for 2012, the Company
expects to make minimum required and voluntary contributions totaling
approximately $250 million. future years’ contributions will ultimately
be based on a wide range of factors including but not limited to asset
returns, discount rates, and funding targets.
Contents Q

88 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
Components of net pension cost for the years ended December 31 were as follows:
(In millions) 2011 2010 2009
Service cost $ 2 $ 2 $ 43
interest cost 228 240 250
expected long-term return on plan assets (267) (253) (239)
amortization of:
net loss from past experience 38 28 34
prior service cost – – (4)
Curtailment – – (46)
net PenSion coSt $ 1 $ 17 $ 38
The Company expects to recognize pre-tax losses of $59 million in
2012 from amortization of past experience. This estimate is based on a
weighted average amortization period for the frozen and inactive plans
of approximately 29 years, as this period is now based on the average
expected remaining life of plan participants.
Other postretirement benefits
unfunded retiree health benefit plans had accumulated benefit
obligations of $302 million at December 31, 2011, and $296 million
at December 31, 2010. retiree life insurance plans had accumulated
benefit obligations of $150 million as of December 31, 2011 and
$148 million as of December 31, 2010.
Components of net other postretirement benefit cost for the years
ended December 31 were as follows:
(In millions) 2011 2010 2009
Service cost $ 2 $ 1 $ 1
interest cost 20 22 24
expected long-term return on plan assets (1) (1) (1)
amortization of:
net gain from past experience – – (5)
prior service cost (16) (18) (18)
net other PoStretirement BeneFit coSt $ 5 $ 4 $ 1
The Company expects to recognize in 2012 pre-tax gains of $12 million
related to amortization of prior service cost and no pre-tax losses from
amortization of past experience. The original amortization period is based
on an average remaining service period of active employees associated
with the other postretirement benefit plans of approximately 9 years.
The weighted average remaining amortization period for prior service
cost is approximately 2.5 years.
The estimated rate of future increases in the per capita cost of health
care benefits is 8% in 2012, decreasing by 0.5% per year to 5% in
2018 and beyond. This estimate reflects the Company’s current claim
experience and management’s estimate that rates of growth will decline
in the future. a 1% increase or decrease in the estimated rate would
have changed 2011 reported amounts as follows:
(In millions) increase decrease
effect on total service and interest cost $ 1 $ (1)
effect on postretirement benefit obligation $ 13 $ (11)
plan assets
The Company’s current target investment allocation percentages (37%
equity securities, 30% fixed income, 15% securities partnerships, 10%
hedge funds and 8% real estate) are developed by management as
guidelines, although the fair values of each asset category are expected
to vary as a result of changes in market conditions. The pension plan
asset portfolio has been most heavily weighted towards equity securities,
consisting of domestic and international investments, in an effort to
earn a higher rate of return on pension plan investments over the long-
term payout period of the pension benefit obligations. During 2011,
the Company modified its target investment allocations, reducing the
target allocation to equity securities and increasing allocations to fixed
income and other alternative investments, including hedge funds. The
further diversification of the pension plan assets from equity securities
into other investments is intended to mitigate the volatility in returns,
while also providing adequate liquidity to fund benefit distributions.
as of December 31, 2011, pension plan assets included $3.0 billion
invested in the separate accounts of Connecticut general Life insurance
Company (“CgLiC”) and Life insurance Company of north america,
which are subsidiaries of the Company, as well as an additional
$0.4 billion invested directly in funds offered by the buyer of the
retirement benefits business.
The fair values of plan assets by category and by the fair value hierarchy
as defined by gaap are as follows. See note 10 for a description of
how fair value is determined, including the level within the fair value
hierarchy and the procedures the Company uses to validate fair value
measurements.
Contents Q

89CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
december 31, 2011
(In millions)
Quoted Prices in
active markets for
identical assets
(Level 1)
Significant other
observable inputs
(Level 2)
Significant
Unobservable
inputs
(Level 3) total
Plan assets at fair value:
fixed maturities:
federal government and agency $ – $ 5 $ – $ 5
Corporate – 332 7 339
Mortgage and other asset-backed – 8 2 10
fund investments and pooled separate accounts (1) – 546 3 549
totaL Fixed matUritieS ‑ 891 12 903
equity securities:
Domestic 1,153 1 14 1,168
international, including funds and pooled separate accounts (1) 141 137 – 278
totaL eQUitY SecUritieS 1,294 138 14 1,446
real estate and mortgage loans, including pooled separate accounts (1) – – 303 303
Securities partnerships – – 314 314
hedge funds – – 148 148
guaranteed deposit account contract – – 39 39
Cash equivalents – 145 – 145
totaL PLan aSSetS at Fair VaLUe $ 1,294 $ 1,174 $ 830 $ 3,298
(1) A pooled separate account has several participating benefit plans and each owns a share of the total pool of investments.
december 31, 2010
(In millions)
Quoted Prices in
active markets for
identical assets
(Level 1)
Significant other
observable inputs
(Level 2)
Significant
Unobservable
inputs
(Level 3) total
Plan assets at fair value:
fixed maturities:
federal government and agency $ – $ 8 $ – $ 8
Corporate – 158 24 182
Mortgage and other asset-backed – 4 – 4
fund investments and pooled separate accounts (1) – 372 2 374
totaL Fixed matUritieS ‑ 542 26 568
equity securities:
Domestic 1,445 – 20 1,465
international, including funds and pooled separate accounts (1) 208 218 – 426
totaL eQUitY SecUritieS 1,653 218 20 1,891
real estate and mortgage loans, including pooled separate accounts (1) – – 240 240
Securities partnerships – – 347 347
guaranteed deposit account contract – – 24 24
Cash equivalents – 93 – 93
totaL PLan aSSetS at Fair VaLUe $ 1,653 $ 853 $ 657 $ 3,163
(1) A pooled separate account has several participating benefit plans and each owns a share of the total pool of investments.
plan assets in Level 1 include exchange-listed equity securities. Level 2
assets primarily include:
•• fixed income and international equity funds priced using their daily
net asset value which is the exit price; and
•• fixed maturities valued using recent trades of similar securities or
pricing models as described below.
because many fixed maturities do not trade daily, fair values are often
derived using recent trades of securities with similar features and
characteristics. When recent trades are not available, pricing models
are used to determine these prices. These models calculate fair values
by discounting future cash flows at estimated market interest rates.
Such market rates are derived by calculating the appropriate spreads
over comparable u.S. treasury securities, based on the credit quality,
industry and structure of the asset.
plan assets classified in Level 3 include securities partnerships, equity
real estate and hedge funds generally valued based on the pension plan’s
ownership share of the equity of the investee including changes in the
fair values of its underlying investments.
Contents Q

90 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
The following table summarizes the changes in pension plan assets classified in Level 3 for the years ended December 31, 2011 and December 31, 2010.
actual return on plan assets in this table may include changes in fair value that are attributable to both observable and unobservable inputs.
(In millions)
Fixed
maturities
& equity
Securities
real estate
& mortgage
Loans
Securities
Partnerships hedge Funds
guaranteed
deposit
account
contract total
balance at January 1, 2011 $ 46 $ 240 $ 347 $ –  $ 24 $ 657
actual return on plan assets:
assets still held at the reporting date 1 44 66 (2) 3 112
assets sold during the period 18 –  –  –  –  18
totaL actUaL retUrn on PLan aSSetS 19 44 66 (2) 3 130
purchases, sales, settlements, net (33) 21 (99) 150 12 51
transfers into/out of Level 3 (6) (2) –  –  –  (8)
balance at December 31, 2011 $ 26 $ 303 $ 314 $ 148 $ 39 $ 830
(In millions)
Fixed
maturities &
equity Securities
real estate &
mortgage Loans
Securities
Partnerships
guaranteed deposit
account contract total
balance at January 1, 2010 $ 167 $ 160 $ 257 $ 29 $ 613
actual return on plan assets:
assets still held at the reporting date (15) 16 53 2 56
assets sold during the period 14 – – – 14
total actual return on plan assets (1) 16 53 2 70
purchases, sales, settlements, net (119) 64 37 (7) (25)
transfers into/out of Level 3 (1) – – – (1)
balance at December 31, 2010 $ 46 $ 240 $ 347 $ 24 $ 657
The assets related to other postretirement benefit plans are invested in
deposit funds with interest credited based on fixed income investments
in the general account of CgLiC. as there are significant unobservable
inputs used in determining the fair value of these assets, they are
classified as Level 3. During 2011, these assets earned a return of
$1 million, offset by a net withdrawal from the fund of $2 million,
while during 2010, they earned a return of $1 million, offset by a net
withdrawal of $2 million.
Assumptions for pension and other postretirement
benefit plans
Management determined the present value of the projected benefit
obligation and the accumulated other postretirement benefit obligation
and related benefit costs based on the following weighted average
assumptions as of and for the years ended December 31:
2011 2010
Discount rate:
pension benefit obligation 4.00% 5.00%
other postretirement benefit obligation 3.75% 4.75%
pension benefit cost 5.00% 5.50%
other postretirement benefit cost 4.75% 5.25%
expected long-term return on plan assets:
pension benefit cost 8.00% 8.00%
other postretirement benefit cost 5.00% 5.00%
expected rate of compensation increase:
other postretirement benefit obligation 3.00% 3.00%
other postretirement benefit cost 3.00% 3.00%
Discount rates are set by applying actual annualized yields at various
durations from the Citigroup pension Liability curve, without adjustment,
to the expected cash flows of the postretirement benefits liabilities. The
Company believes that the Citigroup pension Liability curve is the most
representative curve to use because it is derived from a broad array of
bonds in various industries throughout the domestic market for high
quality bonds. further, Citigroup monitors the bond portfolio to ensure
that only high quality issues are included. accordingly, the Company
does not believe that any adjustment is required to the Citigroup curve.
expected long-term rates of return on plan assets were developed
considering actual long-term historical returns, expected long-term
market conditions, plan asset mix and management’s investment
strategy, which includes a significant allocation to domestic and foreign
Contents Q

91CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
equity securities as well as real estate, securities partnerships and hedge
funds. expected long-term market conditions take into consideration
certain key macroeconomic trends including expected domestic and
foreign gDp growth, employment levels and inflation. based on the
Company’s current outlook, the expected return assumption is considered
reasonable. The actual investment allocation at December 31, 2011
is more heavily weighted towards equity securities than targeted. The
Company expects the allocation of equity securities to move closer
to target during 2012 as additional attractive alternative investments
(securities partnerships and hedge funds) can be identified.
to measure pension costs, the Company uses a market-related asset
valuation for domestic pension plan assets invested in non-fixed income
investments. The market-related value of these pension assets recognizes
the difference between actual and expected long-term returns in the
portfolio over 5 years, a method that reduces the short-term impact
of market fluctuations on pension cost. at December 31, 2011, the
market-related asset value was approximately $3.4 billion compared
with a market value of approximately $3.3 billion.
Benefit payments
The following benefit payments, including expected future services, are expected to be paid in:
(In millions) Pension Benefits
other Postretirement Benefits
gross
net of medicare
Part d Subsidy
2012 $ 516 $ 43 $ 39
2013 $ 338 $ 41 $ 39
2014 $ 340 $ 40 $ 38
2015 $ 327 $ 39 $ 38
2016 $ 323 $ 38 $ 37
2017-2021 $ 1,577 $ 169 $ 162
B. 401(k) plans
The Company sponsors a 401(k) plan in which the Company matches
a portion of employees’ pre-tax contributions. another 401(k) plan
with an employer match was frozen in 1999. participants in the active
plan may invest in various funds that invest in the Company’s common
stock, several diversified stock funds, a bond fund or a fixed-income
fund. in conjunction with the action to freeze the domestic defined
benefit pension plans, effective January 1, 2010, the Company increased
its matching contributions to 401(k) plan participants.
The Company may elect to increase its matching contributions if the
Company’s annual performance meets certain targets. a substantial
amount of the Company’s matching contributions are invested in the
Company’s common stock. The Company’s expense for these plans was
$72 million for 2011, $69 million for 2010 and $36 million for 2009.
NOTE 10 Fair value Measurements
The Company carries certain financial instruments at fair value in
the financial statements including fixed maturities, equity securities,
short-term investments and derivatives. other financial instruments are
measured at fair value under certain conditions, such as when impaired.
fair value is defined as the price at which an asset could be exchanged
in an orderly transaction between market participants at the balance
sheet date. a liability’s fair value is defined as the amount that would
be paid to transfer the liability to a market participant, not the amount
that would be paid to settle the liability with the creditor.
fair values are based on quoted market prices when available. When
market prices are not available, fair value is generally estimated using
discounted cash flow analyses, incorporating current market inputs
for similar financial instruments with comparable terms and credit
quality. in instances where there is little or no market activity for
the same or similar instruments, the Company estimates fair value
using methods, models and assumptions that the Company believes
a hypothetical market participant would use to determine a current
transaction price. These valuation techniques involve some level of
estimation and judgment by the Company which becomes significant
with increasingly complex instruments or pricing models.
The Company’s financial assets and liabilities carried at fair value have
been classified based upon a hierarchy defined by gaap. The hierarchy
gives the highest ranking to fair values determined using unadjusted
quoted prices in active markets for identical assets and liabilities (Level 1)
and the lowest ranking to fair values determined using methodologies
and models with unobservable inputs (Level 3). an asset’s or a liability’s
classification is based on the lowest level of input that is significant to
its measurement. for example, a financial asset or liability carried at
fair value would be classified in Level 3 if unobservable inputs were
significant to the instrument’s fair value, even though the measurement
may be derived using inputs that are both observable (Levels 1 and 2)
and unobservable (Level 3).
The prices the Company uses to value its investment assets are
representative of prices that would be received to sell the assets at the
measurement date (exit prices) and are classified appropriately in the
fair value hierarchy. The Company performs ongoing analyses of prices
used to value invested assets to determine that they represent appropriate
estimates of fair value. This process involves quantitative and qualitative
analysis that is overseen by the Company’s investment professionals,
including reviews of pricing methodologies, judgments of valuation
inputs, and assessments of the significance of any unobservable inputs,
Contents Q

92 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
pricing statistics and trends. These reviews are also designed to ensure
prices do not become stale, have reasonable explanations as to why
they have changed from prior valuations, or require additional review
of other anomalies. The Company also performs sample testing of sales
values to confirm the accuracy of prior fair value estimates. exceptions
identified during these processes indicate that adjustments to prices
are infrequent and result in immaterial adjustments to valuations.
Financial Assets and Financial Liabilities Carried
at Fair value
The following tables provide information as of December 31, 2011 and
December 31, 2010 about the Company’s financial assets and liabilities
carried at fair value. Similar disclosures for separate account assets, which
are also recorded at fair value on the Company’s Consolidated balance
Sheets, are provided separately as gains and losses related to these assets
generally accrue directly to policyholders. in addition, note 9 contains
similar disclosures for the Company’s pension plan assets.
december 31, 2011
(In millions)
Quoted Prices in
active markets for
identical assets
(Level 1)
Significant other
observable inputs
(Level 2)
Significant
Unobservable
inputs
(Level 3) total
financial assets at fair value:
fixed maturities:
federal government and agency $ 217 $ 738 $ 3 $ 958
State and local government – 2,456 – 2,456
foreign government – 1,251 23 1,274
Corporate – 10,132 381 10,513
federal agency mortgage-backed – 9 – 9
other mortgage-backed – 79 1 80
other asset-backed – 363 564 927
total fixed maturities (1) 217 15,028 972 16,217
equity securities 3 67 30 100
Subtotal 220 15,095 1,002 16,317
Short-term investments – 225 – 225
gMib assets (2) – – 712 712
other derivative assets (3) – 45 – 45
totaL FinanciaL aSSetS at Fair VaLUe, excLUding
SeParate accoUntS $ 220 $ 15,365 $ 1,714 $ 17,299
financial liabilities at fair value:
gMib liabilities $ – $ – $ 1,333 $ 1,333
other derivative liabilities (3) – 30 – 30
totaL FinanciaL LiaBiLitieS at Fair VaLUe $ ‑ $ 30 $ 1,333 $ 1,363
(1) Fixed maturities include $826 million of net appreciation required to adjust future policy benefits for the run-off settlement annuity business including $115 million of appreciation
for securities classified in Level 3.
(2) The GMIB assets represent retrocessional contracts in place from two external reinsurers which cover 55% of the exposures on these contracts.
(3) Other derivative assets include $10 million of interest rate and foreign currency swaps qualifying as cash flow hedges and $35 million of interest rate swaps not designated as accounting
hedges. Other derivative liabilities reflect foreign currency and interest rate swaps qualifying as cash flow hedges. See Note 12 for additional information.
Contents Q

93CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
december 31, 2010
(In millions)
Quoted Prices in
active markets for
identical assets
(Level 1)
Significant other
observable inputs
(Level 2)
Significant
Unobservable
inputs
(Level 3) total
financial assets at fair value:
fixed maturities:
federal government and agency $ 133 $ 550 $ 4 $ 687
State and local government – 2,467 – 2,467
foreign government – 1,137 17 1,154
Corporate – 9,080 364 9,444
federal agency mortgage-backed – 10 – 10
other mortgage-backed – 85 3 88
other asset-backed – 348 511 859
total fixed maturities (1) 133 13,677 899 14,709
equity securities 6 87 34 127
Subtotal 139 13,764 933 14,836
Short-term investments – 174 – 174
gMib assets (2) – – 480 480
other derivative assets (3) – 19 – 19
totaL FinanciaL aSSetS at Fair VaLUe, excLUding
SeParate accoUntS $ 139 $ 13,957 $ 1,413 $ 15,509
financial liabilities at fair value:
gMib liabilities $ – $ – $ 903 $ 903
other derivative liabilities (3) – 32 – 32
totaL FinanciaL LiaBiLitieS at Fair VaLUe $ ‑ $ 32 $ 903 $ 935
(1) Fixed maturities include $443 million of net appreciation required to adjust future policy benefits for the run-off settlement annuity business including $74 million of appreciation
for securities classified in Level 3.
(2) The GMIB assets represent retrocessional contracts in place from two external reinsurers which cover 55% of the exposures on these contracts.
(3) Other derivative assets include $16 million of interest rate and foreign currency swaps qualifying as cash flow hedges and $3 million of interest rate swaps not designated as accounting
hedges. Other derivative liabilities reflect foreign currency and interest rate swaps qualifying as cash flow hedges. See Note 12 for additional information.
Level 1 Financial Assets
inputs for instruments classified in Level 1 include unadjusted quoted
prices for identical assets in active markets accessible at the measurement
date. active markets provide pricing data for trades occurring at least
weekly and include exchanges and dealer markets.
assets in Level 1 include actively-traded u.S. government bonds and
exchange-listed equity securities. given the narrow definition of Level 1
and the Company’s investment asset strategy to maximize investment
returns, a relatively small portion of the Company’s investment assets
are classified in this category.
Level 2 Financial Assets and Financial Liabilities
inputs for instruments classified in Level 2 include quoted prices
for similar assets or liabilities in active markets, quoted prices from
those willing to trade in markets that are not active, or other inputs
that are market observable or can be corroborated by market data
for the term of the instrument. Such other inputs include market
interest rates and volatilities, spreads and yield curves. an instrument
is classified in Level 2 if the Company determines that unobservable
inputs are insignificant.
Fixed maturities and equity securities. approximately 93% of the
Company’s investments in fixed maturities and equity securities are
classified in Level 2 including most public and private corporate debt and
equity securities, federal agency and municipal bonds, non-government
asset and mortgage-backed securities and preferred stocks. because many
fixed maturities and preferred stocks do not trade daily, fair values are
often derived using recent trades of securities with similar features and
characteristics. When recent trades are not available, pricing models
are used to determine these prices. These models calculate fair values
by discounting future cash flows at estimated market interest rates.
Such market rates are derived by calculating the appropriate spreads
over comparable u.S. treasury securities, based on the credit quality,
industry and structure of the asset. typical inputs and assumptions
to pricing models include, but are not limited to, a combination of
benchmark yields, reported trades, issuer spreads, liquidity, benchmark
securities, bids, offers, reference data, and industry and economic events.
for mortgage-backed securities, inputs and assumptions may also
include characteristics of the issuer, collateral attributes, prepayment
speeds and credit rating.
nearly all of these instruments are valued using recent trades or pricing
models. Less than 1% of the fair value of investments classified in
Level 2 represents foreign bonds that are valued, consistent with local
market practice, using a single unadjusted market-observable input
derived by averaging multiple broker-dealer quotes.
Short-term investments are carried at fair value, which approximates
cost. on a regular basis the Company compares market prices for these
securities to recorded amounts to validate that current carrying amounts
approximate exit prices. The short-term nature of the investments and
corroboration of the reported amounts over the holding period support
their classification in Level 2.
Contents Q

94 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
Other derivatives classified in Level 2 represent over-the-counter
instruments such as interest rate and foreign currency swap contracts.
fair values for these instruments are determined using market observable
inputs including forward currency and interest rate curves and
widely published market observable indices. Credit risk related to the
counterparty and the Company is considered when estimating the fair
values of these derivatives. however, the Company is largely protected
by collateral arrangements with counterparties, and determined that
no adjustment for credit risk was required as of December 31, 2011
or December 31, 2010. The nature and use of these other derivatives
are described in note 12.
Level 3 Financial Assets and Financial Liabilities
Certain inputs for instruments classified in Level 3 are unobservable
(supported by little or no market activity) and significant to their
resulting fair value measurement. unobservable inputs reflect the
Company’s best estimate of what hypothetical market participants
would use to determine a transaction price for the asset or liability at
the reporting date.
The Company classifies certain newly-issued, privately-placed, complex
or illiquid securities, as well as assets and liabilities relating to gMib,
in Level 3.
Fixed maturities and equity securities. approximately 6% of fixed
maturities and equity securities are priced using significant unobservable
inputs and classified in this category, including:
(In millions) december 31, 2011 december 31, 2010
other asset and mortgage-backed securities – valued using pricing models $ 565 $ 514
Corporate and government bonds – valued using pricing models 355 312
Corporate bonds – valued at transaction price 52 73
equity securities – valued at transaction price 30 34
totaL $ 1,002 $ 933
fair values of mortgage and asset-backed securities and corporate bonds
are determined using pricing models that incorporate the specific
characteristics of each asset and related assumptions including the
investment type and structure, credit quality, industry and maturity
date in comparison to current market indices, spreads and liquidity
of assets with similar characteristics. for mortgage and asset-backed
securities, inputs and assumptions to pricing may also include collateral
attributes and prepayment speeds. recent trades in the subject security
or similar securities are assessed when available, and the Company
may also review published research, as well as the issuer’s financial
statements, in its evaluation. Certain subordinated corporate bonds
and private equity investments are valued at transaction price in the
absence of market data indicating a change in the estimated fair values.
Guaranteed minimum income benefit contracts. because cash flows
of the gMib liabilities and assets are affected by equity markets and
interest rates but are without significant life insurance risk and are
settled in lump sum payments, the Company reports these liabilities
and assets as derivatives at fair value. The Company estimates the fair
value of the assets and liabilities for gMib contracts using assumptions
regarding capital markets (including market returns, interest rates and
market volatilities of the underlying equity and bond mutual fund
investments), future annuitant behavior (including mortality, lapse,
and annuity election rates), and non-performance risk, as well as risk
and profit charges. as certain assumptions used to estimate fair values
for these contracts are largely unobservable (primarily related to future
annuitant behavior), the Company classifies gMib assets and liabilities
in Level 3. The Company considered the following in determining the
view of a hypothetical market participant:
•• that the most likely transfer of these assets and liabilities would
be through a reinsurance transaction with an independent insurer
having a market capitalization and credit rating similar to that of
the Company; and
•• that because this block of contracts is in run-off mode, an insurer
looking to acquire these contracts would have similar existing contracts
with related administrative and risk management capabilities.
These gMib assets and liabilities are calculated with a complex internal
model using many scenarios to determine the fair value of net amounts
estimated to be paid, less the fair value of net future premiums estimated
to be received, adjusted for risk and profit charges that the Company
anticipates a hypothetical market participant would require to assume
this business. net amounts estimated to be paid represent the excess
of the anticipated value of the income benefits over the values of the
annuitants’ accounts at the time of annuitization. generally, market
return, interest rate and volatility assumptions are based on market
observable information. assumptions related to future annuitant behavior
reflect the Company’s belief that a hypothetical market participant would
consider the actual and expected experience of the Company as well as
other relevant and available industry resources in setting policyholder
behavior assumptions. The significant assumptions used to value the
gMib assets and liabilities as of December 31, 2011 were as follows:
•• The market return and discount rate assumptions are based on the
market-observable Libor swap curve.
•• The projected interest rate used to calculate the reinsured income
benefits is indexed to the 7-year treasury rate at the time of
annuitization (claim interest rate) based on contractual terms. That
rate was 1.35% at December 31, 2011 and must be projected for
future time periods. These projected rates vary by economic scenario
and are determined by an interest rate model using current interest
rate curves and the prices of instruments available in the market
including various interest rate caps and zero-coupon bonds. for a
subset of the business, there is a contractually guaranteed floor of
3% for the claim interest rate.
•• The market volatility assumptions for annuitants’ underlying mutual
fund investments that are modeled based on the S&p 500, russell
2000 and naSDaQ Composite are based on the market-implied
volatility for these indices for three to seven years grading to historical
volatility levels thereafter. for the remaining 52% of underlying mutual
fund investments modeled based on other indices (with insufficient
market-observable data), volatility is based on the average historical
level for each index over the past 10 years. using this approach,
Contents Q

95CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
volatility ranges from 16% to 36% for equity funds, 4% to 12% for
bond funds, and 1% to 2% for money market funds.
•• The mortality assumption is 70% of the 1994 group annuity Mortality
table, with 1% annual improvement beginning January 1, 2000.
•• The annual lapse rate assumption reflects experience that differs by
the company issuing the underlying variable annuity contracts, ranges
from 1% to 12% at December 31, 2011, and depends on the time
since contract issue and the relative value of the guarantee.
•• The annual annuity election rate assumption reflects experience
that differs by the company issuing the underlying variable annuity
contracts and depends on the annuitant’s age, the relative value
of the guarantee and whether a contractholder has had a previous
opportunity to elect the benefit. immediately after the expiration
of the waiting period, the assumed probability that an individual
will annuitize their variable annuity contract is up to 80%. for the
second and subsequent annual opportunities to elect the benefit,
the assumed probability of election is up to 35%. actual data is still
emerging for the Company as well as the industry and the estimates
are based on this limited data.
•• The nonperformance risk adjustment is incorporated by adding an
additional spread to the discount rate in the calculation of both (1)
the gMib liability to reflect a hypothetical market participant’s
view of the risk of the Company not fulfilling its gMib obligations,
and (2) the gMib asset to reflect a hypothetical market participant’s
view of the reinsurers’ credit risk, after considering collateral. The
estimated market-implied spread is company-specific for each party
involved to the extent that company-specific market data is available
and is based on industry averages for similarly-rated companies when
company-specific data is not available. The spread is impacted by
the credit default swap spreads of the specific parent companies,
adjusted to reflect subsidiaries’ credit ratings relative to their parent
company and any available collateral. The additional spread over
Libor incorporated into the discount rate ranged from 20 to 160
basis points for the gMib liability and from 50 to 125 basis points
for the gMib reinsurance asset for that portion of the interest rate
curve most relevant to these policies.
•• The risk and profit charge assumption is based on the Company’s
estimate of the capital and return on capital that would be required
by a hypothetical market participant.
The Company regularly evaluates each of the assumptions used in
establishing these assets and liabilities by considering how a hypothetical
market participant would set assumptions at each valuation date. Capital
markets assumptions are expected to change at each valuation date
reflecting currently observable market conditions. other assumptions
may also change based on a hypothetical market participant’s view of
actual experience as it emerges over time or other factors that impact the
net liability. if the emergence of future experience or future assumptions
differs from the assumptions used in estimating these assets and liabilities,
the resulting impact could be material to the Company’s consolidated
results of operations, and in certain situations, could be material to
the Company’s financial condition.
gMib liabilities are reported in the Company’s Consolidated balance
Sheets in accounts payable, accrued expenses and other liabilities.
gMib assets associated with these contracts represent net receivables
in connection with reinsurance that the Company has purchased from
two external reinsurers and are reported in the Company’s Consolidated
balance Sheets in other assets, including other intangibles.
Changes in Level 3 Financial Assets and Financial
Liabilities Carried at Fair value
the following tables summarize the changes in financial assets
and financial liabilities classified in Level 3 for the years ended
December 31, 2011 and 2010. These tables exclude separate account assets
as changes in fair values of these assets accrue directly to policyholders.
gains and losses reported in this table may include changes in fair
value that are attributable to both observable and unobservable inputs.
(In millions)
Fixed
maturities &
equity Securities gmiB assets gmiB Liabilities gmiB net
balance at January 1, 2011 $ 933 $ 480 $ (903) $ (423)
gains (losses) included in income:
gMib fair value gain/(loss) – 270 (504) (234)
other 10 – – –
total gains (losses) included in shareholders’ net income 10 270 (504) (234)
gains included in other comprehensive income 7 – – –
gains required to adjust future policy benefits for settlement annuities (1) 41 – – –
purchases, issuances, settlements:
purchases 129 – – –
Sales (20) – – –
Settlements (61) (38) 74 36
total purchases, sales and settlements 48 (38) 74 36
transfers into/(out of ) Level 3:
transfers into Level 3 81 – – –
transfers out of Level 3 (118) – – –
total transfers into/(out of ) Level 3 (37) – – –
balance at December 31, 2011 $ 1,002 $ 712 $ (1,333) $ (621)
total gains (losses) included in shareholders’ net income attributable
to instruments held at the reporting date $ 6 $ 270 $ (504) $ (234)
(1) Amounts do not accrue to shareholders.
Contents Q

96 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
(In millions)
Fixed
maturities &
equity Securities gmiB assets gmiB Liabilities gmiB net
balance at January 1, 2010 $ 845 $ 482 $ (903) $ (421)
gains (losses) included in income:
gMib fair value gain/(loss) – 57 (112) (55)
other 27 – – –
total gains (losses) included in shareholders’ net income 27 57 (112) (55)
gains included in other comprehensive income 10 – – –
gains required to adjust future policy benefits for settlement annuities (1) 34 – – –
purchases, issuances, settlements:
purchases 39 – – –
Sales (1) – – –
Settlements (112) (59) 112 53
total purchases, sales, and settlements (74) (59) 112 53
transfers into/(out of ) Level 3:
transfers into Level 3 155 – – –
transfers out of Level 3 (64) – – –
total transfers into/(out of ) Level 3 91 – – –
balance at December 31, 2010 $ 933 $ 480 $ (903) $ (423)
total gains (losses) included in shareholders’ net income attributable
to instruments held at the reporting date $ 18 $ 57 $ (112) $ (55)
(1) Amounts do not accrue to shareholders.
as noted in the tables above, total gains and losses included in net
income are reflected in the following captions in the Consolidated
Statements of income:
•• realized investment gains (losses) and net investment income for
amounts related to fixed maturities and equity securities; and
•• gMib fair value (gain) loss for amounts related to gMib assets
and liabilities.
reclassifications impacting Level 3 financial instruments are reported
as transfers into or out of the Level 3 category as of the beginning of
the quarter in which the transfer occurs. Therefore gains and losses
in income only reflect activity for the quarters the instrument was
classified in Level 3.
transfers into or out of the Level 3 category occur when unobservable
inputs, such as the Company’s best estimate of what a market participant
would use to determine a current transaction price, become more or
less significant to the fair value measurement. for the years ended
December 31, 2011 and 2010, transfer activity between Level 3 and
Level 2 primarily reflects changes in the level of unobservable inputs
used to value certain private corporate bonds, principally related to
credit risk of the issuers.
The Company provided reinsurance for other insurance companies that
offer a guaranteed minimum income benefit, and then retroceded a
portion of the risk to other insurance companies. These arrangements
with third-party insurers are the instruments still held at the reporting
date for gMib assets and liabilities in the table above. because these
reinsurance arrangements remain in effect at the reporting date, the
Company has reflected the total gain or loss for the period as the total
gain or loss included in income attributable to instruments still held at
the reporting date. however, the Company reduces the gMib assets
and liabilities resulting from these reinsurance arrangements when
annuitants lapse, die, elect their benefit, or reach the age after which
the right to elect their benefit expires.
under faSb’s guidance for fair value measurements, the Company’s
gMib assets and liabilities are expected to be volatile in future periods
because the underlying capital markets assumptions will be based largely
on market-observable inputs at the close of each reporting period
including interest rates and market-implied volatilities.
gMib fair value losses of $234 million for 2011 were primarily due to
a decline in both the interest rate used for projecting claim exposure
(7-year treasury rates) and the rate used for projecting market returns
and discounting (Libor swap curve).
gMib fair value losses of $55 million for 2010, were primarily due
to declining interest rates, partially offset by increases in underlying
account values resulting from favorable equity and bond fund returns,
which resulted in decreased exposures.
Contents Q

97CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
Separate account assets
fair values and changes in the fair values of separate account assets generally accrue directly to the policyholders and are excluded from the
Company’s revenues and expenses. at December 31, separate account assets were as follows:
2011
(In millions)
Quoted Prices in
active markets for
identical assets
(Level 1)
Significant other
observable inputs
(Level 2)
Significant
Unobservable
inputs
(Level 3) total
guaranteed separate accounts (See note 23) $ 249 $ 1,439 $ – $ 1,688
non-guaranteed separate accounts (1) 1,804 3,851 750 6,405
totaL SeParate accoUnt aSSetS $ 2,053 $ 5,290 $ 750 $ 8,093
(1) Non-guaranteed separate accounts include $3.0 billion in assets supporting the Company’s pension plan, including $702 million classified in Level 3.
2010
(In millions)
Quoted Prices in
active markets for
identical assets
(Level 1)
Significant other
observable inputs
(Level 2)
Significant
Unobservable
inputs
(Level 3) total
guaranteed separate accounts (See note 23) $ 286 $ 1,418 $ – $ 1,704
non-guaranteed separate accounts (1) 1,947 3,663 594 6,204
totaL SeParate accoUnt aSSetS $ 2,233 $ 5,081 $ 594 $ 7,908
(1) Non-guaranteed separate accounts include $2.8 billion in assets supporting the Company’s pension plan, including $557 million classified in Level 3.
Separate account assets in Level 1 include exchange-listed equity
securities. Level 2 assets primarily include:
•• corporate and structured bonds valued using recent trades of similar
securities or pricing models that discount future cash flows at estimated
market interest rates as described above; and
•• actively-traded institutional and retail mutual fund investments and separate
accounts priced using the daily net asset value which is the exit price.
Separate account assets classified in Level 3 include investments primarily
in securities partnerships, real estate and hedge funds generally valued
based on the separate account’s ownership share of the equity of the
investee including changes in the fair values of its underlying investments.
The following tables summarize the change in separate account assets
reported in Level 3 for the years ended December 31, 2011 and 2010.
(In millions)
balance at January 1, 2011 $ 594
policyholder gains (1) 114
purchases, issuances, settlements:
purchases 257
Sales (51)
Settlements (152)
total purchases, sales and settlements 54
transfers into/(out of ) Level 3:
transfers into Level 3 4
transfers out of Level 3 (16)
total transfers into/(out of ) Level 3: (12)
balance at December 31, 2011 $ 750
(1) Included in this amount are gains of $96 million attributable to instruments still held at the reporting date.
Contents Q

98 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
(In millions)
balance at January 1, 2010 $ 550
policyholder gains (1) 71
purchases, issuances, settlements:
purchases 211
Sales (145)
Settlements (76)
total purchases, sales and settlements (10)
transfers into/(out of ) Level 3:
transfers into Level 3 9
transfers out of Level 3 (26)
total transfers into/(out of ) Level 3: (17)
balance at December 31, 2010 $ 594
(1) Included in this amount are gains of $53 million attributable to instruments still held at the reporting date.
Assets and Liabilities Measured at Fair value under
Certain Conditions
Some financial assets and liabilities are not carried at fair value each
reporting period, but may be measured using fair value only under certain
conditions, such as investments in commercial mortgage loans and real
estate entities when they become impaired. During 2011, impaired
commercial mortgage loans and real estate entities representing less
than 1% of total investments were written down to their fair values,
resulting in after-tax realized investment losses of $15 million.
During 2010, impaired commercial mortgage loans and real estate
entities representing less than 1% of total investments were written
down to their fair values, resulting in after-tax realized investment
losses of $25 million.
These fair values were calculated by discounting the expected future
cash flows at estimated market interest rates. Such market rates were
derived by calculating the appropriate spread over comparable u.S.
treasury rates, based on the characteristics of the underlying real estate,
including its type, quality and location. The fair value measurements
were classified in Level 3 because these cash flow models incorporate
significant unobservable inputs.
Fair value Disclosures for Financial Instruments
Not Carried at Fair value
Most financial instruments that are subject to fair value disclosure
requirements are carried in the Company’s Consolidated financial
Statements at amounts that approximate fair value. The following table
provides the fair values and carrying values of the Company’s financial
instruments not recorded at fair value that are subject to fair value
disclosure requirements at December 31, 2011 and December 31, 2010.
(In millions)
december 31, 2011 december 31, 2010
Fair Value carrying Value Fair Value carrying Value
Commercial mortgage loans $ 3,380 $ 3,301 $ 3,470 $ 3,486
Contractholder deposit funds, excluding universal life products $ 1,056 $ 1,035 $ 1,001 $ 989
Long-term debt, including current maturities, excluding capital leases $ 5,281 $ 4,946 $ 2,926 $ 2,709
The fair values presented in the table above have been estimated using
market information when available. The following is a description
of the valuation methodologies and inputs used by the Company to
determine fair value.
Commercial mortgage loans. The Company estimates the fair value of
commercial mortgage loans generally by discounting the contractual
cash flows at estimated market interest rates that reflect the Company’s
assessment of the credit quality of the loans. Market interest rates are
derived by calculating the appropriate spread over comparable u.S.
treasury rates, based on the property type, quality rating and average
life of the loan. The quality ratings reflect the relative risk of the
loan, considering debt service coverage, the loan-to-value ratio and
other factors. fair values of impaired mortgage loans are based on the
estimated fair value of the underlying collateral generally determined
using an internal discounted cash flow model.
Contractholder deposit funds, excluding universal life products.
generally, these funds do not have stated maturities. approximately
50% of these balances can be withdrawn by the customer at any time
without prior notice or penalty. The fair value for these contracts
is the amount estimated to be payable to the customer as of the
reporting date, which is generally the carrying value. Most of the
remaining contractholder deposit funds are reinsured by the buyers
of the individual life insurance and annuity and retirement benefits
businesses. The fair value for these contracts is determined using the
fair value of these buyers’ assets supporting these reinsured contracts.
The Company had a reinsurance recoverable equal to the carrying value
of these reinsured contracts.
Long-term debt, including current maturities, excluding capital
leases. The fair value of long-term debt is based on quoted market
prices for recent trades. When quoted market prices are not available,
fair value is estimated using a discounted cash flow analysis and the
Company’s estimated current borrowing rate for debt of similar terms
and remaining maturities.
fair values of off-balance sheet financial instruments were not material.
Contents Q

99CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
NOTE 11 Investments
A. Fixed Maturities and Equity Securities
Securities in the following table are included in fixed maturities and equity securities on the Company’s Consolidated balance Sheets. These
securities are carried at fair value with changes in fair value reported in other realized investment gains (losses) and interest and dividends reported
in net investment income. The Company’s hybrid investments include certain preferred stock or debt securities with call or conversion features.
(In millions) 2011 2010
included in fixed maturities:
trading securities (amortized cost: $2; $3) $ 2 $ 3
hybrid securities (amortized cost: $26; $45) 28 52
totaL $ 30 $ 55
included in equity securities:
hybrid securities (amortized cost: $90; $108) $ 65 $ 86
fixed maturities included $79 million at December 31, 2011 and
$98 million at December 31, 2010, which were pledged as collateral to
brokers as required under certain futures contracts. These fixed maturities
were primarily federal government securities at December 31, 2011
and primarily corporate securities at December 31, 2010.
The following information about fixed maturities excludes trading and
hybrid securities. The amortized cost and fair value by contractual maturity
periods for fixed maturities were as follows at December 31, 2011:
(In millions) amortized cost Fair Value
Due in one year or less $ 955 $ 967
Due after one year through five years 4,719 5,060
Due after five years through ten years 4,997 5,581
Due after ten years 2,699 3,565
Mortgage and other asset-backed securities 859 1,014
totaL $ 14,229 $ 16,187
actual maturities could differ from contractual maturities because
issuers may have the right to call or prepay obligations, with or without
penalties. also, in some cases the Company may extend maturity dates.
gross unrealized appreciation (depreciation) on fixed maturities by
type of issuer is shown below (excluding trading securities and hybrid
securities with a fair value of $30 million at December 31, 2011 and
$55 million at December 31, 2010).
(In millions) amortized cost
december 31, 2011
Unrealized
appreciation
Unrealized
depreciation Fair Value
federal government and agency $ 552 $ 406 $ – $ 958
State and local government 2,185 274 (3) 2,456
foreign government 1,173 103 (2) 1,274
Corporate 9,460 1,070 (45) 10,485
federal agency mortgage-backed 9 – – 9
other mortgage-backed 73 10 (4) 79
other asset-backed 777 160 (11) 926
totaL $ 14,229 $ 2,023 $ (65) $ 16,187
(In millions) amortized cost
december 31, 2010
Unrealized
appreciation
Unrealized
depreciation Fair Value
federal government and agency $ 459 $ 229 $ (1) $ 687
State and local government 2,305 172 (10) 2,467
foreign government 1,095 63 (4) 1,154
Corporate 8,697 744 (49) 9,392
federal agency mortgage-backed 9 1 – 10
other mortgage-backed 80 10 (3) 87
other asset-backed 752 117 (12) 857
totaL $ 13,397 $ 1,336 $ (79) $ 14,654
Contents Q

100 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
The above table includes investments with a fair value of $3 billion supporting the Company’s run-off settlement annuity business, with gross unrealized
appreciation of $851 million and gross unrealized depreciation of $25 million at December 31, 2011. Such unrealized amounts are required to support future
policy benefit liabilities of this business and, as such, are not included in accumulated other comprehensive income. at December 31, 2010, investments
supporting this business had a fair value of $2.5 billion, gross unrealized appreciation of $476 million and gross unrealized depreciation of $33 million.
as of December 31, 2011, the Company had commitments to purchase $16 million of fixed maturities bearing interest at a fixed market rate.
Review of declines in fair value
Management reviews fixed maturities with a decline in fair value from cost for impairment based on criteria that include:
•• length of time and severity of decline;
•• financial health and specific near term prospects of the issuer;
•• changes in the regulatory, economic or general market environment of the issuer’s industry or geographic region; and
•• the Company’s intent to sell or the likelihood of a required sale prior to recovery.
excluding trading and hybrid securities, as of December 31, 2011, fixed maturities with a decline in fair value from amortized cost (which were
primarily investment grade corporate bonds) were as follows, including the length of time of such decline:
(Dollars in millions)
december 31, 2011
Fair Value amortized cost
Unrealized
depreciation
number of
issues
fixed maturities:
one year or less:
investment grade $ 572 $ 591 $ (19) 167
below investment grade $ 75 $ 80 $ (5) 52
More than one year:
investment grade $ 268 $ 300 $ (32) 62
below investment grade $ 28 $ 37 $ (9) 13
as of December 31, 2011, the unrealized depreciation of investment grade fixed maturities is primarily due to increases in market yields since
purchase. excluding trading and hybrid securities, equity securities with a fair value lower than cost were not material at December 31, 2011.
B. Commercial Mortgage Loans
Mortgage loans held by the Company are made exclusively to commercial borrowers and are diversified by property type, location and borrower.
Loans are secured by high quality, primarily completed and substantially leased operating properties, generally carried at unpaid principal balances
and issued at a fixed rate of interest.
at December 31, commercial mortgage loans were distributed among the following property types and geographic regions:
(In millions) 2011 2010
Property type
office buildings $ 1,014 $ 1,043
apartment buildings 705 835
industrial 670 619
hotels 542 533
retail facilities 297 418
other 73 38
totaL $ 3,301 $ 3,486
geographic region
pacific $ 893 $ 931
South atlantic 870 752
new england 450 585
Central 511 519
Middle atlantic 391 385
Mountain 186 314
totaL $ 3,301 $ 3,486
Contents Q

101CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
at December 31, 2011, scheduled commercial mortgage loan maturities
were as follows (in millions): $529 in 2012, $525 in 2013, $329 in
2014, $372 in 2015 and $1,546 thereafter. actual maturities could differ
from contractual maturities for several reasons: borrowers may have the
right to prepay obligations, with or without prepayment penalties; the
maturity date may be extended; and loans may be refinanced.
as of December 31, 2011, the Company had commitments to extend
credit under commercial mortgage loan agreements of $162 million
that were diversified by property type and geographic region.
Credit quality
The Company applies a consistent and disciplined approach to evaluating
and monitoring credit risk, beginning with the initial underwriting of a
mortgage loan and continuing throughout the investment holding period.
Mortgage origination professionals employ an internal rating system
developed from the Company’s experience in real estate investing and
mortgage lending. a quality rating, designed to evaluate the relative risk
of the transaction, is assigned at each loan’s origination and is updated
each year as part of the annual portfolio loan review. The Company
monitors credit quality on an ongoing basis, classifying each loan as
a loan in good standing, potential problem loan or problem loan.
Quality ratings are based on internal evaluations of each loan’s specific
characteristics considering a number of key inputs, including real
estate market-related factors such as rental rates and vacancies, and
property-specific inputs such as growth rate assumptions and lease
rollover statistics. however, the two most significant contributors to
the credit quality rating are the debt service coverage and loan-to-value
ratios. The debt service coverage ratio measures the amount of property
cash flow available to meet annual interest and principal payments on
debt. a debt service coverage ratio below 1.0 indicates that there is not
enough cash flow to cover the loan payments. The loan-to-value ratio,
commonly expressed as a percentage, compares the amount of the loan
to the fair value of the underlying property collateralizing the loan.
The following tables summarize the credit risk profile of the Company’s
commercial mortgage loan portfolio using carrying values classified
based on loan-to-value and debt service coverage ratios, as of
December 31, 2011 and 2010:
Loan‑to‑Value ratios
(In millions)
december 31, 2011
debt Service coverage ratio
total1.30x or greater 1.20x to 1.29x 1.10x to 1.19x 1.00x to 1.09x Less than 1.00x
below 50% $ 225 $ 55 $ 3 $ 50 $ 9 $ 342
50% to 59% 444 47 26 – 53 570
60% to 69% 646 140 42 – 77 905
70% to 79% 117 132 120 159 33 561
80% to 89% 99 81 79 72 71 402
90% to 99% 36 35 30 58 116 275
100% or above – 10 50 51 135 246
totaL $ 1,567 $ 500 $ 350 $ 390 $ 494 $ 3,301
Loan‑to‑Value ratios
(In millions)
december 31, 2010
debt Service coverage ratio
total1.30x or greater 1.20x to 1.29x 1.10x to 1.19x 1.00x to 1.09x Less than 1.00x
below 50% $ 324 $ – $ – $ – $ 29 $ 353
50% to 59% 409 54 56 – – 519
60% to 69% 533 73 5 28 25 664
70% to 79% 138 79 57 55 11 340
80% to 89% 267 186 165 151 69 838
90% to 99% 15 54 181 185 135 570
100% or above – – 47 43 112 202
totaL $ 1,686 $ 446 $ 511 $ 462 $ 381 $ 3,486
The Company’s annual in-depth review of its commercial mortgage
loan investments is the primary mechanism for identifying emerging
risks in the portfolio. The most recent review was completed by the
Company’s investment professionals in the second quarter of 2011
and included an analysis of each underlying property’s most recent
annual financial statements, rent rolls, operating plans, budgets,
a physical inspection of the property and other pertinent factors.
based on historical results, current leases, lease expirations and rental
conditions in each market, the Company estimates the current year
and future stabilized property income and fair value, and categorizes
the investments as loans in good standing, potential problem loans or
problem loans. based on property valuations and cash flows estimated
as part of this review, and considering updates for loans where material
changes were subsequently identified, the portfolio’s average loan-to-
value ratio improved to 70% at December 31, 2011, decreasing from
74% as of December 31, 2010. The portfolio’s average debt service
coverage ratio was estimated to be 1.40 at December 31, 2011, a slight
increase from 1.38 at December 31, 2010.
Quality ratings are adjusted between annual reviews if new property
information is received or events such as delinquency or a borrower
request for restructure cause management to believe that the Company’s
estimate of financial performance, fair value or the risk profile of the
underlying property has been impacted.
Contents Q

102 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
During the twelve months ended December 31, 2011, the Company
restructured a $65 million potential problem mortgage loan. The
original loan was modified into two notes, including a $55 million
loan at current market terms and a $10 million loan issued at a below
market interest rate. This modification was considered a troubled debt
restructuring because the borrower was experiencing financial difficulties
and a concession was granted as the second loan was issued at a below
market interest rate. no valuation reserve was required because the fair
value of the underlying property exceeds the total outstanding loans.
as a part of this restructuring, both the borrower and the Company
have committed to fund additional capital for leasing and capital
requirements.
other loans were modified during the twelve months ended
December 31, 2011, but were not considered troubled debt restructures.
The impact of modifications to these loans was not material to the
Company’s results of operations, financial condition or liquidity.
potential problem mortgage loans are considered current (no payment
more than 59 days past due), but exhibit certain characteristics that
increase the likelihood of future default. The characteristics management
considers include, but are not limited to, the deterioration of debt
service coverage below 1.0, estimated loan-to-value ratios increasing
to 100% or more, downgrade in quality rating and request from the
borrower for restructuring. in addition, loans are considered potential
problems if principal or interest payments are past due by more than
30 but less than 60 days. problem mortgage loans are either in default
by 60 days or more or have been restructured as to terms, which could
include concessions on interest rate, principal payment or maturity
date. The Company monitors each problem and potential problem
mortgage loan on an ongoing basis, and updates the loan categorization
and quality rating when warranted.
problem and potential problem mortgage loans, net of valuation
reserves, totaled $336 million at December 31, 2011 and $383 million
at December 31, 2010. at December 31, 2011, mortgage loans
collateralized by industrial properties represent the most significant
component of problem and potential problem mortgage loans, with
no significant concentration by geographic region. There were no
significant concentrations by property type or geographic region at
December 31, 2010.
Impaired commercial mortgage loans
a commercial mortgage loan is considered impaired when it is probable
that the Company will not collect all amounts due (principal and
interest) according to the terms of the original loan agreement. The
Company assesses each loan individually for impairment, utilizing the
information obtained from the quality review process discussed above.
impaired loans are carried at the lower of unpaid principal balance or
the fair value of the underlying real estate. Certain commercial mortgage
loans without valuation reserves are considered impaired because the
Company will not collect all interest due according to the terms of
the original agreements; however, the Company does expect to recover
their remaining carrying value primarily because it is less than the fair
value of the underlying real estate.
The carrying value of the Company’s impaired commercial mortgage
loans and related valuation reserves were as follows:
(In millions)
2011 2010
gross reserves net gross reserves net
impaired commercial mortgage
loans with valuation reserves $ 154 $ (19) $ 135 $ 47 $ (12) $ 35
impaired commercial mortgage
loans with no valuation reserves 60 – 60 60 – 60
totaL $ 214 $ (19) $ 195 $ 107 $ (12) $ 95
The average recorded investment in impaired loans was $176 million
during 2011 and $169 million during 2010. The Company recognizes
interest income on problem mortgage loans only when payment is
actually received because of the risk profile of the underlying investment.
interest income that would have been reflected in net income if interest
on non-accrual commercial mortgage loans had been received in
accordance with the original terms was not significant for 2011 or
2010. interest income on impaired commercial mortgage loans was
not significant for 2011 or 2010.
The following table summarizes the changes in valuation reserves for
commercial mortgage loans:
(In millions) 2011 2010
reserve balance, January 1, $ 12 $ 17
increase in valuation reserves 16 24
Charge-offs upon sales and repayments, net of recoveries (1) (12)
transfers to foreclosed real estate (8) (17)
reSerVe BaLance, decemBer 31, $ 19 $ 12
Contents Q

103CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
C. Real Estate
as of December 31, 2011 and 2010, real estate investments consisted primarily of office and industrial buildings in California. investments
with a carrying value of $49 million as of December 31, 2011 and 2010 were non-income producing during the preceding twelve months. as
of December 31, 2011, the Company had commitments to contribute additional equity of $9 million to real estate investments.
D. Other Long-Term Investments
as of December 31, other long-term investments consisted of the following:
(In millions) 2011 2010
real estate entities $ 665 $ 394
Securities partnerships 298 288
interest rate and foreign currency swaps 12 19
Mezzanine loans 31 13
other 52 45
totaL $ 1,058 $ 759
investments in real estate entities and securities partnerships with a
carrying value of $171 million at December 31, 2011 and $169 million
at December 31, 2010 were non-income producing during the preceding
twelve months.
as of December 31, 2011, the Company had commitments to contribute:
•• $165 million to limited liability entities that hold either real estate
or loans to real estate entities that are diversified by property type
and geographic region; and
•• $242 million to entities that hold securities diversified by issuer and
maturity date.
The Company expects to disburse approximately 50% of the committed
amounts in 2012.
E. Short-Term Investments and Cash
Equivalents
Short-term investments and cash equivalents included corporate
securities of $4.1 billion, federal government securities of $164 million
and money market funds of $40 million as of December 31, 2011.
The Company’s short-term investments and cash equivalents as of
December 31, 2010 included corporate securities of $1.1 billion,
federal government securities of $137 million and money market
funds of $40 million. The increase during 2011 is primarily due to
proceeds from the Company’s debt and equity issuances that were
used to partially fund the healthSpring acquisition. See note 3 for
further information.
F. Concentration of Risk
as of December 31, 2011 and 2010, the Company did not have a concentration of investments in a single issuer or borrower exceeding 10%
of shareholders’ equity.
NOTE 12 Derivative Financial Instruments
The Company has written and purchased reinsurance contracts under
its run-off reinsurance segment that are accounted for as free standing
derivatives. The Company also uses derivative financial instruments
to manage the equity, foreign currency, and certain interest rate risk
exposures of its run-off reinsurance segment. in addition, the Company
uses derivative financial instruments to manage the characteristics of
investment assets to meet the varying demands of the related insurance
and contractholder liabilities. See note 2 for information on the
Company’s accounting policy for derivative financial instruments.
Derivatives in the Company’s separate accounts are excluded from
the following discussion because associated gains and losses generally
accrue directly to separate account policyholders.
Collateral and termination features. The Company routinely monitors
exposure to credit risk associated with derivatives and diversifies the
portfolio among approved dealers of high credit quality to minimize this
risk. Certain of the Company’s over-the-counter derivative instruments
contain provisions requiring either the Company or the counterparty
to post collateral or demand immediate payment depending on the
amount of the net liability position and predefined financial strength
or credit rating thresholds. Collateral posting requirements vary by
counterparty. The net liability positions of these derivatives were not
material as of December 31, 2011 or 2010.
Derivative instruments associated with the Company’s
run-off reinsurance segment
Guaranteed Minimum Income Benefits (GMIB)
purpose. The Company has written reinsurance contracts with issuers
of variable annuity contracts that provide annuitants with certain
guarantees of minimum income benefits resulting from the level of
variable annuity account values compared with a contractually guaranteed
amount (“gMib liabilities”). according to the contractual terms of the
written reinsurance contracts, payment by the Company depends on
Contents Q

104 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
the actual account value in the underlying mutual funds and the level
of interest rates when the contractholders elect to receive minimum
income payments. The Company has purchased retrocessional coverage
for a portion of these contracts to reduce a portion of the risks assumed
(“gMib assets”).
Accounting policy. because cash flows are affected by equity markets
and interest rates, but are without significant life insurance risk and are
settled in lump sum payments, the Company accounts for these gMib
liabilities and assets as written and purchased options at fair value.
These derivatives are not designated as hedges and their fair values are
reported in other liabilities (gMib liability) and other assets (gMib
asset), with changes in fair value reported in gMib fair value (gain) loss.
Cash flows. under the terms of these written and purchased contracts,
the Company periodically receives and pays fees based on either
contractholders’ account values or deposits increased at a contractual
rate. The Company will also pay and receive cash depending on changes
in account values and interest rates when contractholders first elect
to receive minimum income payments. These cash flows are reported
in operating activities.
Volume of activity. The potential undiscounted future payments for
the written options (gMib liability, as defined in note 23) was
$1,244 million as of December 31, 2011 and $1,134 million as
of December 31, 2010. The potential undiscounted future receipts
for the purchased options (gMib asset) was $684 million as of
December 31, 2011 and $624 million as of December 31, 2010.
The following table provides the effect of these derivative instruments
on the financial statements for the indicated periods:
Fair Value effect on the Financial Statements (In millions)
instrument
other assets,
including other intangibles
accounts Payable, accrued expenses
and other Liabilities gmiB Fair Value (gain) Loss
as of december 31, as of december 31, For the years ended december 31,
2011 2010 2011 2010 2011 2010
Written options (gMib liability) $ 1,333 $ 903 $ 504 $ 112
purchased options (gMib asset) $ 712 $ 480 (270) (57)
totaL $ 712 $ 480 $ 1,333 $ 903 $ 234 $ 55
GMDB and GMIB Hedge Programs
Purpose. The Company also uses derivative financial instruments under
a dynamic hedge program designed to substantially reduce domestic
and international equity market exposures resulting from changes in
variable annuity account values based on underlying mutual funds for
certain reinsurance contracts that guarantee minimum death benefits
(“gMDb”). During the first quarter of 2011, the Company expanded
this hedge program to include a portion (approximately one-quarter)
of the equity market exposures associated with its gMib business
(“gMDb and gMib equity hedge program”). The Company also
implemented a dynamic hedge program to reduce the exposure to changes
in interest rate levels on the growth rate for approximately one-third
of its gMDb and one-quarter of its gMib businesses (“gMDb and
gMib growth interest rate hedge program”). These hedge programs
are dynamic because the Company will regularly rebalance the hedging
instruments within established parameters as equity and interest rate
exposures of these businesses change.
The Company manages these hedge programs using exchange-traded
equity, foreign currency, and interest rate futures contracts, as well as
interest rate swap contracts. These contracts are generally expected to
rise in value as equity markets and interest rates decline, and decline
in value as equity markets and interest rates rise.
Accounting policy. These hedge programs are not designated as accounting
hedges. although these hedge programs effectively reduce equity
market, foreign currency, and interest rate exposures, changes in the
fair values of these futures and swap contracts may not exactly offset
changes in the portions of the gMDb and gMib liabilities covered by
these hedges, in part because the market does not offer contracts that
exactly match the targeted exposure profile. Changes in fair value of
these futures contracts, as well as interest income and interest expense
relating to the swap contracts are reported in other revenues. The fair
values of the interest rate swaps are reported in other assets and other
liabilities. amounts reflecting corresponding changes in liabilities for
gMDb contracts are included in benefits and expenses.
Cash flows. The Company receives or pays cash daily in the amount
of the change in fair value of the futures contracts. The Company
periodically exchanges cash flows between variable and fixed interest
rates under the interest rate swap contracts. Cash flows relating to these
contracts are included in operating activities.
Volume of activity. The notional value of the equity and currency
futures contracts used in the gMDb and gMib equity hedge program
was $994 million as of December 31, 2011, and $878 million as of
December 31, 2010. equity futures consist primarily of S&p 500,
S&p 400, russell 2000, naSDaQ, topiX (Japanese), euroStoXX
and ftSe (british) equity indices. Currency futures consist of euros,
Japanese yen and british pounds. The notional value of the interest rate
swaps used in the gMDb and gMib growth interest rate hedge program
was $240 million as of December 31, 2011. The notional value was
$29 million for u.S. treasury and $598 million for eurodollar interest
rate futures contracts used by this program as of December 31, 2011.
Contents Q

105CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
The following tables provide the effect of these derivative instruments on the financial statements for the indicated periods:
Fair Value effect on the Financial Statements (In millions)
other revenues
For the years ended december 31,
2011 2010
equity and currency futures for gMDb exposures $ (45) $ (157)
equity and currency futures for gMib exposures 4
totaL eQUitY and cUrrencY FUtUreS $ (41) $ (157)
other assets,
including other intangibles other revenues
as of december 31, 2011
For the year ended
december 31, 2011
interest rate swaps $ 33 $ 39
interest rate futures (1) – (2)
totaL intereSt rate SwaPS and FUtUreS $ 33 $ 37
interest rate derivatives for gMDb exposures $ 31
interest rate derivatives for gMib exposures 6
totaL intereSt rate SwaPS and FUtUreS $ 37
(1) Balance sheet presentation of amounts receivable or payable relating to futures daily variation margin are not fair values and are excluded from this table.
See notes 6 and 10 for further details regarding these businesses.
Derivative instruments used in the Company’s
investment risk management
Derivative financial instruments are also used by the Company as
a part of its investment strategy to manage the characteristics of
investment assets (such as duration, yield, currency and liquidity) to
meet the varying demands of the related insurance and contractholder
liabilities (such as paying claims, investment returns and withdrawals).
Derivatives are typically used in this strategy to minimize interest rate
and foreign currency risks.
Investment Cash Flow Hedges
Purpose. The Company uses interest rate, foreign currency, and
combination (interest rate and foreign currency) swap contracts to
hedge the interest and/or foreign currency cash flows of its fixed
maturity bonds to match associated insurance liabilities.
Accounting policy. using cash flow hedge accounting, fair values
are reported in other long-term investments or other liabilities and
accumulated other comprehensive income and amortized into net
investment income or reported in other realized investment gains and
losses as interest or principal payments are received. net interest cash
flows are reported in operating activities.
Cash flows. under the terms of these various contracts, the Company
periodically exchanges cash flows between variable and fixed interest
rates and/or between two currencies for both principal and interest.
foreign currency swaps are primarily euros, australian dollars, Canadian
dollars, Japanese yen, and british pounds, and have terms for periods
of up to 10 years.
Volume of activity. The following table provides the notional values of
these derivative instruments for the indicated periods:
instrument
notional amount (In millions)
as of december 31,
2011 2010
interest rate swaps $ 134 $ 153
foreign currency swaps 134 159
Combination interest rate and foreign currency swaps 64 64
totaL $ 332 $ 376
Contents Q

106 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
The following table provides the effect of these derivative instruments on the financial statements for the indicated periods:
Fair Value effect on the Financial Statements (In millions)
instrument
other Long‑term investments
accounts Payable, accrued expenses
and other Liabilities
gain (Loss) recognized in other
comprehensive income (1)
as of december 31, as of december 31, For the years ended december 31,
2011 2010 2011 2010 2011 2010
interest rate swaps $ 7 $ 10 $ – $ – $ (3) $ 2
foreign currency swaps 3 6 19 20 (1) 10
Combination interest rate and
foreign currency swaps – – 11 12 1 (7)
totaL $ 10 $ 16 $ 30 $ 32 $ (3) $ 5
(1) Other comprehensive income for foreign currency swaps excludes amounts required to adjust future policy benefits for the run-off settlement annuity business.
for the years ended December 31, 2011 and 2010, the amount of gains (losses) reclassified from accumulated other comprehensive income into
income was not material. no gains (losses) were recognized due to ineffectiveness and there were no amounts excluded from the assessment of
hedge ineffectiveness.
NOTE 13 variable Interest Entities
When the Company becomes involved with a variable interest entity
and when the nature of the Company’s involvement with the entity
changes, in order to determine if the Company is the primary beneficiary
and must consolidate the entity, it evaluates:
•• the structure and purpose of the entity;
•• the risks and rewards created by and shared through the entity; and
•• the entity’s participants’ ability to direct its activities, receive its benefits
and absorb its losses. participants include the entity’s sponsors, equity
holders, guarantors, creditors and servicers.
in the normal course of its investing activities, the Company makes
passive investments in securities that are issued by variable interest
entities for which the Company is not the sponsor or manager. These
investments are predominantly asset-backed securities primarily
collateralized by foreign bank obligations or mortgage-backed securities.
The asset-backed securities largely represent fixed-rate debt securities
issued by trusts that hold perpetual floating-rate subordinated notes
issued by foreign banks. The mortgage-backed securities represent senior
interests in pools of commercial or residential mortgages created and
held by special-purpose entities to provide investors with diversified
exposure to these assets. The Company owns senior securities issued by
several entities and receives fixed-rate cash flows from the underlying
assets in the pools. The Company is not the primary beneficiary and
does not consolidate any of these entities because either:
•• it had no power to direct the activities that most significantly impact
the entities’ economic performance; or
•• it had neither the right to receive benefits nor the obligation to absorb
losses that could be significant to these variable interest entities.
The Company has not provided, and does not intend to provide,
financial support to these entities. The Company performs ongoing
qualitative analyses of its involvement with these variable interest entities
to determine if consolidation is required. The Company’s maximum
potential exposure to loss related to these entities is limited to the
carrying amount of its investment reported in fixed maturities and
equity securities, and its aggregate ownership interest is insignificant
relative to the total principal amount issued by these entities.
Contents Q

107CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
Note 14 Investment Income and Gains and Losses
A. Net Investment Income
The components of pre-tax net investment income for the years ended December 31 were as follows:
(In millions) 2011 2010 2009
fixed maturities $ 817 $ 788 $ 748
equity securities 6 6 7
Commercial mortgage loans 218 221 223
policy loans 86 90 92
real estate (2) (2) (1)
other long-term investments 48 29 (30)
Short-term investments and cash 10 11 10
1,183 1,143 1,049
Less investment expenses 37 38 35
net inVeStment income $ 1,146 $ 1,105 $ 1,014
net investment income for separate accounts (which is not reflected in the Company’s revenues) was $207 million for 2011, $163 million for
2010, and $22 million for 2009.
B. Realized Investment Gains and Losses
The following realized gains and losses on investments for the years ended December 31 exclude amounts required to adjust future policy benefits
for the run-off settlement annuity business.
(In millions) 2011 2010 2009
fixed maturities $ 50 $ 87 $ 2
equity securities (1) 5 12
Commercial mortgage loans (16) (23) (20)
real estate (6) 3 –
other investments, including derivatives 35 3 (37)
realized investment gains (losses), before income taxes 62 75 (43)
Less income taxes (benefits) 21 25 (17)
net reaLized inVeStment gainS (LoSSeS) $ 41 $ 50 $ (26)
included in pre-tax realized investment gains (losses) above were asset write-downs and changes in valuation reserves as follows:
(In millions) 2011 2010 2009
Credit related (1) $ 28 $ 38 $ 93
other 25 1 13
totaL (2) $ 53 $ 39 $ 106
(1) Credit-related losses include other-than-temporary declines in fair value of fixed maturities and equity securities, and changes in valuation reserves and asset write-downs related to
commercial mortgage loans and investments in real estate entities. The amount related to credit losses on fixed maturities for which a portion of the impairment was recognized in
other comprehensive income were immaterial.
(2) Other-than-temporary impairments on fixed maturities of $26 million in 2011 and $47 million in 2009 are included in both the credit-related and other categories above. Other-
than-temporary impairments on fixed maturities in 2010 were immaterial.
The Company recognized pre-tax losses of $7 million in 2011, compared with pre-tax gains of $7 million in 2010 and $13 million in 2009 on
hybrid securities.
realized investment gains in 2011 in other investments, including derivatives, primarily represent gains on sale of real estate properties held in joint
ventures. realized investment losses in 2009 in other investments, including derivatives, primarily represent impairments of real estate entities.
Contents Q

108 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
realized investment gains and (losses) that are not reflected in the Company’s revenues for the years ended December 31 were as follows:
(In millions) 2011 2010 2009
Separate accounts $ 210 $ 191 $ (25)
investment gains required to adjust future policy benefits for the run-off settlement annuity business $ 8 $ 18 $ 51
Sales information for available-for-sale fixed maturities and equity securities, for the years ended December 31 were as follows:
(In millions) 2011 2010 2009
proceeds from sales $ 876 $ 826 $ 949
gross gains on sales $ 53 $ 46 $ 51
gross losses on sales $ (7) $ (3) $ (9)
NOTE 15 Debt
(In millions) 2011 2010
Short‑term:
Commercial paper $ 100 $ 100
Current maturities of long-term debt 4 452
totaL Short‑term deBt $ 104 $ 552
Long‑term:
uncollateralized debt:
2.75% notes due 2016 $ 600 $ –
5.375% notes due 2017 250 250
6.35% notes due 2018 131 131
8.5% notes due 2019 251 251
4.375% notes due 2020 249 249
5.125% notes due 2020 299 299
6.37% notes due 2021 78 78
4.5% notes due 2021 298 –
4% notes due 2022 743 –
7.65% notes due 2023 100 100
8.3% notes due 2023 17 17
7.875% Debentures due 2027 300 300
8.3% Step Down notes due 2033 83 83
6.15% notes due 2036 500 500
5.875% notes due 2041 298 –
5.375% notes due 2042 750 –
other 43 30
totaL Long‑term deBt $ 4,990 $ 2,288
on november 10, 2011, the Company issued $2.1 billion of long-term
debt as follows: $600 million of 5-Year notes due november 15, 2016
at a stated interest rate of 2.75% ($600 million, net of discount,
with an effective interest rate of 2.936% per year), $750 million of
10-Year notes due february 15, 2022 at a stated interest rate of 4%
($743 million, net of discount, with an effective interest rate of 4.346%
per year) and $750 million of 30-Year notes due february 15, 2042
at a stated interest rate of 5.375% ($750 million, net of discount,
with an effective interest rate of 5.542% per year). interest is payable
on May 15 and november 15 of each year beginning May 15, 2012
for the 5-Year notes and february 15 and august 15 of each year
beginning february 15, 2012 for the 10-Year and 30-Year notes. The
proceeds of this debt were used to fund the healthSpring acquisition
in January 2012.
The Company may redeem these notes, at any time, in whole or in
part, at a redemption price equal to the greater of:
•• 100% of the principal amount of the notes to be redeemed; or
•• the present value of the remaining principal and interest payments
on the notes being redeemed discounted at the applicable treasury
rate plus 30 basis points (5-Year 2.75% notes due 2016), 35 basis
points (10-Year 4% notes due 2022), or 40 basis points (30-Year
5.375% notes due 2042).
in June 2011, the Company entered into a new five-year revolving
credit and letter of credit agreement for $1.5 billion, which permits
up to $500 million to be used for letters of credit. This agreement is
diversified among 16 banks, with 3 banks each having 12% of the
Contents Q

109CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
commitment and the remaining 13 banks with 64% of the commitment.
The credit agreement includes options that are subject to consent
by the administrative agent and the committing banks, to increase
the commitment amount to $2 billion and to extend the term past
June 2016. The credit agreement is available for general corporate
purposes, including as a commercial paper backstop and for the
issuance of letters of credit. This agreement includes certain covenants,
including a financial covenant requiring the Company to maintain
a total debt to adjusted capital ratio at or below 0.50 to 1.00. as of
December 31, 2011, the Company had $4 billion of borrowing capacity
within the maximum debt coverage covenant in the agreement in
addition to the $5.1 billion of debt outstanding. There were letters of
credit of $118 million issued as of December 31, 2011.
in March 2011, the Company issued $300 million of 10-Year notes due
March 15, 2021 at a stated interest rate of 4.5% ($298 million, net
of discount, with an effective interest rate of 4.683% per year) and
$300 million of 30-Year notes due March 15, 2041 at a stated interest
rate of 5.875% ($298 million, net of discount, with an effective
interest rate of 6.008% per year). interest is payable on March 15 and
September 15 of each year beginning September 15, 2011. The proceeds
of this debt were used for general corporate purposes, including the
repayment of debt maturing in 2011.
The Company may redeem these notes, at any time, in whole or in
part, at a redemption price equal to the greater of:
•• 100% of the principal amount of the notes to be redeemed; or
•• the present value of the remaining principal and interest payments
on the notes being redeemed discounted at the applicable treasury
rate plus 20 basis points (10-Year 4.5% notes due 2021) or 25 basis
points (30-Year 5.875% notes due 2041).
During 2011, the Company repaid $449 million in maturing long-
term debt.
in the fourth quarter of 2010, the Company entered into the following
transactions related to its long-term debt:
•• in December 2010 the Company offered to settle its 8.5% notes due
2019, including accrued interest from november 1 through the
settlement date. The tender price equaled the present value of the
remaining principal and interest payments on the notes being
redeemed, discounted at a rate equal to the 10-year treasury rate
plus a fixed spread of 100 basis points. The tender offer priced at
a yield of 4.128% and principal of $99 million was tendered, with
$251 million remaining outstanding. The Company paid $130 million,
including accrued interest and expenses, to settle the notes, resulting
in an after-tax loss on early debt extinguishment of $21 million.
•• in December 2010 the Company offered to settle its 6.35% notes due
2018, including accrued interest from September 16 through the
settlement date. The tender price equaled the present value of the
remaining principal and interest payments on the notes being
redeemed, discounted at a rate equal to the 10-year treasury rate
plus a fixed spread of 45 basis points. The tender offer priced at a
yield of 3.923% and principal of $169 million was tendered, with
$131 million remaining outstanding. The Company paid $198 million,
including accrued interest and expenses, to settle the notes, resulting
in an after-tax loss on early debt extinguishment of $18 million.
•• in December 2010, the Company issued $250 million of 4.375%
notes ($249 million net of debt discount, with an effective interest
rate of 5.1%). The difference between the stated and effective interest
rates primarily reflects the effect of treasury locks. See note 12 to the
Consolidated financial Statements for further information. interest
is payable on June 15 and December 15 of each year beginning
December 15, 2010. These notes will mature on December 15, 2020.
The proceeds of this debt were used to fund the tender offer for the
8.5% Senior notes due 2019 and the 6.35% Senior notes due 2018
described above.
in May 2010, the Company issued $300 million of 5.125%
notes ($299 million, net of debt discount, with an effective interest
rate of 5.36% per year). interest is payable on June 15 and December 15
of each year beginning December 15, 2010. These notes will mature
on June 15, 2020. The proceeds of this debt were used for general
corporate purposes.
The Company may redeem the notes issued in 2010 at any time, in
whole or in part, at a redemption price equal to the greater of:
•• 100% of the principal amount of the notes to be redeemed; or
•• the present value of the remaining principal and interest payments
on the notes being redeemed discounted at the applicable treasury
rate plus 25 basis points.
Maturities of debt and capital leases are as follows (in millions): $4
in 2012, $6 in 2013, $23 in 2014, none in 2015, $600 in 2016 and
the remainder in years after 2016. interest expense on long-term
debt, short-term debt and capital leases was $202 million in 2011,
$182 million in 2010, and $166 million in 2009.
NOTE 16 Common and preferred Stock
as of December 31, the Company had issued the following shares:
(Shares in thousands) 2011 2010
Common: par value $0.25
600,000 shares authorized
outstanding – January 1 271,880 274,257
issuance of Common Stock 15,200 –
issued for stock option and other benefit plans 3,735 3,805
repurchase of common stock (5,282) (6,182)
outstanding – December 31 285,533 271,880
treasury stock 80,612 79,066
iSSUed ‑ decemBer 31 366,145 350,946
Contents Q

110 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
on november 16, 2011, the Company issued 15.2 million shares
of its common stock at $42.75 per share. proceeds of $650 million
($629 million net of underwriting discount and fees) were used to
fund the healthSpring acquisition in January 2012.
The Company maintains a share repurchase program, which was
authorized by its board of Directors. The decision to repurchase shares
depends on market conditions and alternative uses of capital. The
Company has, and may continue from time to time, to repurchase
shares on the open market through a rule 10b5-1 plan that permits
a company to repurchase its shares at times when it otherwise might
be precluded from doing so under insider trading laws or because of
self-imposed trading blackout periods.
During 2011, and through february 23, 2012, the Company repurchased
5.3 million shares for approximately $225 million. The total remaining
share repurchase authorization as of february 23, 2012 was $522 million.
The Company repurchased 6.2 million shares for $201 million during 2010.
The Company has authorized a total of 25 million shares of $1 par
value preferred stock. no shares of preferred stock were outstanding
at December 31, 2011 or 2010.
NOTE 17 Accumulated Other Comprehensive Income (Loss)
accumulated other comprehensive income (loss) excludes amounts required to adjust future policy benefits for the run-off settlement annuity
business.
Changes in accumulated other comprehensive income (loss) were as follows:
2011
(In millions) Pre‑tax
tax (expense)
Benefit after‑tax
net unrealized appreciation, securities:
net unrealized appreciation on securities arising during the year $ 366 $ (127) $ 239
reclassification adjustment for losses (gains) included in shareholders’ net income (49) 18 (31)
net unrealized appreciation, securities $ 317 $ (109) $ 208
net unrealized appreciation, derivatives $ 1 $ ‑ $ 1
net translation of foreign currencies $ (30) $ 2 $ (28)
Postretirement benefits liability adjustment:
reclassification adjustment for amortization of net losses from past experience and prior
service costs $ 22 $ (7) $ 15
net change arising from assumption and plan changes and experience (580) 205 (375)
net postretirement benefits liability adjustment $ (558) $ 198 $ (360)
2010
(In millions) Pre‑tax
tax (expense)
Benefit after‑tax
net unrealized appreciation, securities:
net unrealized appreciation on securities arising during the year $ 319 $ (109) $ 210
reclassification adjustment for (gains) included in net income (92) 32 (60)
net unrealized appreciation, securities $ 227 $ (77) $ 150
net unrealized appreciation, derivatives $ 8 $ (2) $ 6
net translation of foreign currencies $ 48 $ (11) $ 37
Postretirement benefits liability adjustment:
reclassification adjustment for amortization of net losses from past experience and prior
service costs $ 10 $ (4) $ 6
net change arising from assumption and plan changes and experience (311) 116 (195)
net postretirement benefits liability adjustment $ (301) $ 112 $ (189)
Contents Q

111CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
2009
(In millions) Pre‑tax
tax (expense)
Benefit after‑tax
net unrealized appreciation, securities:
net unrealized appreciation on securities arising during the year $ 843 $ (292) $ 551
reclassification adjustment for (gains) included in net income (14) 3 (11)
net unrealized appreciation, securities $ 829 $ (289) $ 540
net unrealized depreciation, derivatives $ (30) $ 13 $ (17)
net translation of foreign currencies $ 76 $ (28) $ 48
Postretirement benefits liability adjustment:
reclassification adjustment for amortization of net losses from past experience and prior service costs $ 7 $ (3) $ 4
Curtailment gain (46) 16 (30)
reclassification adjustment included in shareholders’ net income (39) 13 (26)
net change arising from assumption and plan changes and experience (107) 36 (71)
net postretirement benefits liability adjustment $ (146) $ 49 $ (97)
NOTE 18 Shareholders’ Equity and Dividend Restrictions
State insurance departments and foreign jurisdictions that regulate
certain of the Company’s subsidiaries prescribe accounting practices
(which differ in some respects from gaap) to determine statutory
net income and surplus. The Company’s life insurance and hMo
company subsidiaries are regulated by such statutory requirements. The
statutory net income for the years ended, and statutory surplus as of,
December 31 of the Company’s life insurance and hMo subsidiaries
were as follows:
(In millions) 2011 2010 2009
net income $ 953 $ 1,697 $ 1,088
Surplus $ 5,286 $ 5,107 $ 4,728
as of December 31, 2011, statutory surplus for each of the Company’s
life insurance and hMo subsidiaries is sufficient to meet the minimum
required by regulators. as of December 31, 2011, the Company’s life
insurance and hMo subsidiaries had investments on deposit with state
departments of insurance with statutory carrying values of $306 million.
The Company’s life insurance and hMo subsidiaries are also subject
to regulatory restrictions that limit the amount of annual dividends or
other distributions (such as loans or cash advances) insurance companies
may extend to the parent company without prior approval of regulatory
authorities. The maximum dividend distribution that the Company’s
life insurance and hMo subsidiaries may make during 2012 without
prior approval is approximately $0.9 billion. restricted net assets of the
Company as of December 31, 2011, were approximately $7.2 billion.
one of the Company’s life insurance subsidiaries is permitted to loan
up to $600 million to the parent company without prior approval.
NOTE 19 Income Taxes
A. Income Tax Expense
The components of income taxes for the years ended December 31 were as follows:
(In millions) 2011 2010 2009
current taxes
u.S. income $ 320 $ 267 $ 211
foreign income 58 45 48
State income 20 19 16
398 331 275
deferred taxes (benefits)
u.S. income 198 182 279
foreign income 43 15 39
State income 1 (7) 1
242 190 319
totaL income taxeS $ 640 $ 521 $ 594
Contents Q

112 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
total income taxes for the years ended December 31 were different from the amount computed using the nominal federal income tax rate of
35% for the following reasons:
(In millions) 2011 2010 2009
tax expense at nominal rate $ 689 $ 655 $ 664
tax-exempt interest income (29) (31) (31)
effect of permanently invested foreign earnings (23) (31) (23)
Dividends received deduction (4) (3) (3)
resolution of federal tax matters (30) – (27)
State income tax (net of federal income tax benefit) 14 9 12
Change in valuation allowance 4 (94) (2)
other 19 16 4
totaL income taxeS $ 640 $ 521 $ 594
Effect of permanently Invested Foreign Earnings
The Company accrues income taxes on certain undistributed earnings
of its South Korea and hong Kong subsidiaries using the foreign
jurisdiction tax rates, as compared to the higher u.S. statutory tax
rate. These undistributed earnings include those amounts which
management has determined to be permanently invested overseas. The
Company continues to evaluate this permanent investment strategy
for additional foreign jurisdictions.
as a result, shareholders’ net income for the year ended
December 31, 2011, increased by $23 million that included $19 million
attributable to South Korea and $4 million for hong Kong. Shareholders’
net income increased by $31 million in 2010 and $23 million in 2009
from using this method to record income taxes. The 2010 increase
included $20 million attributable to South Korea and $11 million
for hong Kong, while the 2009 increase was all attributable to South
Korea. permanent investment of earnings from these foreign operations
has resulted in cumulative unrecognized deferred tax liabilities of
$77 million through December 31, 2011.
B. Deferred Income Taxes
Deferred income tax assets and liabilities as of December 31 are shown below.
(In millions) 2011 2010
deferred tax assets
employee and retiree benefit plans $ 829 $ 746
investments, net 108 100
other insurance and contractholder liabilities 443 391
Deferred gain on sale of businesses 46 58
policy acquisition expenses 140 143
Loss carryforwards 8 76
other accrued liabilities 109 107
bad debt expense 17 18
other 37 37
Deferred tax assets before valuation allowance 1,737 1,676
Valuation allowance for deferred tax assets (42) (23)
Deferred tax assets, net of valuation allowance 1,695 1,653
deferred tax liabilities
Depreciation and amortization 377 314
foreign operations, net 289 267
unrealized appreciation on investments and foreign currency translation 397 290
total deferred tax liabilities 1,063 871
net deFerred income tax aSSetS $ 632 $ 782
Management believes consolidated taxable income expected to be
generated in the future will be sufficient to support realization of the
Company’s net deferred tax assets. This determination is based upon
the Company’s consistent overall earnings history and future earnings
expectations. other than deferred tax benefits attributable to operating
loss carryforwards, a majority of which were recognized during 2011,
there are no time constraints within which the Company’s deferred
tax assets must be realized.
The Company’s deferred tax asset is net of a federal, state, and beginning
in 2011, a foreign valuation allowance. The foreign valuation allowance
of $15 million was recorded in connection with the Company’s
acquisition of firstassist, though had minimal impact of shareholder’s
net income. The valuation allowance reflects management’s assessment
that certain deferred tax assets may not be realizable.
Contents Q

113CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
C. Uncertain Tax positions
a reconciliation of unrecognized tax benefits for the years ended December 31 is as follows:
(In millions) 2011 2010 2009
balance at January 1, $ 177 $ 214 $ 164
increase (decrease) due to prior year positions (113) (55) 5
increase due to current year positions 7 34 76
reduction related to settlements with taxing authorities (17) (13) (28)
reduction related to lapse of applicable statute of limitations (2) (3) (3)
BaLance at decemBer 31, $ 52 $ 177 $ 214
unrecognized tax benefits decreased during 2011 due primarily to
completion of the 2007 and 2008 irS examination.
The December 31, 2011 unrecognized tax benefit balance included
$21 million that would increase shareholders’ net income if recognized.
The Company has determined it at least reasonably possible that within
the next twelve months there could be a significant increase in the level
of unrecognized tax benefits should there be adverse developments
relative to certain irS specific matters. These changes are not expected
to have a material impact on shareholders’ net income.
The Company classifies net interest expense on uncertain tax positions
and any applicable penalties as a component of income tax expense, but
excludes these amounts from the liability for uncertain tax positions.
The Company’s liability for net interest and penalties was $2 million at
December 31, 2011, $14 million at December 31, 2010 and $13 million
at December 31, 2009. The 2011 decline included $11 million associated
with the completion of the 2007 and 2008 irS examinations.
During the first quarter of 2011, the irS completed its examination of
the Company’s 2007 and 2008 consolidated federal income tax returns,
resulting in an increase to shareholders’ net income of $24 million
($33 million reported in income tax expense, partially offset by a
$9 million pre-tax charge). The increase in shareholders’ net income
included a reduction in net unrecognized tax benefits of $11 million
and a reduction of interest expense of $11 million (reported in income
tax expense).
During the first quarter of 2009, the irS completed its examination of
the Company’s 2005 and 2006 consolidated federal income tax returns,
resulting in an increase to shareholders’ net income of $21 million
($20 million in continuing operations and $1 million in discontinued
operations). The increase reflected a reduction in net unrecognized tax
benefits of $8 million, ($17 million reported in income tax expense,
partially offset by a $9 million pre-tax charge) and a reduction of
interest and penalties of $13 million (reported in income tax expense).
D. Federal Income Tax Examinations,
Litigation and Other Matters
The Company has a continuing dispute with the irS for tax years 2004
through 2006 concerning the appropriate reserve methodology for
certain reinsurance contracts. trial was held before the united States tax
Court for the 2004 tax year in September 2011; the Court’s decision
is expected in 2012. prior to trial, the irS conceded the adjustments,
but did not agree with the Company’s reserve methodology. Though
the irS concession was a favorable development, that significantly
limits exposure, the Company has continued to pursue the litigation
in order to establish that its methodology is appropriate and can be
applied prospectively. The irS raised the same issue in its audit of
the Company’s 2005 and 2006 tax returns. as a result, the Company
filed a petition with the united States tax Court for these years on
September 19, 2011. The Company continues to believe that it will
prevail in both the 2004 and 2005-2006 litigation.
During the fourth quarter of 2011, the irS issued a notice of deficiency
relating to the 2007 and 2008 tax years. The Company disagrees with
such irS action. on January 11, 2012 the Company filed a petition
in the united States tax Court and believes that the ultimate outcome
will not impact results of operations or liquidity.
The irS is expected to begin examination of the Company’s 2009
and 2010 consolidated federal income tax returns in early 2012. The
Company conducts business in numerous states and foreign jurisdictions,
and may be engaged in multiple audit proceedings at any given time.
generally, no further state or foreign audit activity for years prior to
2004 is expected.
the patient protection & affordable Care act, including the
reconciliation act of 2010, included provisions limiting the tax
deductibility of certain future retiree benefit and compensation related
payments. The effect of these provisions reduced shareholders’ net
income in 2011 by $8 million. The Company will continue to evaluate
the tax effect of these provisions.
Contents Q

114 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
NOTE 20 Employee Incentive plans
The people resources Committee (“the Committee”) of the board of
Directors awards stock options, restricted stock, deferred stock and,
beginning in 2010, strategic performance shares to certain employees.
to a very limited extent, the Committee has issued common stock
instead of cash compensation and dividend equivalent rights as part
of restricted and deferred stock units. The Company issues shares
from treasury stock for option exercises, awards of restricted stock
and payment of deferred and restricted stock units.
Compensation cost and related tax benefits for these awards were
as follows:
(In millions) 2011 2010 2009
Compensation cost $ 61 $ 49 $ 42
tax benefits $ 14 $ 12 $ 15
The Company had the following number of shares of common stock available for award at December 31: 11.7 million in 2011, 7.5 million in
2010 and 23.3 million in 2009.
Stock options. The Company awards options to purchase the Company’s common stock at the market price of the stock on the grant date.
options vest over periods ranging from one to five years and expire no later than 10 years from grant date.
The table below shows the status of, and changes in, common stock options during the last three years:
(Options in thousands)
2011 2010 2009
options
weighted average
exercise Price options
weighted average
exercise Price options
weighted average
exercise Price
outstanding – January 1 12,093 $ 31.10 13,751 $ 29.34 12,258 $ 35.48
granted 1,546 $ 42.36 1,846 $ 34.64 4,709 $ 14.15
exercised (3,480) $ 27.93 (2,565) $ 24.31 (1,167) $ 25.32
expired or canceled (578) $ 33.61 (939) $ 30.86 (2,049) $ 33.42
outstanding – December 31 9,581 $ 33.92 12,093 $ 31.10 13,751 $ 29.34
options exercisable at year-end 6,147 $ 34.94 7,656 $ 34.42 8,578 $ 33.53
Compensation expense of $18 million related to unvested stock options at December 31, 2011 will be recognized over the next two years
(weighted average period).
The table below summarizes information for stock options exercised during the last three years:
(In millions) 2011 2010 2009
intrinsic value of options exercised $ 53 $ 30 $ 7
Cash received for options exercised $ 97 $ 62 $ 30
excess tax benefits realized from options exercised $ 10 $ 5 $ –
The following table summarizes information for outstanding common stock options at December 31, 2011:
(Dollars in millions, except per share amounts)
options
outstanding
options
exercisable
number (in thousands) 9,581 6,147
total intrinsic value $ 91 $ 56
Weighted average exercise price $ 33.92 $ 34.94
Weighted average remaining contractual life 6.1 years 4.9 years
The weighted average fair value of options granted under employee incentive plans was $13.96 for 2011, $11.56 for 2010 and $4.6 for 2009,
using the black-Scholes option-pricing model and the following assumptions:
2011 2010 2009
Dividend yield 0.1% 0.1% 0.3%
expected volatility 40.0% 40.0% 40.0%
risk-free interest rate 1.7% 1.9% 1.6%
expected option life 4 years 4 years 4 years
The expected volatility reflects the Company’s past daily stock price
volatility. The Company does not consider volatility implied in the
market prices of traded options to be a good indicator of future volatility
because remaining maturities of traded options are less than one year.
The risk-free interest rate is derived using the four-year u.S. treasury
bond yield rate as of the award date for the primary grant. expected
option life reflects the Company’s historical experience.
Contents Q

115CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
Restricted stock. The Company awards restricted stock to its employees
or directors with vesting periods ranging from two to five years. These
awards are generally in one of two forms: restricted stock grants or
restricted stock units. restricted stock grants are the most widely used
form of restricted stock awards and are used for substantially all u.S.-
based employees receiving such awards. recipients of restricted stock
grants are entitled to earn dividends and to vote during the vesting
period, but forfeit their awards if their employment terminates before
the vesting date. awards of restricted stock units are generally limited
to international employees. a restricted stock unit represents a right
to receive a common share of stock when the unit vests. recipients
of restricted stock units are entitled to receive hypothetical dividends,
but cannot vote during the vesting period. They forfeit their units if
their employment terminates before the vesting date.
The table below shows the status of, and changes in, restricted stock
grants and units during the last three years:
(Awards in thousands)
2011 2010 2009
grants/Units
weighted average
Fair Value at
award date grants/Units
weighted average
Fair Value at
award date grants/Units
weighted average
Fair Value at
award date
outstanding – January 1 4,306 $ 27.70 4,113 $ 27.65 2,347 $ 40.53
awarded 945 $ 42.62 1,155 $ 34.63 2,678 $ 18.14
Vested (564) $ 42.79 (541) $ 40.87 (557) $ 32.00
forfeited (441) $ 28.99 (421) $ 29.28 (355) $ 33.79
oUtStanding ‑ decemBer 31 4,246 $ 28.88 4,306 $ 27.70 4,113 $ 27.65
The fair value of vested restricted stock was: $24 million in 2011,
$18 million in 2010 and $10 million in 2009.
at the end of 2011, approximately 2,900 employees held 4.2 million
restricted stock grants and units with $66 million of related compensation
expense to be recognized over the next three years (weighted average
period).
Strategic Performance Shares. The Company awards strategic
performance shares to its executives generally with a performance
period of three years. Strategic performance shares are divided into two
broad groups: 50% are subject to a market condition (total shareholder
return relative to industry peer companies) and 50% are subject to a
performance conditions (revenue growth and cumulative adjusted net
income). These targets are set by the Committee. at the end of the
performance period, holders of strategic performance shares will be
awarded anywhere from 0 to 200% of the original grant of strategic
performance shares in Cigna common stock.
The table below shows the status of, and changes in, strategic performance
shares during 2011 and 2010:
(Awards in thousands)
2011 2010
grants/Units
weighted average
Fair Value at
award date grants/Units
weighted average
Fair Value at
award date
outstanding – January 1 430 $ 34.73 – $ –
awarded 529 $ 42.92 480 $ 34.73
Vested – $ – – $ –
forfeited (125) $ 37.92 (50) $ 34.65
oUtStanding ‑ decemBer 31 834 $ 39.45 430 $ 34.73
at the end of 2011, 67 employees held approximately 830,000 strategic performance shares and $19 million of related compensation expense
expected to be recognized over the next two years. for strategic performance shares subject to a performance condition, the amount of expense
may vary based on actual performance in 2012 and 2013.
NOTE 21 Leases, Rentals and Outsourced Service Arrangements
rental expenses for operating leases, principally for office space, amounted
to $115 million in 2011, $127 million in 2010 and $138 million in
2009. as of December 31, 2011, future net minimum rental payments
under non-cancelable operating leases were approximately $547 million,
payable as follows (in millions): $108 in 2012, $97 in 2013, $83 in
2014, $67 in 2015, $52 in 2016 and $140 thereafter.
The Company also has several outsourced service arrangements with
third parties, primarily for human resource and information technology
support services. The initial service periods under these arrangements
range from seven to eight years and their related costs are reported
consistent with operating leases over the service period based on the
pattern of use. The Company recorded in other operating expense
$116 million in 2011, $114 million in 2010 and $115 million in
2009 for these arrangements.
Contents Q

116 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
NOTE 22 Segment Information
The Company’s operating segments generally reflect groups of related
products, except for the international segment which is generally based
on geography. in accordance with gaap, operating segments that do not
require separate disclosure were combined in “other operations”. The
Company measures the financial results of its segments using “segment
earnings (loss)”, which is defined as shareholders’ income (loss) from
continuing operations before after-tax realized investment results.
Consolidated pre-tax income from continuing operations is primarily
attributable to domestic operations. Consolidated pre-tax income from
continuing operations generated by the Company’s foreign operations
was approximately 15% in 2011, 13% in 2010 and 9% in 2009.
The Company determines segment earnings (loss) consistent with
accounting policies used in preparing the consolidated financial
statements, except that amounts included in Corporate are not allocated
to segments. The Company allocates certain other operating expenses,
such as systems and other key corporate overhead expenses, on systematic
bases. income taxes are generally computed as if each segment were
filing a separate income tax return. The Company does not report total
assets by segment since this is not a metric used to allocate resources
or evaluate segment performance.
The Company presents segment information as follows:
Health Care offers insured and self-insured medical, dental, behavioral
health, vision, and prescription drug benefit plans, health advocacy
programs and other products and services that may be integrated to
provide comprehensive health care benefit programs. Cigna healthCare
companies offer these products and services in all 50 states, the District
of Columbia and the u.S. Virgin islands. These products and services
are offered through a variety of funding arrangements such as guaranteed
cost, retrospectively experience-rated and administrative services only
arrangements.
Disability and Life includes group disability, life, accident and specialty
insurance.
International includes supplemental health, life and accident
insurance products; and international health care products and services
including those offered to individuals and globally mobile employees
of multinational companies and organizations.
Run-off Reinsurance is predominantly comprised of gMDb, gMib,
workers’ compensation and personal accident reinsurance products.
on December 31, 2010, the Company essentially exited from its
workers’ compensation and personal accident reinsurance business
by purchasing retrocessional coverage from a bermuda subsidiary of
enstar group Limited and transferring the ongoing administration of
this business to the reinsurer.
The Company also reports results in two other categories.
Other Operations consist of:
•• corporate-owned life insurance (“CoLi”);
•• deferred gains recognized from the 1998 sale of the individual life
insurance and annuity business and the 2004 sale of the retirement
benefits business; and
•• run-off settlement annuity business.
Corporate reflects amounts not allocated to other segments, such as net
interest expense (defined as interest on corporate debt less net investment
income on investments not supporting segment operations), interest
on uncertain tax positions, certain litigation matters, intersegment
eliminations, compensation cost for stock options and certain corporate
overhead expenses such as directors’ expenses.
in 2010, the Company began reporting the expense associated with
its frozen pension plans in Corporate. prior periods were not restated
as the effect on prior periods was not material.
Contents Q

117CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
Summarized segment financial information for the years ended December 31 was as follows:
(In millions) 2011 2010 2009
health care
premiums and fees:
Medical:
guaranteed cost (1) (2) $ 4,176 $ 3,929 $ 3,380
experience-rated (2) (3) 1,934 1,823 1,699
Stop loss 1,451 1,287 1,274
Dental 894 804 731
Medicare 489 1,470 595
Medicare part D 624 558 342
other (4) 600 543 515
total medical 10,168 10,414 8,536
Life and other non-medical 77 103 179
total premiums 10,245 10,517 8,715
fees (2) (5) 2,936 2,802 2,669
total premiums and fees 13,181 13,319 11,384
Mail order pharmacy revenues 1,447 1,420 1,282
other revenues 234 266 262
net investment income 274 243 181
Segment revenues $ 15,136 $ 15,248 $ 13,109
income taxes $ 556 $ 476 $ 399
Segment earnings $ 991 $ 861 $ 731
(1) Includes guaranteed cost premiums primarily associated with open access and commercial HMO, as well as other risk-related products.
(2) Premiums and/or fees associated with certain specialty products are also included.
(3) Includes minimum premium arrangements with a risk profile similar to experience-rated funding arrangements. The risk portion of minimum revenue is reported in experience-rated
medical premium whereas the self funding portion of minimum premium revenue is recorded in fees. Also includes certain non-participating cases for which special customer level
reporting of experience is required.
(4) Other medical premiums include risk revenue for specialty products.
(5) Represents administrative service fees for medical members and related specialty product fees for non-medical members as well as fees related to Medicare Part D of $61 million in
2011, $57 million in 2010 and $41 million in 2009.
Contents Q

118 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
(In millions) 2011 2010 2009
disability and Life
premiums and fees:
Life $ 1,256 $ 1,238 $ 1,301
Disability 1,268 1,167 1,057
other 256 262 276
total 2,780 2,667 2,634
other revenues – 123 113
net investment income 267 261 244
Segment revenues $ 3,047 $ 3,051 $ 2,991
income taxes $ 109 $ 120 $ 109
Segment earnings $ 287 $ 291 $ 284
international
premiums and fees:
health Care $ 1,464 $ 1,037 $ 884
Supplemental health, Life, and accident 1,526 1,231 998
total 2,990 2,268 1,882
other revenues 27 31 22
net investment income 96 82 69
Segment revenues $ 3,113 $ 2,381 $ 1,973
income taxes $ 125 $ 95 $ 70
equity in income of investees $ 14 $ 14 $ 11
Segment earnings $ 286 $ 243 $ 183
run‑off reinsurance
premiums and fees and other revenues $ 20 $ (133) $ (254)
net investment income 103 114 113
Segment revenues $ 123 $ (19) $ (141)
income taxes (benefits) $ (99) $ (136) $ 93
Segment earnings (loss) $ (183) $ 26 $ 185
other operations
premiums and fees and other revenues $ 169 $ 174 $ 176
net investment income 400 404 407
Segment revenues $ 569 $ 578 $ 583
income taxes $ 29 $ 39 $ 31
Segment earnings $ 89 $ 85 $ 86
corporate
other revenues and eliminations $ (58) $ (62) $ (58)
net investment income 6 1 –
Segment revenues $ (52) $ (61) $ (58)
income tax benefits $ (101) $ (98) $ (91)
Segment loss $ (184) $ (211) $ (142)
realized investment gains (losses)
realized investment gains (losses) $ 62 $ 75 $ (43)
income taxes (benefits) 21 25 (17)
realized investment gains (losses), net of taxes and noncontrolling interest $ 41 $ 50 $ (26)
total
premiums and fees and other revenues $ 19,343 $ 18,653 $ 16,161
Mail order pharmacy revenues 1,447 1,420 1,282
net investment income 1,146 1,105 1,014
realized investment gains (losses) 62 75 (43)
total revenues $ 21,998 $ 21,253 $ 18,414
income taxes $ 640 $ 521 $ 594
Segment earnings $ 1,286 $ 1,295 $ 1,327
realized investment gains (losses), net of taxes and noncontrolling interest $ 41 $ 50 $ (26)
Shareholders’ income from continuing operations $ 1,327 $ 1,345 $ 1,301
Contents Q

119CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
premiums and fees, mail order pharmacy revenues and other revenues by product type were as follows for the years ended December 31:
(In millions) 2011 2010 2009
Medical $ 14,568 $ 14,253 $ 12,089
Disability 1,280 1,162 1,063
Supplemental health, Life, and accident 3,103 2,839 2,748
Mail order pharmacy 1,447 1,420 1,282
other 392 399 261
totaL $ 20,790 $ 20,073 $ 17,443
Concentration of risk. for the Company’s international segment, South
Korea is the single largest geographic market. South Korea generated
31% of the segment’s revenues and 51% of the segment’s earnings
in 2011. South Korea generated 32% of the segment’s revenues and
49% of the segment’s earnings in 2010. Due to the concentration
of business in South Korea, the international segment is exposed to
potential losses resulting from economic and geopolitical developments
in that country, as well as foreign currency movements affecting the
South Korean currency, which could have a significant impact on the
segment’s results and the Company’s consolidated financial results.
NOTE 23 Contingencies and Other Matters
The Company, through its subsidiaries, is contingently liable for various
guarantees provided in the ordinary course of business.
A. Financial Guarantees primarily Associated
with the Sold Retirement Benefits
Business
Separate account assets are contractholder funds maintained in accounts
with specific investment objectives. The Company records separate
account liabilities equal to separate account assets. in certain cases,
primarily associated with the sold retirement benefits business (which
was sold in april 2004), the Company guarantees a minimum level
of benefits for retirement and insurance contracts, written in separate
accounts. The Company establishes an additional liability if management
believes that the Company will be required to make a payment under
these guarantees.
The Company guarantees that separate account assets will be sufficient
to pay certain retiree or life benefits. The sponsoring employers are
primarily responsible for ensuring that assets are sufficient to pay
these benefits and are required to maintain assets that exceed a certain
percentage of benefit obligations. This percentage varies depending on
the asset class within a sponsoring employer’s portfolio (for example,
a bond fund would require a lower percentage than a riskier equity
fund) and thus will vary as the composition of the portfolio changes.
if employers do not maintain the required levels of separate account
assets, the Company or an affiliate of the buyer has the right to redirect
the management of the related assets to provide for benefit payments.
as of December 31, 2011, employers maintained assets that exceeded
the benefit obligations. benefit obligations under these arrangements
were $1.7 billion as of December 31, 2011. as of December 31, 2011,
approximately 75% of these guarantees are reinsured by an affiliate of the
buyer of the retirement benefits business. The remaining guarantees are
provided by the Company with minimal reinsurance from third parties.
There were no additional liabilities required for these guarantees as of
December 31, 2011. Separate account assets supporting these guarantees
are classified in Levels 1 and 2 of the gaap fair value hierarchy. See
note 10 for further information on the fair value hierarchy.
The Company does not expect that these financial guarantees will have
a material effect on the Company’s consolidated results of operations,
liquidity or financial condition.
B. Guaranteed Minimum Income Benefit
Contracts
The Company’s reinsurance operations, which were discontinued in
2000 and are now an inactive business in run-off mode, reinsured
minimum income benefits under certain variable annuity contracts
issued by other insurance companies. a contractholder can elect the
guaranteed minimum income benefit (“gMib”) within 30 days of any
eligible policy anniversary after a specified contractual waiting period.
The Company’s exposure arises when the guaranteed annuitization
benefit exceeds the annuitization benefit based on the policy’s current
account value. at the time of annuitization, the Company pays the
excess (if any) of the minimum benefit guaranteed under the contract
over the benefit based on the current account value in a lump sum to
the direct writing insurance company.
in periods of declining equity markets or declining interest rates, the
Company’s gMib liabilities increase. Conversely, in periods of rising
equity markets and rising interest rates, the Company’s liabilities for
these benefits decrease.
The Company estimates the fair value of the gMib assets and liabilities
using assumptions for market returns and interest rates, volatility of
the underlying equity and bond mutual fund investments, mortality,
lapse, annuity election rates, non-performance risk, and risk and profit
charges. See note 10 for additional information on how fair values
for these liabilities and related receivables for retrocessional coverage
are determined.
the Company is required to disclose the maximum potential
undiscounted future payments for gMib contracts. under these
guarantees, the future payment amounts are dependent on equity
and bond fund market and interest rate levels prior to and at the
date of annuitization election, which must occur within 30 days of a
policy anniversary, after the appropriate waiting period. Therefore, the
future payments are not fixed and determinable under the terms of
Contents Q

120 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
the contract. accordingly, the Company has estimated the maximum
potential undiscounted future payments using hypothetical adverse
assumptions, defined as follows:
•• no annuitants surrendered their accounts;
•• all annuitants lived to elect their benefit;
•• all annuitants elected to receive their benefit on the next available
date (2012 through 2018); and
•• all underlying mutual fund investment values remained at the
December 31, 2011 value of $1.1 billion with no future returns.
The maximum potential undiscounted payments that the Company
would make under those assumptions would aggregate $1.2 billion
before reinsurance recoveries. The Company expects the amount
of actual payments to be significantly less than this hypothetical
undiscounted aggregate amount. The Company has retrocessional
coverage in place from two external reinsurers which covers 55% of the
exposures on these contracts. The Company bears the risk of loss if its
retrocessionaires do not meet or are unable to meet their reinsurance
obligations to the Company.
C. Certain Other Guarantees
The Company had indemnification obligations to lenders of up to
$292 million as of December 31, 2011, related to borrowings by
certain real estate joint ventures which the Company either records as
an investment or consolidates. These borrowings, that are nonrecourse
to the Company, are secured by the joint ventures’ real estate properties
with fair values in excess of the loan amounts and mature at various
dates beginning in 2012 through 2021. The Company’s indemnification
obligations would require payment to lenders for any actual damages
resulting from certain acts such as unauthorized ownership transfers,
misappropriation of rental payments by others or environmental
damages. based on initial and ongoing reviews of property management
and operations, the Company does not expect that payments will be
required under these indemnification obligations. any payments that
might be required could be recovered through a refinancing or sale of
the assets. in some cases, the Company also has recourse to partners
for their proportionate share of amounts paid. There were no liabilities
required for these indemnification obligations as of December 31, 2011.
as of December 31, 2011, the Company guaranteed that it would
compensate the lessors for a shortfall of up to $44 million in the market
value of certain leased equipment at the end of the lease. guarantees
of $28 million expire in 2012 and $16 million expire in 2016. The
Company had liabilities for these guarantees of $14 million as of
December 31, 2011.
the Company has agreements with certain banks that provide
banking services to settle claim checks processed by the Company
for administrative Services only (“aSo”) and certain minimum
premium customers. The customers are responsible for adequately
funding their accounts as claim checks are presented for payment.
under these agreements, the Company guarantees that the banks will
not incur a loss if a customer fails to properly fund its account. The
amount of the guarantee fluctuates daily. as of December 31, 2011, the
aggregate maximum exposure under these guarantees was approximately
$390 million and there were no liabilities required. There were no
material charges related to these guarantees for the twelve months ended
December 31, 2011 and there were $3 million in after-tax charges for
the same period in 2010. Through february 13, 2012, the exposure
that existed at December 31, 2011 has been reduced by approximately
94% through customers’ funding of claim checks when presented for
payment. in addition, the Company can limit its exposure under these
guarantees by suspending claim payments for any customer who has
not adequately funded their bank account.
The Company contracts on an aSo basis with customers who fund their
own claims. The Company charges these customers administrative fees
based on the expected cost of administering their self-funded programs.
in some cases, the Company provides performance guarantees associated
with meeting certain service-related and other performance standards.
if these standards are not met, the Company may be financially at
risk up to a stated percentage of the contracted fee or a stated dollar
amount. The Company establishes liabilities for estimated payouts
associated with these performance guarantees. approximately 14% of
aSo fees reported for the twelve months ended December 31, 2011
were at risk, with reimbursements estimated to be approximately 1%.
The Company had indemnification obligations as of December 31, 2011
in connection with acquisition and disposition transactions. These
indemnification obligations are triggered by the breach of representations
or covenants provided by the Company, such as representations for the
presentation of financial statements, the filing of tax returns, compliance
with law or the identification of outstanding litigation. These obligations
are typically subject to various time limitations, defined by the contract
or by operation of law, such as statutes of limitation. in some cases, the
maximum potential amount due is subject to contractual limitations
based on a percentage of the transaction purchase price, while in other
cases limitations are not specified or applicable. The Company does not
believe that it is possible to determine the maximum potential amount
due under these obligations, since not all amounts due under these
indemnification obligations are subject to limitation. There were no
liabilities for these indemnification obligations as of December 31, 2011.
The Company does not expect that these guarantees will have a material
adverse effect on the Company’s consolidated results of operations,
financial condition or liquidity.
D. Regulatory and Industry Developments
Regulation. The health services industry is heavily regulated by federal
and state laws and administrative agencies, such as state departments
of insurance and the federal Departments of Labor, health and
human Services, treasury and Justice, as well as the courts. regulation,
legislation and judicial decisions have resulted in changes to industry
and the Company’s business practices and will continue to do so
in the future. in addition, the Company’s subsidiaries are routinely
involved with various claims, lawsuits and regulatory and irS audits
and investigations that could result in financial liability, changes in
business practices, or both. health care regulation and legislation in its
various forms, including the implementation of the patient protection
and affordable Care act (including the reconciliation act) that was
signed into law during the first quarter of 2010, could have a material
adverse effect on the Company’s health care operations if it inhibits
the Company’s ability to respond to market demands, adversely affects
the way the Company does business, or results in increased medical or
administrative costs without improving the quality of care or services.
other possible regulatory and legislative changes or judicial decisions
that could have an adverse effect on the Company’s businesses include:
Contents Q

121CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
•• additional mandated benefits or services that increase costs;
•• legislation that would grant plan participants broader rights to sue
their health plans;
•• changes in public policy and in the political environment, that
could affect state and federal law, including legislative and regulatory
proposals related to health care issues, that could increase cost and
affect the market for the Company’s health care products and services;
•• changes in employee retirement income Security act of 1974 (“eriSa”)
regulations resulting in increased administrative burdens and costs;
•• additional restrictions on the use of prescription drug formularies and
rulings from pending purported class action litigation, that could result
in adjustments to or the elimination of the average wholesale price of
pharmaceutical products as a benchmark in establishing certain rates,
charges, discounts, guarantees and fees for various prescription drugs;
•• additional privacy legislation and regulations that interfere with
the proper use of medical information for research, coordination of
medical care and disease and disability management;
•• additional variations among state laws mandating the time periods and
administrative processes for payment of health care provider claims;
•• legislation that would exempt independent physicians from antitrust
laws; and
•• changes in federal tax laws, such as amendments that could affect
the taxation of employer provided benefits.
The health services industry remains under scrutiny by various state
and federal government agencies and could be subject to government
efforts to bring criminal actions in circumstances that could previously
have given rise only to civil or administrative proceedings.
Guaranty fund assessments. The Company operates in a regulatory
environment that may require the Company to participate in assessments
under state insurance guaranty association laws. The Company’s exposure
to assessments is based on its share of business it writes in the relevant
jurisdictions for certain obligations of insolvent insurance companies to
policyholders and claimants. for the years ended December 31, 2011
and 2010, charges related to guaranty fund assessments were not
material to the Company’s results of operations.
The Company is aware of an insurer that is in rehabilitation, an
intermediate action before insolvency. as of December 31, 2011,
the regulator had petitioned the state court for liquidation and the
Company believes it is likely that the state court will rule on insolvency
for this insurer in 2012. if the insurer is declared insolvent and placed
in liquidation, the Company and other insurers may be required to pay
a portion of policyholder claims through guaranty fund assessments
from various states in which the Company’s insurance subsidiaries write
premiums. based on current information available, that is subject to
change, the Company has estimated that potential future assessments
could decrease its future results of operations by up to $40 million
after-tax. The ultimate amount and timing of any future charges for
this potential insolvency will depend on several factors, including the
declaration of insolvency and the amount of the potential insolvency, the
basis, amount and timing of associated estimated future guaranty fund
assessments and the availability and amount of any potential premium
tax and other offsets. Cash payments, if any, by the Company’s insurance
subsidiaries are likely to extend over several years. The Company will
continue to monitor the outcome of the court’s deliberations and may
record a liability and expense in a future reporting period.
E. Litigation and Other Legal Matters
The Company is routinely involved in numerous claims, lawsuits,
regulatory and irS audits, investigations and other legal matters arising,
for the most part, in the ordinary course of managing a health services
business, including payments to providers and benefit level disputes.
Such legal matters include benefit claims, breach of contract claims, tort
claims, disputes regarding reinsurance arrangements, employment related
suits, employee benefit claims, wage and hour claims, and intellectual
property and real estate related disputes. Litigation of income tax matters
is accounted for under faSb’s accounting guidance for uncertainty
in income taxes. further information can be found in note 19. The
outcome of litigation and other legal matters is always uncertain, and
unfavorable outcomes that are not justified by the evidence can occur.
The Company believes that it has valid defenses to the legal matters
pending against it and is defending itself vigorously.
When the Company (in the course of its regular review of pending
litigation and legal matters) has determined that a material loss is
reasonably possible, the matter is disclosed including an estimate or
range of loss or a statement that such an estimate cannot be made.
in many proceedings, however, it is inherently difficult to determine
whether any loss is probable or even possible or to estimate the amount
or range of any loss. in accordance with applicable accounting guidance,
when litigation and regulatory matters present loss contingencies
that are both probable and estimable, the Company accrues the
estimated loss by a charge to income. The amount accrued represents
the Company’s best estimate of the probable loss. if only a range of
estimated losses can be determined, the Company accrues an amount
within the range that, in the Company’s judgment, reflects the most
likely outcome; if none of the estimates within that range is a better
estimate than any other amount, the Company accrues at the low end
of the range. in cases that the Company has accrued an estimated loss,
the accrued amount may differ materially from the ultimate amount
of the relevant costs. as a litigation or regulatory matter develops, the
Company monitors the matter for further developments that could
affect the amount previously accrued, if any, and updates such amount
accrued or disclosures previously provided as appropriate.
except as otherwise noted, the Company believes that the legal actions,
proceedings and investigations currently pending against it should not
have a material adverse effect on the Company’s results of operation,
financial condition or liquidity based upon current knowledge and
taking into consideration current accruals. however, in light of the
uncertainties involved in these matters, there is no assurance that their
ultimate resolution will not exceed the amounts currently accrued by
the Company and that an adverse outcome in one or more of these
matters could be material to the Company’s results of operation,
financial condition or liquidity for any particular period.
Amara cash balance pension plan litigation. on December 18, 2001,
Janice amara filed a class action lawsuit, captioned Janice C. Amara,
Gisela R. Broderick, Annette S. Glanz, individually and on behalf of all
others similarly situated v. Cigna Corporation and Cigna Pension Plan,
in the united States District Court for the District of Connecticut
against Cigna Corporation and the Cigna pension plan on behalf of
herself and other similarly situated participants in the Cigna pension
plan affected by the 1998 conversion to a cash balance formula. The
plaintiffs allege various eriSa violations including, among other
things, that the plan’s cash balance formula discriminates against older
employees; the conversion resulted in a wear away period (when the
Contents Q

122 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Financial Statements and Supplementary Data
pre-conversion accrued benefit exceeded the post-conversion benefit);
and these conditions are not adequately disclosed in the plan.
in 2008, the court issued a decision finding in favor of Cigna Corporation
and the Cigna pension plan on the age discrimination and wear away
claims. however, the court found in favor of the plaintiffs on many
aspects of the disclosure claims and ordered an enhanced level of
benefits from the existing cash balance formula for the majority of the
class, requiring class members to receive their frozen benefits under
the pre-conversion Cigna pension plan and their post-1997 accrued
benefits under the post-conversion Cigna pension plan. The court also
ordered, among other things, pre-judgment and post-judgment interest.
both parties appealed the court’s decisions to the united States
Court of appeals for the Second Circuit which issued a decision on
october 6, 2009 affirming the District Court’s judgment and order
on all issues. on January 4, 2010, both parties filed separate petitions
for a writ of certiorari to the united States Supreme Court. Cigna’s
petition was granted, and on May 16, 2011, the Supreme Court issued
its opinion in which it reversed the lower courts’ decisions and remanded
the case to the trial judge for reconsideration of the remedy. The Court
unanimously agreed with the Company’s position that the lower courts
erred in granting a remedy for an inaccurate plan description under an
eriSa provision that allows only recovery of plan benefits. however,
the decision identified possible avenues of “appropriate equitable relief ”
that plaintiffs may pursue as an alternative remedy.
The case is now in the trial court following remand. briefs have
been filed on the remedial issues and oral argument took place on
December 9, 2011. The Company will continue to vigorously defend its
position in this case. as of December 31, 2011, the Company continues
to carry a liability of $82 million pre-tax ($53 million after-tax), that
reflects the Company’s best estimate of the exposure.
Ingenix. on february 13, 2008, State of new York attorney general
andrew M. Cuomo announced an industry-wide investigation into the
use of data provided by ingenix, inc., a subsidiary of unitedhealthcare,
used to calculate payments for services provided by out-of-network
providers. The Company received four subpoenas from the new York
attorney general’s office in connection with this investigation and
responded appropriately. on february 17, 2009, the Company entered
into an assurance of Discontinuance resolving the investigation. in
connection with the industry-wide resolution, the Company contributed
$10 million to the establishment of a new non-profit company that
now compiles and provides the data formerly provided by ingenix.
The Company was named as a defendant in a number of putative
nationwide class actions asserting that due to the use of data from
ingenix, inc., the Company improperly underpaid claims, an industry-
wide issue. all of the class actions were consolidated into Franco v.
Connecticut General Life Insurance Company et al., which is pending
in the united States District Court for the District of new Jersey. The
consolidated amended complaint, filed on august 7, 2009, asserts
claims under eriSa, the riCo statute, the Sherman antitrust act
and new Jersey state law on behalf of subscribers, health care providers
and various medical associations. Cigna filed a motion to dismiss the
consolidated amended complaint on September 9, 2009. plaintiffs
filed a motion for class certification on May 28, 2010. fact and expert
discovery have been completed.
on September 23, 2011, the court granted in part and denied in part
the motion to dismiss the consolidated amended complaint. The court
dismissed all claims by the health care provider and medical association
plaintiffs for lack of standing to sue, and as a result the case will proceed
only on behalf of subscribers. in addition, the court dismissed all of the
antitrust claims, the eriSa claims based on disclosure and the new
Jersey state law claims. The court did not dismiss the eriSa claims
for benefits and claims under the riCo statute.
on June 9, 2009, Cigna filed motions in the united States District Court
for the Southern District of florida to enforce a previous settlement, In
re Managed Care Litigation, by enjoining the riCo and antitrust causes
of action asserted by the provider and medical association plaintiffs
in the Ingenix litigation on the ground that they arose previously and
were released in the prior settlement. on november 30, 2009, the
Court granted the motions and ordered the provider and association
plaintiffs to withdraw their riCo and antitrust claims from the Ingenix
litigation. plaintiffs appealed to the eleventh Circuit and the appeal
is pending. The claims of these provider and association plaintiffs
have now been dismissed by the Franco court for lack of standing as
described above, and therefore Cigna moved to dismiss the eleventh
Circuit appeal as moot.
it is reasonably possible that others could initiate additional litigation
or additional regulatory action against the Company with respect to use
of data provided by ingenix, inc. The Company denies the allegations
asserted in the investigations and litigation and will vigorously defend
itself in these matters.
Due to numerous uncertain and unpredictable factors presented in
these cases, it is not possible to estimate a range of loss at this time
and, accordingly, no accrual has been recorded in the Company’s
financial statements.
Karp gender discrimination litigation. on March 3, 2011, bretta
Karp filed a class action gender discrimination lawsuit against the
Company in the united States District Court for the District of
Massachusetts. The plaintiff alleges systemic discrimination against
females in compensation, promotions, training, and performance
evaluations in violation of title Vii of the Civil rights act of 1964,
as amended, and Massachusetts law. plaintiff seeks monetary damages
and various other forms of broad programmatic relief, including
injunctive relief, backpay, lost benefits, and preferential rights to jobs.
The Company filed a motion to dismiss the lawsuit on May 16, 2011,
which is fully briefed and pending. The Company denies the allegations
asserted in the litigation and will vigorously defend itself in this case.
Due to numerous uncertain and unpredictable factors presented in
this case, it is not possible to estimate a range of loss (if any) at this
time, and accordingly, no accrual has been recorded in the Company’s
financial statements.
Contents Q

123CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Report of Independent Registered public Accounting Firm
Report of Independent Registered public Accounting Firm
To the Board of Directors and Shareholders of Cigna
Corporation
in our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of income, comprehensive income
and changes in total equity and cash flows present fairly, in all material
respects, the financial position of Cigna Corporation and its subsidiaries
(“the Company”) at December 31, 2011 and December 31, 2010, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 2011 in conformity with accounting
principles generally accepted in the united States of america. also in
our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2011,
based on criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring organizations of the treadway
Commission (CoSo). The Company’s management is responsible for
these financial statements, for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in Management’s
annual report on internal Control over financial reporting. our
responsibility is to express opinions on these financial statements and
on the Company’s internal control over financial reporting based on
our integrated audits. We conducted our audits in accordance with
the standards of the public Company accounting oversight board
(united States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects. our audits of the financial statements included examining,
on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. our audit of internal control over
financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. our audits
also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
a company’s internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.
a company’s internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management
and directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the company’s assets that could have a material
effect on the financial statements.
because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. also, projections
of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ Pricewaterhousecoopers LLP
philadelphia, pennsylvania
february 23, 2012
Contents Q

124 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Quarterly Financial Data (unaudited)
Quarterly Financial Data (unaudited)
The following unaudited quarterly financial data is presented on a consolidated basis for each of the years ended December 31, 2011 and
December 31, 2010. Quarterly financial results necessarily rely heavily on estimates. This and certain other factors, such as the seasonal nature
of portions of the insurance business, suggest the need to exercise caution in drawing specific conclusions from quarterly consolidated results.
(In millions, except per share amounts)
Three months ended
march 31 june 30 Sept. 30 dec. 31
Consolidated Results
2011
total revenues $ 5,413 $ 5,509 $ 5,613 $ 5,463
income from continuing operations before income taxes 600 616 297 455
Shareholders’ net income 429 (1) 408(2) 200(3) 290(4)
Shareholders’ net income per share:
basic 1.59 1.52 0.74 1.05
Diluted 1.57 1.50 0.74 1.04
2010
total revenues $ 5,205 $ 5,353 $ 5,266 $ 5,429
income from continuing operations before income taxes 422 439 464 545
Shareholders’ net income 283(5) 294(6) 307(7) 461(8)
Shareholders’ net income per share:
basic 1.03 1.07 1.13 1.71
Diluted 1.02 1.06 1.13 1.69
Stock and Dividend Data
2011
price range of common
stock — high $ 44.29 $ 51.81 $ 52.95 $ 47.61
— low $ 36.76 $ 42.80 $ 40.24 $ 38.82
Dividends declared per common share $ 0.040 $ – $ – $ –
2010
price range of common
stock  — high $ 39.26 $ 37.61 $ 36.03 $ 38.53
— low $ 32.00 $ 30.78 $ 29.12 $ 34.33
Dividends declared per common share $ 0.040 $ – $ – $ –
(1) The first quarter of 2011 includes an after-tax gain of $13 million for the GMIB business and a net tax benefit of $24 million related to the resolution of a Federal tax matter.
(2) The second quarter of 2011 includes an after-tax loss of $21 million for the GMIB business.
(3) The third quarter of 2011 includes an after-tax loss of $134 million for the GMIB business.
(4) The fourth quarter of 2011 includes an after-tax gain of $7 million for the GMIB business and, an after-tax charge of $31 million for costs associated with acquisitions.
(5) The first quarter of 2010 includes an after-tax gain of $5 million for the GMIB business.
(6) The second quarter of 2010 includes an after-tax loss of $104 million for the GMIB business.
(7) The third quarter of 2010 includes an after-tax loss of $10 million for the GMIB business.
(8) The fourth quarter of 2010 includes an after-tax gain of $85 million for the GMIB business, an after-tax charge of $20 million for the loss on a reinsurance transaction, a net tax
benefit of $101 million related to the resolution of a Federal tax matter, and an after-tax charge of $39 million related to the early extinguishment of debt.
Contents Q

125CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 8 Quarterly Financial Data (unaudited)

$50
$100
$150
$0
S&P 500 Index
S&P Managed Health Care, Life & Health Ins. Indexes**
12/29/06 12/31/07 12/31/08 12/30/1112/31/1012/31/09
Cigna
Five-Year Cumulative Total Shareholder Return*
December 29, 2006 – December 30, 2011
* Assumes that the value of the investment in Cigna common stock and each index was $100 on December 29, 2006 and that all dividends were reinvested.
** Weighted average of S & P Managed Health Care (75%) and Life & Health Insurance (25%) Indexes.
12/29/06 12/31/07 12/31/08 12/31/08 12/31/10 12/30/11
Cigna $100 $123 $38 $81 $84 $96
S&p 500 index $100 $105 $66 $84 $97 $99
S&p Mgd. health Care, Life & health ins. indexes** $100 $114 $53 $66 $75 $89
*Assumes that the value of the investment in Cigna common stock and each index was $100 on December 29, 2006 and that all dividends were reinvested.
**Weighted average of S&P Managed Health Care (75%) and Life & Health Insurance (25%) Indexes.
Contents Q

126 CIGNA CORpORATION – 2011 Form 10-K
Part ii 
ITEM 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
ITEM 9 Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure
none.
ITEM 9A Controls and procedures
A. Disclosure Controls and procedures
based on an evaluation of the effectiveness of Cigna’s disclosure
controls and procedures conducted under the supervision and with the
participation of Cigna’s management, Cigna’s Chief executive officer
and Chief financial officer concluded that, as of the end of the period
covered by this report, Cigna’s disclosure controls and procedures are
effective to ensure that information required to be disclosed by Cigna in
the reports that it files or submits under the exchange act is recorded,
processed, summarized and reported, within the time periods specified
in the SeC’s rules and forms.
B. Internal Control Over Financial Reporting
Management’s Annual Report on Internal
Control over Financial Reporting
The Company’s management report on internal control over financial
reporting under the caption “Management’s annual report on internal
Control over financial reporting” on page 67 in this form 10-K.
Attestation Report of the Registered public
Accounting Firm
The attestation report of Cigna’s independent registered public accounting
firm, on the effectiveness of Cigna’s internal control over financial
reporting appears under the caption “report of independent registered
public accounting firm” on page 123 of this form 10-K.
Changes in Internal Control Over Financial
Reporting
There have been no changes in Cigna’s internal control over financial
reporting identified in connection with the evaluation described in the
above paragraph that have materially affected, or are reasonably likely
to materially affect, Cigna’s internal control over financial reporting.
ITEM 9B Other Information
none.
Contents Q

127CIGNA CORpORATION – 2011 Form 10-K
Part iii 
ITEM 11 Executive Compensation
Part iii
ITEM 10 Directors, Executive Officers and
Corporate Governance
A. Directors of the Registrant
The information under the captions “The board of Directors’ nominees for terms to expire in april 2015,” “Directors Who Will Continue
in office,” “board of Directors and Committee Meetings, Membership, attendance and independence” (as it relates to audit Committee
disclosure), and “Section 16(a) beneficial ownership reporting Compliance” in Cigna’s proxy statement to be dated on or about March 16, 2012
is incorporated by reference.
B. Executive Officers of the Registrant
See part i – “executive officers of the registrant on page 31 in this form 10-K.”
C. Code of Ethics and Other Corporate Governance Disclosures
Cigna’s Code of ethics is the Company’s code of business conduct and
ethics, and applies to Cigna’s directors, officers (including the chief
executive officer, chief financial officer and chief accounting officer) and
employees. The Code of ethics is posted on the Corporate governance
section found on the “about Cigna” page of the Company’s website,
www.cigna.com. in the event the Company substantively amends
its Code of ethics or waives a provision of the Code, Cigna intends
to disclose the amendment or waiver on the Corporate governance
section of the Company’s website.
in addition, the Company’s corporate governance guidelines (board
practices) and the charters of its board committees (audit, corporate
governance, executive, finance and people resources) are available on
the Corporate governance section of the Company’s website. These
corporate governance documents, as well as the Code of ethics, are
available in print to any shareholder who requests them.
ITEM 11 Executive Compensation
The information under the captions “Director Compensation,” “report of the people resources Committee,” “Compensation Discussion and
analysis” and “executive Compensation” in Cigna’s proxy statement to be dated on or about March 16, 2012 is incorporated by reference.
Contents Q

http://www.cigna.com/aboutus/investor-relations

128 CIGNA CORpORATION – 2011 Form 10-K
Part iii 
ITEM 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
ITEM 12 Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
The following table presents information regarding Cigna’s equity compensation plans as of December 31, 2011:
Plan category
(a) (1)
Securities to Be issued
Upon exercise of
outstanding options,
warrants and rights
(b) (2)
weighted average
exercise Price Per Share
of outstanding options,
warrants and rights
(c) (3)
Securities remaining available
For Future issuance Under equity
compensation Plans (excluding
Securities reflected in column (a))
equity Compensation plans approved by Security holders 11,480,832 $ 33.92 12,184,049
equity Compensation plans not approved by Security holders – – –
totaL 11,480,832 $ 33.92 12,184,049
(1) In addition to outstanding options, includes 116,694 restricted stock units, 82,791 deferred shares, 32,315 director deferred share units that settle in shares, and 1,667,702 strategic
performance shares which are reported at the maximum 200% payout rate.
(2) The weighted-average exercise price is based only on outstanding options.
(3) Includes 437,931 shares of common stock available as of the close of business December 31, 2011 for future issuance under the Cigna Directors Equity Plan; and 8,212,760 shares
of common stock available as of the close of business on December 31, 2011 for future issuance under the Cigna Long-Term Incentive Plan as shares of restricted stock, strategic
performance shares, shares in payment of dividend equivalent rights, shares in lieu of cash payable under a Qualifying Plan, or shares in payment of strategic performance units.
The information under the captions “Stock held by Directors, nominees and executive officers” and “Largest Security holders” in Cigna’s proxy
statement to be dated on or about March 16, 2012 is incorporated by reference.
ITEM 13 Certain Relationships, Related Transactions
and Director Independence
The information under the caption “Certain transactions” in Cigna’s proxy statement to be dated on or about March 16, 2012 is incorporated
by reference.
ITEM 14 principal Accounting Fees and Services
The information under the captions “policy for the pre-approval of audit and non-audit Services” and “fees to independent registered public
accounting firm” in Cigna’s proxy statement to be dated on or about March 16, 2012 is incorporated by reference.
Contents Q

129CIGNA CORpORATION – 2011 Form 10-K
Part iV 
ITEM 15 Exhibits and Financial Statement Schedules
Part iV
ITEM 15 Exhibits and Financial Statement Schedules
(a) (1) The following financial Statements appear on pages 68
through 124:
Consolidated Statements of income for the years ended
December 31, 2011, 2010 and 2009.
Consolidated balance Sheets as of December 31, 2011 and
2010.
C o n s o l i d a t e d S t a t e m e n t s o f C o m p r e h e n s i v e
income and Changes in total equity for the years ended
December 31, 2011, 2010 and 2009.
Consolidated Statements of Cash flows for the years ended
December 31, 2011, 2010 and 2009.
notes to the Consolidated financial Statements.
report of independent registered public accounting firm.
(2) The financial statement schedules are listed in the index to
financial Statement Schedules on page fS-1.
(3) The exhibits are listed in the index to exhibits beginning on
page e-1.
Contents Q

130 CIGNA CORpORATION – 2011 Form 10-K
Part iV 
ITEM 15 Signatures
Signatures
pursuant to the requirements of Section 13 or 15(d) of the Securities exchange act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
cigna corPoration
Date: february 23, 2012
by: /s/ ralph J. nicoletti
name: ralph j. nicoletti
title: Executive Vice President and Chief Financial Officer (Principal Financial Officer)
pursuant to the requirements of the Securities exchange act of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated as of february 23, 2012.
Signature title
/s/ David M. Cordani Chief Executive Officer and Director (Principal Executive Officer)
david m. cordani
/s/ ralph J. nicoletti Executive Vice President and Chief Financial Officer (Principal Financial Officer)
ralph j. nicoletti
/s/ Mary t. hoeltzel Vice President and Chief Accounting Officer (Principal Accounting Officer)
mary t. hoeltzel
/s/ eric J. foss Director
eric j. Foss
/s/ isaiah harris, Jr. Chairman of the Board
isaiah harris, jr.
/s/ Jane e. henney, M.D. Director
jane e. henney, m.d.
/s/ roman Martinez iV Director
roman martinez iV
/s/ John M. partridge Director
john m. Partridge
/s/ James e. rogers Director
james e. rogers
/s/ Joseph p. Sullivan Director
joseph P. Sullivan
/s/ eric C. Wiseman Director
eric c. wiseman
/s/ Donna f. Zarcone Director
donna F. zarcone
/s/ William D. Zollars Director
william d. zollars
Contents Q

FS-1CIGNA CORpORATION – 2011 Form 10-K
index to FinanciaL Statement SchedULeS 
ITEM 15 Exhibits and Financial Statement Schedules
index to FinanciaL Statement
SchedULeS
Report of Independent Registered public Accounting Firm on Financial Statement Schedules ………………………………..FS‑2
Schedules
I — Summary of Investments-other than Investments in Related parties — December 31, 2011 ……………………………………………………………………………FS‑3
II — Condensed Financial Information of Cigna Corporation — (Registrant) …………………………………………………………………………………………………………………………….FS‑4
III — Supplementary Insurance Information ………………………………………………………………………………………………………………………………………………………………………………………………………………………FS‑10
Iv — Reinsurance ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………FS‑12
v — valuation and Qualifying Accounts and Reserves …………………………………………………………………………………………………………………………………………………………………………………………….FS‑13
Schedules other than those listed above are omitted because they are not required or are not applicable, or the required information is shown in
the financial statements or notes thereto.
ITEM 15 Exhibits and
Financial
Statement
Schedules
ITEM 15 Exhibits and Financial Statement Schedules
index to FinanciaL Statement SchedULeS 
Contents Q

FS-2 CIGNA CORpORATION – 2011 Form 10-K
Part iV
ITEM 15 Report of Independent Registered public Accounting Firm on Financial Statement Schedules
Report of Independent Registered public Accounting Firm
on Financial Statement Schedules
To the Board of Directors and Shareholders of Cigna Corporation
our audits of the consolidated financial statements and of the effectiveness
of internal control over financial reporting referred to in our report dated
february 23, 2012 (which report and consolidated financial statements
are included under item 8 in this annual report on form 10-K) also
included an audit of the financial statement schedules listed in item 15(a)
(2) of this form 10-K. in our opinion, these financial statement
schedules present fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated
financial statements.
/s/ Pricewaterhousecoopers LLP
philadelphia, pennsylvania
february 23, 2012
Contents Q

FS-3CIGNA CORpORATION – 2011 Form 10-K
ITEM 15 Exhibits and Financial Statement Schedules
Part iV
ITEM 15 Exhibits and Financial Statement Schedules
Part iV
Cigna Corporation and Subsidiaries
Schedule I — Summary of Investments-other than Investments in Related parties —
December 31, 2011 (In millions)
type of investment cost Fair Value
amount at which shown
in the consolidated
Balance Sheet
fixed maturities:
bonds:
united States government and government agencies and authorities $ 552 $ 958 $ 958
States, municipalities and political subdivisions 2,185 2,456 2,456
foreign governments 1,173 1,274 1,274
public utilities 84 88 88
all other corporate bonds 9,378 10,401 10,401
asset backed securities:
united States government agencies mortgage-backed 9 9 9
other mortgage-backed 74 80 80
other asset-backed 778 927 927
redeemable preferred stocks 24 24 24
totaL Fixed matUritieS 14,257 16,217 16,217
equity securities:
Common stocks:
industrial, miscellaneous and all other 25 27 27
non redeemable preferred stocks 99 73 73
totaL eQUitY SecUritieS 124 100 100
Commercial mortgage loans on real estate 3,301 3,301
policy loans 1,502 1,502
real estate investments 87 87
other long-term investments 1,014 1,058
Short-term investments 225 225
totaL inVeStmentS $ 20,510 $ 22,490
Contents Q

FS-4 CIGNA CORpORATION – 2011 Form 10-K
Part iV
ITEM 15 Exhibits and Financial Statement Schedules
Cigna Corporation and Subsidiaries
Schedule II — Condensed Financial Information of Cigna Corporation — (Registrant)
Statements of Income
(In millions)
For the year ended december 31,
2011 2010 2009
operating expenses:
interest $ 195 $ 176 $ 160
intercompany interest 19 26 80
other 92 129 68
totaL oPerating exPenSeS 306 331 308
Loss before income taxes (306) (331) (308)
income tax benefit (107) (106) (118)
Loss of parent company (199) (225) (190)
equity in income of subsidiaries from continuing operations 1,526 1,570 1,491
Shareholders’ income from continuing operations 1,327 1,345 1,301
income from discontinued operations, net of taxes – – 1
SharehoLderS’ net income $ 1,327 $ 1,345 $ 1,302
See Notes to Financial Statements on pages FS-7 through FS-9.
Contents Q

FS-5CIGNA CORpORATION – 2011 Form 10-K
ITEM 15 Exhibits and Financial Statement Schedules
Part iV
Cigna Corporation and Subsidiaries
Schedule II — Condensed Financial Information of Cigna Corporation (Registrant)
Balance sheets
(In millions)
as of december 31,
2011 2010
ASSETS:
investments in subsidiaries $ 14,956 $ 14,384
other assets 793 568
totaL aSSetS $ 15,749 $ 14,952
LIABILITIES:
intercompany $ 460 $ 3,718
Short-term debt 100 548
Long-term debt 4,869 2,180
other liabilities 1,976 1,861
totaL LiaBiLitieS 7,405 8,307
SHAREHOLDERS’ EQUITy:
Common stock (shares issued, 366; 351; authorized, 600) 92 88
additional paid-in capital 3,188 2,534
net unrealized appreciation — fixed maturities 739 529
net unrealized appreciation — equity securities 1 3
net unrealized depreciation — derivatives (23) (24)
net translation of foreign currencies (3) 25
postretirement benefits liability adjustment (1,507) (1,147)
accumulated other comprehensive loss (793) (614)
retained earnings 11,143 9,879
Less treasury stock, at cost (5,286) (5,242)
totaL SharehoLderS’ eQUitY 8,344 6,645
totaL LiaBiLitieS and SharehoLderS’ eQUitY $ 15,749 $ 14,952
See Notes to Financial Statements on pages FS-7 through FS-9.
Contents Q

FS-6 CIGNA CORpORATION – 2011 Form 10-K
Part iV
ITEM 15 Exhibits and Financial Statement Schedules
Cigna Corporation and Subsidiaries
Schedule II — Condensed Financial Information of Cigna Corporation (Registrant)
Statements of Cash Flows
(In millions)
For the year ended december 31,
2011 2010 2009
Cash flows from operating activities:
Shareholders’ net income $ 1,327 $ 1,345 $ 1,302
adjustments to reconcile shareholders’ net income to net cash provided by operating activities:
equity in income of subsidiaries (1,527) (1,574) (1,494)
(income) from discontinued operations – – (1)
Dividends received from subsidiaries 1,135 1,050 650
other liabilities (296) (294) (401)
other, net (91) 162 356
net cash provided by operating activities 548 689 412
Cash flows from financing activities:
net change in intercompany debt (3,258) (816) (579)
repayment of debt (449) (268) (199)
net proceeds on issuance of long-term debt 2,661 543 346
issuance of common stock 734 64 30
Common dividends paid (11) (11) (11)
repurchase of common stock (225) (201) –
net cash used in financing activities (548) (689) (413)
net increase (decrease) in cash and cash equivalents – – (1)
Cash and cash equivalents, beginning of year – – 1
Cash and cash equivalents, end of year $ – $ – $ –
See Notes to Financial Statements on pages FS-7 through FS-9.
Contents Q

FS-7CIGNA CORpORATION – 2011 Form 10-K
ITEM 15 Exhibits and Financial Statement Schedules
Part iV
Cigna Corporation and Subsidiaries
Schedule II — Condensed Financial Information of Cigna Corporation (Registrant)
Notes to Condensed Financial Statements
The accompanying condensed financial statements should be read
in conjunction with the Consolidated financial Statements and the
accompanying notes thereto in the annual report on form 10-K.
note 1—for purposes of these condensed financial statements, Cigna
Corporation’s (the Company) wholly owned and majority owned
subsidiaries are recorded using the equity basis of accounting. Certain
reclassifications have been made to prior years’ amounts to conform
to the 2011 presentation.
note 2—Short-term and long-term debt consisted of the following
at December 31:
(In millions) december 31, 2011 december 31, 2010
Short‑term:
Commercial paper $ 100 $ 100
Current maturities of long-term debt – 448
totaL Short‑term deBt $ 100 $ 548
Long‑term:
uncollateralized debt:
2.75% notes due 2016 $ 600 $ –
5.375% notes due 2017 250 250
6.35% notes due 2018 131 131
8.5% notes due 2019 251 251
4.375% notes due 2020 249 249
5.125% notes due 2020 299 299
4.5% notes due 2021 298 –
4% notes due 2022 743 –
7.65% notes due 2023 100 100
8.3% notes due 2023 17 17
7.875% Debentures due 2027 300 300
8.3% Step Down notes due 2033 83 83
6.15% notes due 2036 500 500
5.875% notes due 2041 298 –
5.375% notes due 2042 750 –
totaL Long‑term deBt $ 4,869 $ 2,180
on november 10, 2011, the Company issued $2.1 billion of long-term
debt as follows: $600 million of 5-Year notes due november 15, 2016
at a stated interest rate of 2.75% ($600 million, net of discount,
with an effective interest rate of 2.936% per year), $750 million of
10-Year notes due february 15, 2022 at a stated interest rate of 4%
($743 million, net of discount, with an effective interest rate of 4.346%
per year) and $750 million of 30-Year notes due february 15, 2042 at
a stated interest rate of 5.375% ($750 million, net of discount, with
an effective interest rate of 5.542% per year). interest is payable on
May 15 and november 15 of each year beginning May 15, 2012 for the
5-Year notes and february 15 and august 15 of each year beginning
february 15, 2012 for the 10-Year and 30-Year notes. The proceeds
of this debt were used to reduce the intercompany payable balance
with Cigna holdings and ultimately used to fund the healthSpring
acquisition in 2012.
Contents Q

FS-8 CIGNA CORpORATION – 2011 Form 10-K
Part iV
ITEM 15 Exhibits and Financial Statement Schedules
The Company may redeem these notes, at any time, in whole or in
part, at a redemption price equal to the greater of:
•• 100% of the principal amount of the notes to be redeemed; or
•• the present value of the remaining principal and interest payments
on the notes being redeemed discounted at the applicable treasury
rate plus 30 basis points (5-Year 2.75% notes due 2016), 35 basis
points (10-Year 4% notes due 2022), or 40 basis points (30-Year
5.375% notes due 2042).
in June 2011, the Company entered into a new five-year revolving
credit and letter of credit agreement for $1.5 billion, which permits
up to $500 million to be used for letters of credit. This agreement is
diversified among 16 banks, with 3 banks each having 12% of the
commitment and the remaining 13 banks with 64% of the commitment.
The credit agreement includes options that are subject to consent
by the administrative agent and the committing banks, to increase
the commitment amount to $2 billion and to extend the term past
June 2016. The credit agreement is available for general corporate
purposes, including as a commercial paper backstop and for the
issuance of letters of credit. This agreement includes certain covenants,
including a financial covenant requiring the Company to maintain
a total debt to adjusted capital ratio at or below 0.50 to 1.00. as of
December 31, 2011, the Company had $4 billion of borrowing capacity
within the maximum debt coverage covenant in the agreement in
addition to the $5.1 billion of debt outstanding. There were letters of
credit of $118 million issued as of December 31, 2011.
in March 2011, the Company issued $300 million of 10-Year notes due
March 15, 2021 at a stated interest rate of 4.5% ($298 million, net
of discount, with an effective interest rate of 4.683% per year) and
$300 million of 30-Year notes due March 15, 2041 at a stated interest
rate of 5.875% ($298 million, net of discount, with an effective
interest rate of 6.008% per year). interest is payable on March 15 and
September 15 of each year beginning September 15, 2011. The proceeds
of this debt were used for general corporate purposes, including the
repayment of debt maturing in 2011.
The Company may redeem these notes, at any time, in whole or in
part, at a redemption price equal to the greater of:
•• 100% of the principal amount of the notes to be redeemed; or
•• the present value of the remaining principal and interest payments
on the notes being redeemed discounted at the applicable treasury
rate plus 20 basis points (10-Year 4.5% notes due 2021) or 25 basis
points (30-Year 5.875% notes due 2041).
During 2011, the Company repaid $449 million in maturing long-
term debt.
in the fourth quarter of 2010, the Company entered into the following
transactions related to its long-term debt:
•• in December 2010 the Company offered to settle its 8.5% notes due
2019, including accrued interest from november 1 through the
settlement date. The tender price equaled the present value of the
remaining principal and interest payments on the notes being
redeemed, discounted at a rate equal to the 10-year treasury rate
plus a fixed spread of 100 basis points. The tender offer priced at
a yield of 4.128% and principal of $99 million was tendered, with
$251 million remaining outstanding. The Company paid $130 million,
including accrued interest and expenses, to settle the notes, resulting
in an after-tax loss on early debt extinguishment of $21 million.
•• in December 2010 the Company offered to settle its 6.35% notes due
2018, including accrued interest from September 16 through the
settlement date. The tender price equaled the present value of the
remaining principal and interest payments on the notes being
redeemed, discounted at a rate equal to the 10-year treasury rate
plus a fixed spread of 45 basis points. The tender offer priced at a
yield of 3.923% and principal of $169 million was tendered, with
$131 million remaining outstanding. The Company paid $198 million,
including accrued interest and expenses, to settle the notes, resulting
in an after-tax loss on early debt extinguishment of $18 million.
•• in December 2010, the Company issued $250 million of 4.375%
notes ($249 million net of debt discount, with an effective interest
rate of 5.1%). The difference between the stated and effective interest
rates primarily reflects the effect of treasury locks. interest is payable on
June 15 and December 15 of each year beginning December 15, 2010.
These notes will mature on December 15, 2020. The proceeds of this
debt were used to fund the tender offer for the 8.5% Senior notes due
2019 and the 6.35% Senior notes due 2018 described above.
in May 2010, the Company issued $300 million of 5.125%
notes ($299 million, net of debt discount, with an effective interest
rate of 5.36% per year). interest is payable on June 15 and December 15
of each year beginning December 15, 2010. These notes will mature
on June 15, 2020. The proceeds of this debt were used for general
corporate purposes.
Contents Q

FS-9CIGNA CORpORATION – 2011 Form 10-K
ITEM 15 Exhibits and Financial Statement Schedules
Part iV
The Company may redeem the notes issued in 2010 at any time, in
whole or in part, at a redemption price equal to the greater of:
•• 100% of the principal amount of the notes to be redeemed; or
•• the present value of the remaining principal and interest payments
on the notes being redeemed discounted at the applicable treasury
rate plus 25 basis points.
Maturities of debt are as follows (in millions): none in 2012,
2013, 2014, 2015, $600 in 2016 and the remainder in years after 2016.
interest expense on long-term and short-term debt was $195 million
in 2011, $176 million in 2010, and $160 million in 2009. interest
paid on long-term and short-term debt was $179 million in 2011,
$175 million in 2010, and $153 million in 2009.
note 3—intercompany liabilities consist primarily of loans payable to
Cigna holdings, inc. of $460 million as of December 31, 2011 and
$3.7 billion as of December 31, 2010. The proceeds of the debt issuance
in november 2011 of $2.1 billion (see note 2) and the equity issuance
of $629 million (see note 5) were used to reduce the intercompany loan
payable balance with Cigna holdings and ultimately used to fund the
healthSpring acquisition in 2012. interest was accrued at an average
monthly rate of 0.63% for 2011 and 0.61% for 2010.
note 4—as of December 31, 2011, the Company had guarantees and
similar agreements in place to secure payment obligations or solvency
requirements of certain wholly owned subsidiaries as follows:
•• The Company has arranged for bank letters of credit in the amount
of $36 million in support of its indirect wholly owned subsidiaries.
as of December 31, 2011, approximately $33 million of the letters
of credit were issued to support Cigna global reinsurance Company,
an indirect wholly owned subsidiary domiciled in bermuda. These
letters of credit primarily secure the payment of insureds’ claims
from run-off reinsurance operations. as of December 31, 2011,
approximately $3 million of the letters of credit were issued to
provide collateral support for various other indirectly wholly owned
subsidiaries of the Company.
•• Various indirect, wholly owned subsidiaries have obtained surety bonds
in the normal course of business. if there is a claim on a surety bond
and the subsidiary is unable to pay, the Company guarantees payment
to the company issuing the surety bond. The aggregate amount of
such surety bonds as of December was $24 million.
•• The Company is obligated under a $27 million letter of credit required
by the insurer of its high-deductible self-insurance programs to
indemnify the insurer for claim liabilities that fall within deductible
amounts for policy years dating back to 1994.
•• The Company also provides solvency guarantees aggregating $34 million
under state and federal regulations in support of its indirect wholly
owned medical hMos in several states.
•• The Company has arranged a $55 million letter of credit in support
of Cigna europe insurance Company, an indirect wholly owned
subsidiary. The Company has agreed to indemnify the banks providing
the letters of credit in the event of any draw. Cigna europe insurance
Company is the holder of the letters of credit.
•• in addition, the Company has agreed to indemnify payment of
losses included in Cigna europe insurance Company’s reserves
on the assumed reinsurance business transferred from aCe. as of
December 31, 2011, the reserve was $88 million.
in 2011, no payments have been made on these guarantees and none
are pending. The Company provided other guarantees to subsidiaries
that, in the aggregate, do not represent a material risk to the Company’s
results of operations, liquidity or financial condition.
note 5 – on november 16, 2011, the Company issued 15.2 million shares
of its common stock at $42.75 per share. proceeds were $650 million
($629 million net of underwriting discount and fees). The proceeds
were used to reduce the intercompany loan payable balance with Cigna
holdings and ultimately used to fund the healthSpring acquisition
in January 2012.
Contents Q

FS-10 CIGNA CORpORATION – 2011 Form 10-K
Part iV
ITEM 15 Exhibits and Financial Statement Schedules
Cigna Corporation and Subsidiaries
Schedule III — Supplementary Insurance Information
Segment
(In millions)
deferred policy
acquisition costs
Future policy benefits
and contractholder
deposit funds
medical claims
payable and
unpaid claims
Unearned
premiums and
fees
Year ended December 31, 2011:
health Care $ 51 $ 481 $ 1,229 $ 77
Disability and Life 1 1,178 3,208 16
international 1,192 1,338 411 381
run-off reinsurance – 1,172 240 –
other operations 68 12,977 160 27
Corporate – – (7) –
totaL $ 1,312 $ 17,146 $ 5,241 $ 501
Year ended December 31, 2010:
health Care $ 54 $ 488 $ 1,400 $ 80
Disability and Life 2 1,066 3,180 17
international 998 1,173 288 288
run-off reinsurance – 1,139 244 –
other operations 68 12,790 159 31
Corporate – – (8) –
totaL $ 1,122 $ 16,656 $ 5,263 $ 416
Year ended December 31, 2009:
health Care $ 60 $ 507 $ 1,098 $ 76
Disability and Life 6 1,023 3,122 32
international 808 1,003 228 282
run-off reinsurance – 1,287 288 –
other operations 69 12,800 161 37
Corporate – – (8) –
totaL $ 943 $ 16,620 $ 4,889 $ 427
Contents Q

FS-11CIGNA CORpORATION – 2011 Form 10-K
ITEM 15 Exhibits and Financial Statement Schedules
Part iV
Premiums and
fees (1)
net investment
income (2)
Benefit expenses
(1)(3)
amortization of
deferred policy
acquisition
expenses
other operating
expenses (4)
$ 13,181 $ 274 $ 8,265 $ 139 $ 5,185
2,780 267 2,003 4 644
2,990 96 1,697 185 819
24 103 140 – 265
114 400 385 6 60
– 6 – – 233
$ 19,089 $ 1,146 $ 12,490 $ 334 $ 7,206
$ 13,319 $ 243 $ 8,670 $ 155 $ 5,086
2,667 261 1,935 6 699
2,268 82 1,255 145 639
25 114 (22) – 113
114 404 395 6 53
– 1 – – 248
$ 18,393 $ 1,105 $ 12,233 $ 312 $ 6,838
$ 11,384 $ 181 $ 7,096 $ 141 $ 4,742
2,634 244 1,922 6 670
1,882 69 1,080 146 491
29 113 (146) – (273)
112 407 398 6 62
– – (16) – 191
$ 16,041 $ 1,014 $ 10,334 $ 299 $ 5,883
(1) Amounts presented are shown net of the effects of reinsurance. See Note 7 to the Consolidated Financial Statements included in Cigna’s 2011 Annual Report on Form 10-K.
(2) The allocation of net investment income is based upon the investment year method, the identification of certain portfolios with specific segments, or a combination of both.
(3) Benefit expenses include Health Care medical claims expense and other benefit expenses.
(4) Other operating expenses include mail order pharmacy cost of goods sold, GMIB fair value (gain) loss and other operating expenses, and excludes amortization of deferred policy
acquisition expenses.
Contents Q

FS-12 CIGNA CORpORATION – 2011 Form 10-K
Part iV
ITEM 15 Exhibits and Financial Statement Schedules
Cigna Corporation and Subsidiaries
Schedule Iv — Reinsurance
(In millions) gross amount
ceded to other
companies
assumed from
other companies net amount
Percentage
of amount
assumed to net
Year ended December 31, 2011:
Life insurance in force $ 606,587 $ 53,088 $ 9,163 $ 562,662 1.6%
premiums and fees:
Life insurance and annuities $ 1,990 $ 280 $ 40 $ 1,750 2.3%
accident and health insurance 17,352 167 154 17,339 0.9%
totaL $ 19,342 $ 447 $ 194 $ 19,089 1.0%
Year ended December 31, 2010:
Life insurance in force $ 566,841 $ 44,335 $ 9,734 $ 532,240 1.8%
premiums and fees:
Life insurance and annuities $ 2,026 $ 264 $ 107 $ 1,869 5.7%
accident and health insurance 16,272 173 425 16,524 2.6%
totaL $ 18,298 $ 437 $ 532 $ 18,393 2.9%
Year ended December 31, 2009:
Life insurance in force $ 544,687 $ 50,011 $ 71,107 $ 565,783 12.6%
premiums and fees:
Life insurance and annuities $ 1,909 $ 297 $ 305 $ 1,917 15.9%
accident and health insurance 13,476 156 804 14,124 5.7%
totaL $ 15,385 $ 453 $ 1,109 $ 16,041 6.9%
Contents Q

FS-13CIGNA CORpORATION – 2011 Form 10-K
ITEM 15 Exhibits and Financial Statement Schedules
Part iV
Cigna Corporation and Subsidiaries
Schedule v — valuation and Qualifying Accounts and Reserves
description
(In millions)
Balance at
beginning of
period
charged
(credited) to costs
and expenses (1)
charged
(credited) to
other accounts (2)
other deductions
‑ describe (3)
Balance at end of
period
2011:
investment asset valuation reserves:
Commercial mortgage loans $ 12 $ 16 $ – $ (9) $ 19
allowance for doubtful accounts:
premiums, accounts and notes receivable $ 49 $ 4 $ (1) $ (7) $ 45
Deferred tax asset valuation allowance $ 23 $ 4 $ 15 $ – $ 42
reinsurance recoverables $ 10 $ (5) $ – $ – $ 5
2010:
investment asset valuation reserves:
Commercial mortgage loans $ 17 $ 24 $ – $ (29) $ 12
allowance for doubtful accounts:
premiums, accounts and notes receivable $ 43 $ 11 $ – $ (5) $ 49
Deferred tax asset valuation allowance $ 116 $ (93) $ – $ – $ 23
reinsurance recoverables $ 15 $ (5) $ – $ – $ 10
2009:
investment asset valuation reserves:
Commercial mortgage loans $ 3 $ 17 $ – $ (3) $ 17
allowance for doubtful accounts:
premiums, accounts and notes receivable $ 50 $ (2) $ – $ (5) $ 43
Deferred tax asset valuation allowance $ 126 $ (2) $ – $ (8) $ 116
reinsurance recoverables $ 23 $ (7) $ – $ (1) $ 15
(1) 2010 amount for deferred tax asset valuation allowance primarily reflects the resolution of a federal tax matter. See Note 19 to the Consolidated Financial Statements.
(2) 2011 increase to deferred tax asset valuation allowance reflects effects of the acquisition of First Assist in November 2011.
(3) 2011 and 2010 amounts for commercial mortgage loans primarily reflects charge-offs upon sales and repayments, as well as transfers to foreclosed real estate.
Contents Q

E-1 CIGNA CORpORATION – 2011 Form 10-K
Part iV 
ITEM 15 Exhibits and Financial Statement Schedules
Index to Exhibits
number description method of Filing
2.1 agreement and plan of Merger dated as of october 24, 2011
by and among Cigna Corporation, Cigna Magnolia Corp. and
healthSpring, inc.*
filed as exhibit 2.1 to the registrant’s form 8-K on october 27, 2011
and incorporated herein by reference.
2.2 Voting agreement dated as of october 24, 2011 among Cigna
Corporation and herbert a. fritch
filed as exhibit 2.3 to the registrant’s form 8-K on october 26, 2011
and incorporated herein by reference.
3.1 restated Certificate of incorporation of the registrant as last amended
october 28, 2011
filed as exhibit 3.1 to the registrant’s form 10-Q for the quarterly
period ended September 30, 2011 and incorporated herein by
reference.
3.2 by-Laws of the registrant as last amended and restated
october 20, 2010
filed as exhibit 3.1 to the registrant’s form 8-K on october 26, 2010
and incorporated herein by reference.
4.1 (a) indenture dated august 16, 2006 between Cigna Corporation and
u.S. bank national association
filed as exhibit 4.1 to the registrant’s form S-3aSr on
august 17, 2006 and incorporated herein by reference.
(b) Supplemental indenture no. 1 dated March 7, 2008 between Cigna
Corporation and u.S. bank national association
filed as exhibit 4.1 to the registrant’s form 8-K on
november 14, 2006 and incorporated herein by reference.
(c) Supplemental indenture no. 2 dated March 7, 2008 between Cigna
Corporation and u.S. bank national association
filed as exhibit 4.1(c) to the registrant’s form 10-Q for the quarterly
period ended March 31, 2011 and incorporated herein by reference
(d) Supplemental indenture no. 3 dated March 7, 2008 between Cigna
Corporation and u.S. bank national association
filed as exhibit 4.1 to the registrant’s form 8-K on March 10, 2008
and incorporated herein by reference.
(e) Supplemental indenture no. 4 dated March 7, 2008 between Cigna
Corporation and u.S. bank national association
filed as exhibit 99.2 to the registrant’s form 8-K on May 12, 2009
and incorporated herein by reference.
(f ) Supplemental indenture no. 5 dated March 7, 2008 between Cigna
Corporation and u.S. bank national association
filed as exhibit 99.2 to the registrant’s form 8-K on May 28, 2010
and incorporated herein by reference.
(g) Supplemental indenture no. 6 dated March 7, 2008 between Cigna
Corporation and u.S. bank national association
filed as exhibit 99.2 to the registrant’s form 8-K on
December 9, 2009 and incorporated herein by reference.
(h) Supplemental indenture no. 7 dated March 7, 2011 between Cigna
Corporation and u.S. bank national association
filed as exhibit 4.1 to the registrant’s form 8-K on March 8, 2011
and incorporated herein by reference.
(i) Supplemental indenture no. 8 dated november 10, 2011 between
Cigna Corporation and u.S. bank national associated
filed as exhibit 4.1 to the registrant’s form 8-K on
november 14, 2011 and incorporated herein by reference.
4.2 indenture dated January 1, 1994 between Cigna Corporation and
Marine Midland bank
filed as exhibit 4.2 to the registrant’s form 10-K for the year ended
December 31, 2009 and incorporated herein by reference.
4.3 indenture dated June 30, 1988 between Cigna Corporation and
bankers trust
filed as exhibit 4.3 to the registrant’s form 10-K for the year ended
December 31, 2009 and incorporated herein by reference.
exhibits 10.1 through 10.27 are identified as compensatory plans, management contracts or arrangements pursuant to item 15 of form 10-K.
10.1 Deferred Compensation plan for Directors of Cigna Corporation, as
amended and restated January 1, 1997
filed herewith.
10.2 Deferred Compensation plan of 2005 for Directors of Cigna
Corporation, amended and restated effective april 28, 2010
filed as exhibit 10.2 to the registrant’s form 10-K for the year ended
December 31, 2010 and incorporated herein by reference.
10.3 Cigna Corporation non-employee Director Compensation program
amended and restated effective January 1, 2012
filed herewith.
10.4 Cigna restricted Share equivalent plan for non-employee Directors
as amended and restated effective January 1, 2008
filed as exhibit 10.3 to the registrant’s form 10-K for the year ended
December 31, 2007 and incorporated herein by reference.
10.5 Cigna Corporation Director equity plan filed as exhibit 10.3 to the registrant’s form 10-Q for the quarterly
period ended March 31, 2010 and incorporated herein by reference.
10.6 Cigna Corporation Compensation program for independent Vice
Chairman/Chairman of the board of Directors
filed as exhibit 10.1 to the registrant’s form 10-Q for the quarterly
period ended September 30, 2009 and incorporated herein by
reference.
10.7 Cigna Corporation Stock plan, as amended and restated through
July 2000
filed as exhibit 10.7 to the registrant’s form 10-K for the year ended
December 31, 2009 and incorporated herein by reference.
10.8 (a) Cigna Stock unit plan, as amended and restated effective
July 22, 2008
filed as exhibit 10.1 to the registrant’s form 10-Q for the quarterly
period ended September 30, 2008 and incorporated herein by
reference.
(b) amendment no. 1 to the Cigna Stock unit plan, as amended and
restated effective July 22, 2008
filed as exhibit 10.3 to the registrant’s form 10-Q for the quarterly
period ended June 30, 2010 and incorporated herein by reference.
* Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any
omitted schedule upon request.
Part iV
ITEM 15 Exhibits and
Financial
Statement
Schedules
Contents Q

E-2CIGNA CORpORATION – 2011 Form 10-K
Part iV 
ITEM 15 Exhibits and Financial Statement Schedules
number description method of Filing
10.9 Cigna executive Severance benefits plan as amended and restated
effective april 27, 2010
filed as exhibit 10.2 to the registrant’s form 10-Q for the quarterly
period ended June 30, 2010 and incorporated herein by reference.
10.10 Description of Severance benefits for executives in non-Change of
Control Circumstances
filed as exhibit 10.10 to the registrant’s form 10-K for the year
ended December 31, 2009 and incorporated herein by reference.
10.11 Description of Cigna Corporation Strategic performance Share
program
filed as exhibit 10.1 to the registrant’s form 10-Q for the quarterly
period ended March 31, 2010 and incorporated herein by reference.
10.12 Cigna executive incentive plan amended and restated as of
January 1, 2008
filed as exhibit 10.8 to the registrant’s form 10-K for the year ended
December 31, 2007 and incorporated herein by reference.
10.13 (a) Cigna Long-term incentive plan as amended and restated effective as
of april 28, 2010
filed as exhibit 10.2 to the registrant’s form 10-Q for the quarterly
period ended March 31, 2010 and incorporated herein by reference.
(b) amendment no. 1 to the Cigna Long-term incentive plan as
amended and restated effective as of april 28, 2010
filed as exhibit 10.1 to the registrant’s form 10-Q for the quarterly
period ended June 30, 2010 and incorporated herein by reference.
(c) amendment no. 2 to the Cigna Long-term incentive plan as
amended and restated effective as of april 28, 2010
filed as exhibit 10.1 to the registrant’s form 10-Q for the quarterly
period ended March 31, 2011 and incorporated herein by reference.
10.14 Cigna Deferred Compensation plan, as amended and restated
october 24, 2001
filed herewith.
10.15 Cigna Deferred Compensation plan of 2005 effective as of
January 1, 2005
filed as exhibit 10.12 to the registrant’s form 10-K for the year
ended December 31, 2007 and incorporated herein by reference.
10.16 (a) Cigna Supplemental pension plan as amended and restated effective
august 1, 1998
filed as exhibit 10.15(a) to the registrant’s form 10-K for the year
ended December 31, 2009 and incorporated herein by reference.
(b) amendment no. 1 to the Cigna Supplemental pension plan,
amended and restated effective as of September 1, 1999
filed as exhibit 10.15(b) to the registrant’s form 10-K for the year
ended December 31, 2009 and incorporated herein by reference.
(c) amendment no. 2 dated December 6, 2000 to the Cigna
Supplemental pension
filed herewith.
10.17 (a) Cigna Supplemental pension plan of 2005 effective as of
January 1, 2005
filed as exhibit 10.15 to the registrant’s form 10-K for the year
ended December 31, 2007 and incorporated herein by reference.
(b) amendment no. 1 to the Cigna Supplemental pension plan of 2005 filed as exhibit 10.1 to the registrant’s form 10-Q for the quarterly
period ended June 30, 2009 and incorporated herein by reference.
10.18 Cigna Supplemental 401(k) plan effective January 1, 2010 filed as exhibit 10.17 to the registrant’s form 10-K for the year
ended December 31, 2009 and incorporated herein by reference.
10.19 Description of Cigna Corporation financial Services program filed as exhibit 10.18 to the registrant’s form 10-K for the year
ended December 31, 2009 and incorporated herein by reference.
10.20 Schedule regarding amended Deferred Stock unit agreements
effective December 31, 2008 with Mr. Murabito and form of
amended Deferred Stock unit agreement
filed as exhibit 10.20 to the registrant’s form 10-K for the year
ended December 31, 2008 and incorporated herein by reference.
10.21 form of Cigna Long-term incentive plan: nonqualified Stock
option and grant Letter
filed herewith.
10.22 form of Cigna Long-term incentive plan: restricted Stock grant
and grant Letter
filed herewith.
10.23 form of Cigna Long-term incentive plan: restricted Stock unit
grant and grant Letter
filed as exhibit 10.27 to the registrant’s form 10-K for the year
ended December 31, 2010 and incorporated herein by reference.
10.24 bertram L. Scott’s offer of employment dated May 19, 2010 filed as exhibit 10.2 to the registrant’s form 10-Q for the quarterly
period ended March 31, 2011 and incorporated herein by reference.
10.25 agreement and release dated april 27, 2011 with Carol ann petren filed as exhibit 99.1 to the registrant’s form 8-K filed on
May 3, 2011 and incorporated herein by reference.
10.26 ralph nicoletti’s offer of employment dated april 27, 2011 filed as exhibit 10.1 to the registrant’s form 8-K filed on
May 31, 2011 and incorporated herein by reference.
10.27 agreement and release executed December 9, 2011 with bertram L.
Scott
filed as exhibit 10.1 to the registrant’s form 8-K filed on
December 9, 2011 and incorporated herein by reference.
12 Computation of ratios of earnings to fixed Charges filed herewith.
21 Subsidiaries of the registrant filed herewith.
23 Consent of independent registered public accounting firm filed herewith.
* Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any
omitted schedule upon request.
31.1 Certification of Chief executive officer of Cigna Corporation
pursuant to rule 13a-14(a) or rule 15d-14(a) of the Securities
exchange act of 1934
filed herewith.
31.2 Certification of Chief financial officer of Cigna Corporation
pursuant to rule 13a-14(a) or rule 15d-14(a) of the Securities
exchange act of 1934
filed herewith.
Contents Q

E-3 CIGNA CORpORATION – 2011 Form 10-K
Part iV 
ITEM 15 Exhibits and Financial Statement Schedules
number description method of Filing
32.1 Certification of Chief executive officer of Cigna Corporation
pursuant to rule 13a-14(b) or rule 15d-14(b) and 18 u.S.C.
Section 1350
furnished herewith.
32.2 Certification of Chief financial officer of Cigna Corporation
pursuant to rule 13a-14(b) or rule 15d-14(b) and 18 u.S.C.
Section 1350
furnished herewith.
* Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any
omitted schedule upon request.
The registrant will furnish to the Commission upon request of any other instruments defining the rights of holders of long-term debt.
Shareholders may obtain copies of exhibits by writing to Cigna Corporation, Shareholder Services Department, 1601 Chestnut Street, philadelphia, pa 19192.
Contents Q

Part iV 
E-4CIGNA CORpORATION – 2011 Form 10-K
ITEM 15 Exhibits and Financial Statement Schedules
Part iV
ITEM 15 Exhibits and
Financial
Statement
Schedules
ExHIBIT 12 Cigna Corporation — Computation of Ratio of Earnings to Fixed Charges
Year ended december 31,
(Dollars in millions) 2011 2010 2009 2008 2007
income from continuing operations before income taxes $ 1,968 $ 1,870 $ 1,898 $ 382 $ 1,634
adjustments:
Loss (income) from equity investee (22) (21) (17) (12) (5)
(income) attributable to noncontrolling interest (1) (4) (3) (2) (3)
income before income taxes, as adjusted $ 1,945 $ 1,845 $ 1,878 $ 368 $ 1,626
fixed charges included in income:
interest expense $ 202 $ 182 $ 166 $ 146 $ 122
interest portion of rental expense 38 45 47 45 34
interest credited to contractholders 5 5 3 6 7
$ 245 $ 232 $ 216 $ 197 $ 163
income available for fixed charges $ 2,190 $ 2,077 $ 2,094 $ 565 $ 1,789
ratio oF earningS to Fixed chargeS:
including interest credited to contractholders 8.9 9.0 9.7 2.9 11.0
Contents Q

Part iV 
E-5 CIGNA CORpORATION – 2011 Form 10-K
ITEM 15 Exhibits and Financial Statement Schedules
Part iV
ITEM 15 Exhibits and
Financial
Statement
Schedules
ExHIBIT 21 Subsidiaries of the Registrant
Listed below are subsidiaries of Cigna Corporation as of December 31, 2011 with their jurisdictions of organization shown in parentheses.
Those subsidiaries not listed would not, in the aggregate, constitute a “significant subsidiary” of Cigna Corporation, as that term is defined in
rule 1-02(w) of regulation S-X.
Cigna holdings, inc. (Delaware)
i. Connecticut general Corporation (Connecticut)
a. benefits Management Corporation (Montana)
(1) allegiance Life & health insurance Company, inc. (Montana)
(2) allegiance re, inc. (Montana)
b. Cigna arbor Life insurance Company (Connecticut)
C. Cigna behavioral health, inc. (Minnesota)
(1) Cigna behavioral health of California, inc. (California)
(2) Cigna behavioral health of texas, inc. (texas)
(3) MCC independent practice association of new York, inc. (new York)
D. Cigna Dental health, inc. (florida)
(1) Cigna Dental health of California, inc. (California)
(2) Cigna Dental health of Colorado, inc. (Colorado)
(3) Cigna Dental health of Delaware, inc. (Delaware)
(4) Cigna Dental health of florida, inc. (florida)
(5) Cigna Dental health of illinois, inc. (illinois)
(6) Cigna Dental health of Kansas, inc. (Kansas)
(7) Cigna Dental health of Kentucky, inc. (Kentucky)
(8) Cigna Dental health of Maryland, inc. (Maryland)
(9) Cigna Dental health of Missouri, inc. (Missouri)
(10) Cigna Dental health of new Jersey, inc. (new Jersey)
(11) Cigna Dental health of north Carolina, inc. (north Carolina)
(12) Cigna Dental health of ohio, inc. (ohio)
(13) Cigna Dental health of pennsylvania, inc. (pennsylvania)
(14) Cigna Dental health of texas, inc. (texas)
(15) Cigna Dental health of Virginia, inc. (Virginia)
(16) Cigna Dental health plan of arizona, inc. (arizona)
e. Cigna health Corporation (Delaware)
(1) healthsource, inc. (new hampshire)
(a) Cigna healthCare of arizona, inc. (arizona)
(b) Cigna healthCare of California, inc. (California)
(c) Cigna healthCare of Colorado, inc. (Colorado)
(d) Cigna healthCare of Connecticut, inc. (Connecticut)
(e) Cigna healthCare of florida, inc. (florida)
(f ) Cigna healthCare of georgia, inc. (georgia)
(g) Cigna healthCare of illinois, inc. (illinois)
(h) Cigna healthCare of indiana, inc. (indiana)
(i) Cigna healthCare of Maine, inc. (Maine)
(j) Cigna healthCare of Massachusetts, inc. (Massachusetts)
(k) Cigna healthCare Mid-atlantic, inc. (Maryland)
(l) Cigna healthCare of new hampshire, inc. (new hampshire)
(m) Cigna healthCare of new Jersey, inc. (new Jersey)
(n) Cigna healthCare of new York, inc. (new York)
(o) Cigna healthCare of north Carolina, inc. (north Carolina)
(p) Cigna healthCare of pennsylvania, inc. (pennsylvania)
(q) Cigna healthCare of South Carolina, inc. (South Carolina)
(r) Cigna healthCare of St. Louis, inc. (Missouri)
(s) Cigna healthCare of tennessee, inc. (tennessee)
(t) Cigna healthCare of texas, inc. (texas)
(u) Cigna healthCare of utah, inc. (utah)
Contents Q

E-6CIGNA CORpORATION – 2011 Form 10-K
Part iV 
ITEM 15 Exhibits and Financial Statement Schedules
(v) Cigna insurance Services Company (South Carolina)
(w) temple insurance Company Limited (bermuda)
f. Cigna healthCare holdings, inc. (Colorado)
(1) Cigna healthCare — pacific (California)
(2) Cigna healthCare — Centennial State (Colorado)
(3) great-West healthCare — illinois (illinois)
g. Cigna health Management, inc. (Delaware)
h. Cigna Life insurance Company of Canada (Canada)
i. Cigna Life insurance Company of new York (new York)
J Connecticut general Life insurance Company (Connecticut)
(1) Cigna health & Life insurance Company (Connecticut)
(2) tel Drug of pennsylvania, LLC (pennsylvania)
K. Life insurance Company of north america (pennsylvania)
(1) Cigna & CMC Life insurance Company Limited (China)
(2) Lina Life insurance Company of Korea (Korea)
L. tel Drug, inc. (South Dakota)
M. Vielife holdings Limited (united Kingdom)
(1) Vielife Limited (united Kingdom)
ii. Cigna investment group, inc. (Delaware)
a. Cigna investments, inc. (Delaware)
(1) Cigna benefits financing, inc. (Delaware)
iii. Cigna global holdings, inc. (Delaware)
a. Cigna international Corporation, inc. (Delaware)
b. Cigna global reinsurance Company, Ltd. (bermuda)
(1) Cigna holdings overseas, inc. (Delaware)
(a) Cigna apac holdings Limited (new Zealand)
(i) Cigna hong Kong holdings Company Limited (hong Kong)
(a) Cigna Data Services (Shanghai) Company Limited (China)
(b) Cigna Worldwide general insurance Company Limited (hong Kong)
(c) Cigna Worldwide Life insurance Company Limited (hong Kong)
(ii) Cigna taiwan Life assurance Company Limited (taiwan)
(b) Cigna europe insurance Company S.a.-n.V. (belgium)
(c) Cigna european Services (uK) Limited (united Kingdom)
(d) Cigna global insurance Company Limited (guernsey, C.i.)
(e) Cigna hayat Sigorta a.S. (turkey)
(f ) Cigna health Solutions india pvt. Ltd. (india)
(g) Cigna international Services australia pty Ltd. (australia)
(h) Cigna Life insurance Company of europe S.a.- n.V. (belgium)
(h) firstassist group holdings Limited (united Kingdom)
(i) firstassist group Limited (united Kingdom)
(a) firstassist Legal protection Limited (united Kingdom)
(ii) firstassist insurance Services Limited (united Kingdom)
(j) rhp ThailandLimited (Thailand)
(i) Cigna brokerage Services (Thailand) Limited (Thailand)
(ii) Cigna non-Life insurance brokerage (Thailand)
(iii) KDM Thailand Limited (Thailand)
(a) Cigna insurance public Company Limited (Thailand)
(k) Vanbreda international n.V. (belgium)
(i) Vanbreda international SDn.bhD (Malaysia)
(ii) Vanbreda international (Dubai) Limited (united arab emirates)
(2) Cigna Worldwide insurance Company (Delaware)
(a) pt. asuransi Cigna (indonesia)
Contents Q

Part I
Item 1 Business
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Mine Safety Disclosures
Executive Officers of the Registrant
Part II
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6 Selected Financial Data
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8 Financial Statements and Supplementary Data
Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A Controls and Procedures
Item 9B Other Information
Part III
Item 10 Directors, Executive Officers and Corporate Governance
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13 Certain Relationships, Related Transactions and Director Independence
Item 14 Principal Accounting Fees and Services
Part IV
Item 15 Exhibits and Financial Statement Schedules
Signatures
Index To Financial Statement Schedules
Index to Exhibits

Last page viewed:
Previous page:
Back to Contents:
Next page:

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 205

49

Form 10-K
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1

93

4 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012
or

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

Commission file number: 1-

108

64

UnitedHealth Group Incorporated
(Exact name of registrant as specified in its charter)

Minnesota 41-13219

39

(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)

UnitedHealth Group Center
9

90

0 Bren Road East

Minnetonka, Minnesota 5

53

43
(Address of principal executive offices) (Zip Code)

(9

52

) 9

36

-1300
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE, INC.
(Title of each class) (Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes È No ‘

Indicate by check mark 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 (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes È No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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. ‘

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one)

Large accelerated filer È Accelerated filer ‘
Non-accelerated filer ‘ Smaller reporting company ‘

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No È

The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2012 was $59,444,144,

48

3 (based on the last
reported sale price of $58.

50

per share on June 30, 2012, on the New York Stock Exchange).

*

As of January 31, 2013, there were 1,024,

92

5,324 shares of the registrant’s Common Stock, $.01 par value per share, issued and outstanding.

Note that in Part III of this report on Form 10-K, we incorporate by reference certain information from our Definitive Proxy Statement for the
2013 Annual Meeting of Shareholders. This document will be filed with the Securities and Exchange Commission (SEC) within the time
period permitted by the SEC. The SEC allows us to disclose important information by referring to it in that manner. Please refer to such
information.

* Only shares of voting stock held beneficially by directors, executive officers and subsidiaries of the Company have been excluded in
determining this number.

UNITEDHEALTH GROUP

Table of Contents

Page

Part I

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35

Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . 40

Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Item 8. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

65

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . .

105

Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Part III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . .

109

Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

Part IV

Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

110

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

120

Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND

ISSUER PURCHASES OF EQUITY SECURITIES

MARKET PRICES

Our common stock is traded on the New York Stock Exchange (NYSE) under the symbol UNH. On January 31,
2013, there were 15,204 registered holders of record of our common stock. The per share high and low common
stock sales prices reported by the NYSE were as follows:

High Low

Cash

Dividends

Declared

2013
First quarter (through February 6, 2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

57

.

83

$

51

.36 $0.2125

2012
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59.43 $49.

82

$0.1625
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $60.75 $53.

78

$0.2125
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59.31 $50.32 $0.2125
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $58.29 $51.09 $0.2125

2011

First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

45

.75 $36.

37

$0.1250
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $52.64 $43.30 $0.1625
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $53.50 $41.27 $0.1625
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $51.

71

$41.32 $0.1625

DIVIDEND POLICY

In June 2012, our Board of Directors increased our cash dividend on common stock to an annual dividend rate of
$0.

85

per share, paid quarterly. Since May 2011, we had paid an annual cash dividend on common stock of $0.65
per share, distributed quarterly. Declaration and payment of future quarterly dividends is at the discretion of the
Board and may be adjusted as business needs or market conditions change.

ISSUER PURCHASES OF EQUITY SECURITIES

Issuer Purchases of Equity Securities (a)
Fourth Quarter 2012

For the Month Ended

Total Number
of

Shares

Purchased
Average

Price

Paid per Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans

or Programs

Maximum Number
of Shares That May
Yet Be Purchased

Under The Plans or
Programs

(in millions) (in millions)

(in millions)

October 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . — $ — —

94

November 30, 2012 . . . . . . . . . . . . . . . . . . . . . — — — 94
December 31, 2012 . . . . . . . . . . . . . . . . . . . . . 9

54

9 85

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 $ 54 9

(a) In November 19

97

, our Board of Directors adopted a share repurchase program, which the Board evaluates
periodically. In June 2012, the Board renewed and expanded our share repurchase program with an
authorization to repurchase up to 110 million shares of our common stock in open market purchases or other
types of transactions (including prepaid or structured repurchase programs). There is no established
expiration date for the program.

35

UNREGISTERED SALE OF EQUITY SECURITIES

On November 2, 2012, we issued and sold, in reliance on Section 4(a)(2) of the Securities Act of 1933, as
amended, 8 million shares of our common stock to CSHG

112

2 FUNDO DE INVESTIMENTO
MULTIMERCADO — CRÉDITO PRIVADO INVESTIMENTO NO EXTERIOR, a fund wholly beneficially
owned by Dr. Edson de Godoy Bueno, a member of our Board of Directors. We received net proceeds of
approximately $

47

0 million in cash and did not pay underwriting or placement discounts or fees in the
transaction. Dr. Bueno has agreed to hold the shares for five years from the date of sale, subject to certain
exceptions.

PERFORMANCE GRAPHS

The following two performance graphs compare our total return to shareholders with the returns of indexes of
other specified companies and the S&P 500 Index. The first graph compares the cumulative five-year total return
to shareholders on our common stock relative to the cumulative total returns of the S&P 500 index and a
customized peer group of certain Fortune 50 companies (the “Fortune 50 Group”), for the five-year period ended
December 31, 2012. The second graph compares our cumulative total return to shareholders with the S&P 500
Index and an index of a group of peer companies selected by us for the five-year period ended December 31,
2012. We are not included in either the Fortune 50 Group index in the first graph or the peer group index in the
second graph. In calculating the cumulative total shareholder return of the indexes, the shareholder returns of the
Fortune 50 Group companies in the first graph and the peer group companies in the second graph are weighted
according to the stock market capitalizations of the companies at January 1 of each year. The comparisons
assume the investment of $

100

on December 31, 2007 in our common stock and in each index, and that
dividends were reinvested when paid.

36

Fortune 50 Group

The Fortune 50 Group consists of the following companies: American International Group, Inc., Berkshire
Hathaway Inc., Cardinal Health, Inc., Citigroup Inc., General Electric Company, International Business
Machines Corporation and Johnson & Johnson. Although there are differences in terms of size and industry, like
UnitedHealth Group, all of these companies are large multi-segment companies using a well-defined operating
model in one or more broad sectors of the economy.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among UnitedHealth Group, the S&P 500 Index,

and Fortune 50 Group

UnitedHealth Group S&P 500 Index Fortune 50 Group

$0

$80

$60

$40

$20

$100

$120

12/07 12/08 12/09 12/10 12/11 12/12

12/07 12/08 12/09 12/10 12/11 12/12

UnitedHealth Group . . . . . . . . . . . . . . . . . . . . . . . . . . $100.00 $45.74 $52.49 $62.93 $

89

.48 $ 97.17
S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00 63.00 79.

67

91

.67 93.61 108.59
Fortune 50 Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00 52.

66

58.

88

69

.57 69.

55

82.41

The stock price performance included in this graph is not necessarily indicative of future stock price
performance.

37

Peer Group

The companies included in our peer group are Aetna Inc., Cigna Corporation, Coventry Health Care, Inc.,
Humana Inc. and WellPoint, Inc. We believe that this peer group reflects publicly traded peers to our
UnitedHealthcare businesses.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among UnitedHealth Group, the S&P 500 Index,

and a Peer Group

UnitedHealth Group S&P 500 Index Peer Group

$0
$60
$40
$20
$100
$80
$120
12/07 12/08 12/09 12/10 12/11 12/12
12/07 12/08 12/09 12/10 12/11 12/12

UnitedHealth Group . . . . . . . . . . . . . . . . . . . . . . . . . . $100.00 $45.74 $52.49 $62.93 $89.48 $ 97.17
S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00 63.00 79.67 91.67 93.61 108.59
Peer Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00 44.58 60.73 62.11 80.06 83.33

The stock price performance included in this graph is not necessarily indicative of future stock price
performance.

38

ITEM 6. SELECTED FINANCIAL DATA

FINANCIAL HIGHLIGHTS

For the Year Ended December 31,

(In millions, except percentages and per share data) 2012 2011 2010 2009 2008

Consolidated operating results
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $110,618 $101,

86

2 $94,155 $

87

,138 $

81

,186
Earnings from operations . . . . . . . . . . . . . . . . . . . . . . . . . . 9,254 8,

46

4 7,864 6,359 5,263
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,526 5,142 4,634 3,822 2,9

77

Return on shareholders’ equity (a) . . . . . . . . . . . . . . . . . . . 18.7% 18.9% 18.7% 17.3% 14.9%

Basic earnings per share attributable to UnitedHealth
Group common shareholders . . . . . . . . . . . . . . . . . . . . . $ 5.38 $ 4.81 $ 4.14 $ 3.27 $ 2.45

Diluted earnings per share attributable to UnitedHealth
Group common shareholders . . . . . . . . . . . . . . . . . . . . . 5.28 4.73 4.10 3.24 2.40

Cash dividends declared per common share . . . . . . . . . . . 0.8000 0.6125 0.4050 0.0300 0.0300

Consolidated cash flows from (used for)
Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,155 $ 6,9

68

$ 6,273 $ 5,625 $ 4,238
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,649) (4,1

72

) (5,339) (9

76

) (5,072)
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 471 (2,490) (1,611) (2,275) (605)

Consolidated financial condition
(As of December 31)
Cash and investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,148 $ 28,172 $25,902 $24,350 $21,575
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,885 67,889 63,063 59,045 55,815
Total commercial paper and long-term debt . . . . . . . . . . . 16,754 11,638 11,142 11,173 12,794
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,178 28,292 25,825 23,606 20,780
Debt to debt-plus-equity ratio . . . . . . . . . . . . . . . . . . . . . . 35.0% 29.1% 30.1% 32.1% 38.1%

(a) Return on equity is calculated as net earnings divided by average equity. Average equity is calculated using

the equity balance at the end of the preceding year and the equity balances at the end of the four quarters of
the year presented.

Financial Highlights should be read with the accompanying Management’s Discussion and Analysis of Financial
Condition and Results of Operations in Item 7 and the Consolidated Financial Statements and Notes to the
Consolidated Financial Statements included in Item 8, “Financial Statements.”

39

RESULTS SUMMARY

(in millions, except percentages and per share data)

For the Years Ended

December 31,
Increase/

(Decrease)

Increase/

(Decrease)

2012 2011 2010 2012 vs. 2011 2011 vs. 2010

Revenues:
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

99

,728 $ 91,

98

3 $85,405 $7,745 8% $6,578 8%
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,437 6,613 5,819 824 12 794 14
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,773 2,612 2,322 161 6 290 12
Investment and other income . . . . . . . . . . . . . . 680 654 609 26 4 45 7

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,618 101,862 94,155 8,7

56

9 7,

70

7 8

Operating costs:
Medical costs . . . . . . . . . . . . . . . . . . . . . . . . . . 80,226 74,332 68,

84

1 5,894 8 5,491 8
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . 17,306 15,557 14,270 1,749 11 1,287 9
Cost of products sold . . . . . . . . . . . . . . . . . . . . 2,523 2,385 2,

116

138 6 269 13
Depreciation and amortization . . . . . . . . . . . . . 1,309 1,124 1,064 185 16 60 6

Total operating costs . . . . . . . . . . . . . . . . . . . . . . 101,364 93,398 86,291 7,

96

6 9 7,

107

8

Earnings from operations . . . . . . . . . . . . . . . . . . . 9,254 8,464 7,864 790 9 600 8
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . (632) (505) (481) 127 25 24 5

Earnings before income taxes . . . . . . . . . . . . . . . 8,622 7,

95

9 7,383 663 8 576 8
Provision for income taxes . . . . . . . . . . . . . . . . . (3,096) (2,817) (2,749) 279 10 68 2

Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,526 $ 5,142 $ 4,634 $ 384 7% $ 508 11%

Diluted earnings per share attributable to
UnitedHealth Group common shareholders . . $ 5.28 $ 4.73 $ 4.10 $ 0.55 12% $ 0.63 15%

Medical care ratio (a) . . . . . . . . . . . . . . . . . . . . . . 80.4% 80.8% 80.6% (0.4)% 0.2%
Operating cost ratio . . . . . . . . . . . . . . . . . . . . . . . 15.6 15.3 15.2 0.3 0.1
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . 8.4 8.3 8.4 0.1 (0.1)
Tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.9 35.4 37.2 0.5 (1.8)
Net margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0 5.0 4.9 — 0.1
Return on equity (b) . . . . . . . . . . . . . . . . . . . . . . . 18.7% 18.9% 18.7% (0.2)% 0.2%

(a) Medical care ratio is calculated as medical costs divided by premium revenue.
(b) Return on equity is calculated as net earnings divided by average equity. Average equity is calculated using

the equity balance at the end of the preceding year and the equity balances at the end of the four quarters of
the year presented.

SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS

The following represents a summary of select 2012 year-over-year operating comparisons to 2011 and other 2012
significant items.

• Consolidated revenues increased 9% and UnitedHealthcare revenues increased 8%.

• UnitedHealthcare medical enrollment grew by 6.4 million people, including 4.4 million people served in
Brazil as a result of the Amil acquisition; Medicare Part D stand-alone membership decreased by 0.6 million
people.

• The consolidated medical care ratio of 80.4% decreased 40 basis points.

• Earnings from operations increased 8% at UnitedHealthcare and 14% at Optum.

• Net earnings of $5.5 billion and diluted earnings per share of $5.28 increased 7% and 12%, respectively.

45

• $1.1 billion in cash was held by non-regulated entities as of December 31, 2012.

• 2012 debt offerings amounted to $4 billion, including the August debt exchange.

• Cash paid for acquisitions in 2012, net of cash assumed, totaled $6.5 billion, including the fourth quarter
acquisition of approximately 65% of the outstanding shares of Amil. We also plan to acquire an additional
25% of Amil in the first half of 2013. See Note 6 of

Notes to the Consolidated Financial Statements

included in Item 8, “Financial Statements” for further detail on Amil.

• We repurchased 57 million shares for $3.1 billion and paid dividends of $0.8 billion.

2012 RESULTS OF OPERATIONS COMPARED TO 2011 RESULTS

Consolidated Financial Results

Revenues

Revenue increases in 2012 were driven by growth in the number of individuals served and premium rate
increases related to underlying medical cost trends in our UnitedHealthcare businesses and growth in our

Optum

health service and technology offerings.

Medical Costs

Medical costs increased in 2012 due to risk-based membership growth in our public and senior markets
businesses, unit cost inflation across all businesses and continued moderate increases in health system use,
partially offset by an increase in favorable medical reserve development. Unit cost increases represented the
primary driver of our medical cost trend, with the largest contributor being price increases to hospitals.

Operating Costs

The increases in our operating costs for 2012 were due to business growth, including increases in revenues from
UnitedHealthcare fee-based benefits and Optum services, which carry comparatively higher operating costs, as
well as investments in the OptumRx pharmacy management services and UnitedHealthcare Military & Veterans
businesses.

Income Tax Rate

The increase in our effective income tax rate for 2012 was due to the favorable resolution of various tax matters
in 2011, which lowered the 2011 effective income tax rate.

Reportable Segments

We have four reportable segments across our two business platforms, UnitedHealthcare and Optum:

• UnitedHealthcare, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare &
Retirement, UnitedHealthcare Community & State, and UnitedHealthcare International;

• OptumHealth;

• OptumInsight; and

• OptumRx.

See Note 13 of Notes to the Consolidated Financial Statements included in Item 8, “Financial Statements” and
Item 1, “Business” for a description of how each of our reportable segments derives its revenues.

Transactions between reportable segments principally consist of sales of pharmacy benefit products and services
to UnitedHealthcare customers by OptumRx, certain product offerings and care management and integrated care
delivery services sold to UnitedHealthcare by OptumHealth, and health information and technology solutions,
consulting and other services sold to UnitedHealthcare by OptumInsight. These transactions are recorded at
management’s estimate of fair value. Intersegment transactions are eliminated in consolidation.

46

The following table presents reportable segment financial information:

For the Years Ended December 31,

Increase/

(Decrease)
Increase/

(Decrease)

(in millions, except percentages) 2012 2011 2010 2012 vs. 2011 2011 vs. 2010

Revenues
UnitedHealthcare . . . . . . . . . . . . . . . . . . . . . . $

103

,419 $ 95,336 $ 88,730 $8,083 8% $6,606 7%

OptumHealth . . . . . . . . . . . . . . . . . . . . . . . . . 8,147 6,704 4,565 1,443 22 2,139 47
OptumInsight . . . . . . . . . . . . . . . . . . . . . . . . . 2,882 2,671 2,342 211 8 329 14
OptumRx . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,359 19,278 16,724 (919) (5) 2,554 15

Total Optum . . . . . . . . . . . . . . . . . . . . . . . . 29,388 28,653 23,631 735 3 5,022 21
Eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . (22,189) (22,127) (18,206) 62 — 3,921 22

Consolidated revenues . . . . . . . . . . . . . . . . . . $110,618 $101,862 $ 94,155 $8,756 9% $7,707 8%

Earnings from operations
UnitedHealthcare . . . . . . . . . . . . . . . . . . . . . . $ 7,815 $ 7,203 $ 6,740 $ 612 8% $ 463 7%

OptumHealth . . . . . . . . . . . . . . . . . . . . . . . . . 561 423 511 138 33 (88) (17)
OptumInsight . . . . . . . . . . . . . . . . . . . . . . . . . 485 381 84

104

27 297 354
OptumRx . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393 457 529 (64) (14) (72) (14)

Total Optum . . . . . . . . . . . . . . . . . . . . . . . . 1,439 1,261 1,124 178 14 137 12

Consolidated earnings from operations . . . . . $ 9,254 $ 8,464 $ 7,864 $ 790 9% $ 600 8%

Operating margin
UnitedHealthcare . . . . . . . . . . . . . . . . . . . . . . 7.6% 7.6% 7.6% — % — %
OptumHealth . . . . . . . . . . . . . . . . . . . . . . . . . 6.9 6.3 11.2 0.6 (4.9)
OptumInsight . . . . . . . . . . . . . . . . . . . . . . . . . 16.8 14.3 3.6 2.5 10.7
OptumRx . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 2.4 3.2 (0.3) (0.8)

Total Optum . . . . . . . . . . . . . . . . . . . . . . . . 4.9 4.4 4.8 0.5 (0.4)
Consolidated operating margin . . . . . . . . . . . 8.4% 8.3% 8.4% 0.1% (0.1)%

UnitedHealthcare

The following table summarizes UnitedHealthcare revenue by business:

For the Years Ended December 31,
Increase/
(Decrease)
Increase/
(Decrease)
(in millions, except percentages) 2012 2011 2010 2012 vs. 2011 2011 vs. 2010

UnitedHealthcare Employer & Individual . . . . . . . . . $ 46,596 $45,404 $42,550 $1,192 3% $2,854 7%
UnitedHealthcare Medicare & Retirement (a) . . . . . . 39,257 34,933 33,018 4,324 12 1,915 6
UnitedHealthcare Community & State (a) . . . . . . . . . 16,422 14,954 13,123 1,468 10 1,831 14
UnitedHealthcare International . . . . . . . . . . . . . . . . . 1,144 45 39 1,099 nm 6 15

Total UnitedHealthcare revenue . . . . . . . . . . . . . . $103,419 $95,336 $88,730 $8,083 8% $6,606 7%

nm = not meaningful

(a) In the fourth quarter of 2012, UnitedHealthcare reclassified 75,000 dually eligible enrollees to
UnitedHealthcare Community & State from UnitedHealthcare Medicare & Retirement to better reflect how
these members are served. Earlier periods presented have been conformed to reflect this change.

47

The following table summarizes the number of individuals served by our UnitedHealthcare businesses, by major
market segment and funding arrangement:

December 31,
Increase/
(Decrease)
Increase/
(Decrease)

(in thousands, except percentages) 2012 2011 2010 2012 vs. 2011 2011 vs. 2010

Commercial risk-based . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,340 9,550 9,405 (210) (2)% 145 2%
Commercial fee-based . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,585 16,320 15,405 1,265 8 915 6

Total commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,925 25,870 24,810 1,055 4 1,060 4

Medicare Advantage (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2,565 2,165 2,005 400 18 160 8
Medicaid (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,830 3,600 3,385 230 6 215 6
Medicare Supplement (Standardized) . . . . . . . . . . . . . . . . 3,180 2,935 2,770 245 8 165 6

Total public and senior . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,575 8,700 8,160 875 10 540 7

International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,425 — — 4,425 nm — —

Total UnitedHealthcare — medical . . . . . . . . . . . . . . . . . . 40,925 34,570 32,970 6,355 18% 1,600 5%

Supplemental Data:
Medicare Part D stand-alone . . . . . . . . . . . . . . . . . . . . . 4,225 4,855 4,530 (630) (13)% 325 7%

nm = not meaningful

(a) Earlier periods presented above have been recast such that all periods presented reflect the dually eligible
enrollment change from Medicare Advantage to Medicaid discussed above.

Commercial risk-based membership decreased in 2012 due to a competitive market environment, conversions to
fee-based products by large public sector clients that we retained and other decreases in the public sector. In fee-
based commercial products, the increase was due to a number of new business awards and strong customer
retention. Medicare Advantage increased due to strengthened execution in product design, marketing and local
engagement, which drove sales growth, combined with the addition of 185,000 Medicare Advantage members
from 2012 acquisitions. Medicaid growth was due to a combination of winning new state accounts and growth
within existing state customers, partially offset by a fourth quarter market withdrawal from one product in a
specific region, affecting 175,000 beneficiaries. Medicare Supplement growth was due to strong retention and
new sales. In our Medicare Part D stand-alone business, membership decreased primarily as a result of the first
quarter 2012 loss of approximately 470,000 auto-assigned low-income subsidy Medicare Part D beneficiaries,
due to pricing benchmarks for the government-subsidized low income Medicare Part D market coming in below
our bids in a number of regions. International represents commercial membership in Brazil added as a result of
the Amil acquisition in 2012.

UnitedHealthcare’s revenue growth in 2012 was primarily due to growth in the number of individuals served,
commercial premium rate increases related to expected increases in underlying medical cost trends and the
impact of lower premium rebates.

UnitedHealthcare’s earnings from operations for 2012 increased compared to the prior year primarily due to the
factors that increased revenues combined with an improvement in the medical care ratio driven by effective
management of medical costs and increased favorable medical reserve development. The favorable development
for 2012 was driven by lower than expected health system utilization levels and increased efficiency in claims
handling and processing.

In March 2012, UnitedHealthcare Military & Veterans was awarded the TRICARE West Region Managed Care
Support Contract. The contract, for health care operations, includes a transition period and five one-year renewals
at the government’s option. The first year of operations is anticipated to begin April 1, 2013. The base
administrative services contract is expected to generate a total of $1.4 billion in revenues over the five years.

48

Optum. Total revenues increased in 2012 due to business growth and 2011 acquisitions at OptumHealth, partially
offset by a reduction in pharmacy service revenues related to reduced levels of UnitedHealthcare Part D
prescription drug membership and related prescription volumes.

Optum’s earnings from operations and operating margin for 2012 increased compared to 2011 due to
improvements in operating cost structure stemming from advances in business simplification, integration and
overall efficiency and revenue growth in higher margin products.

The results by segment were as follows:

OptumHealth

Revenue increases at OptumHealth for 2012 were primarily due to market expansion, including growth related to
2011 acquisitions in integrated care delivery, and strong overall business growth.

Earnings from operations for 2012 and operating margins increased compared to 2011 primarily due to gains in
operating efficiency and cost management as well as increases in earnings from integrated care operations.

OptumInsight

Revenues at OptumInsight for 2012 increased primarily due to the impact of growth in compliance services for
care providers and payment integrity offerings for commercial payers, which was partially offset by the June
2011 divestiture of the clinical trials services business.

The increases in earnings from operations and operating margins for 2012 reflect an improved mix of services
and advances in operating efficiency and cost management.

OptumRx

The decreases in OptumRx revenues in 2012 were due to the reduction in UnitedHealthcare Medicare Part D plan
participants. Intersegment revenues eliminated in consolidation were $15.6 billion for 2012 and $16.7 billion for
2011.

OptumRx earnings from operations and operating margins for 2012 decreased primarily due to decreased
prescription volume in the Medicare Part D business and investments to support growth initiatives, which were
partially offset by earnings contributions from specialty pharmacy growth and greater use of generic medications.

Over the course of 2013, we will consolidate and manage our commercial pharmacy benefit programs from
Express Scripts’ subsidiary, Medco Health Solutions, Inc. As a result of this transition, OptumRx expects to add
approximately12 million members throughout 2013.

2011 RESULTS OF OPERATIONS COMPARED TO 2010 RESULTS

Consolidated Financial Results
Revenues

The increases in revenues for 2011 were driven by strong organic growth in the number of individuals served in
our UnitedHealthcare businesses, commercial premium rate increases reflecting underlying medical cost trends
and revenue growth across all Optum businesses.

Medical Costs

Medical costs for 2011 increased due to risk-based membership growth in our commercial and public and senior
markets businesses and continued increases in the cost per service paid for health system use, and a modest
increase in health system utilization, mainly in outpatient and physician office settings.

49

For each period, our operating results include the effects of revisions in medical cost estimates related to prior
periods. Changes in medical cost estimates related to prior periods, resulting from more complete claim information
identified in the current period, are included in total medical costs reported for the current period. For 2011 and
2010 there was $720 million and $800 million, respectively, of net favorable medical cost development related to
prior fiscal years. The favorable development in both periods was primarily driven by continued improvements in
claims submission timeliness, which resulted in higher completion factors and lower than expected health system
utilization levels. The favorable development in 2010 also benefited from a reduction in reserves needed for
disputed claims from care providers; and favorable resolution of certain state-based assessments.

Operating Costs

The increase in our operating costs for 2011 was due to business growth, including an increased mix of Optum
and UnitedHealthcare fee-based and service revenues, which have higher operating costs, and increased spending
related to reform readiness and compliance. These factors were partially offset by overall operating cost
management and the increase in 2010 operating costs due to the goodwill impairment and charges for a business
line disposition of certain i3-branded clinical trial service businesses.

Income Tax Rate

The effective income tax rate for 2011 decreased compared to the prior year due to favorable resolution of
various historical tax matters in the current year as well as a higher effective income tax rate in 2010, due to the
cumulative implementation of certain changes under the Health Reform Legislation.

Reportable Segments
UnitedHealthcare

UnitedHealthcare’s revenue growth for 2011 was due to growth in the number of individuals served across our
businesses and commercial premium rate increases reflecting expected underlying medical cost trends.

UnitedHealthcare’s earnings from operations for 2011 increased compared to the prior year as revenue growth
and improvements in the operating cost ratio more than offset increased compliance costs and an increase to the
medical care ratio, which was primarily due to the initiation of premium rebate obligations in 2011, and lower
favorable reserve development levels.

Optum. Total revenue for these businesses increased in 2011 due to business growth and acquisitions at
OptumHealth and OptumInsight and growth in customers served through pharmaceutical benefit management
programs at OptumRx.

Optum’s operating margin for 2011 was down compared to 2010. The decrease was due to changes in business
mix within Optum’s businesses and realignment of certain internal business arrangements.

The results by segment were as follows:
OptumHealth

Increased revenues at OptumHealth for 2011 were primarily due to expansions in service offerings through
acquisitions in clinical services, as well as growth in consumer and population health management offerings.

Earnings from operations for 2011 and operating margin decreased compared to 2010. The decreases reflect the
impact from internal business and service arrangement realignments and the mix effect of growth and expansion
in newer businesses such as clinical services.

OptumInsight

Increased revenues at OptumInsight for 2011 were due to the impact of organic growth and the full-year impact of
2010 acquisitions, which were partially offset by the divestiture of the clinical trials services business in June 2011.

50

The increases in earnings from operations and operating margins for 2011 reflect an increased mix of higher
margin services in 2011 as well as the effect on 2010 earnings from operations and operating margin of the
goodwill impairment and charges for a business line disposition of certain i3-branded clinical trial service
businesses.

OptumRx

The increase in OptumRx revenues for 2011 was due to increased prescription volumes, primarily due to growth
in customers served through Medicare Part D prescription drug plans by our UnitedHealthcare Medicare &
Retirement business, and a favorable mix of higher revenue specialty drug prescriptions. Intersegment revenues
eliminated in consolidation were $16.7 billion and $14.4 billion for 2011 and 2010, respectively.

OptumRx earnings from operations and operating margins for 2011 decreased as the mix of lower margin
specialty pharmaceuticals and Medicaid business and investments to support growth initiatives including the in-
sourcing of our commercial pharmacy benefit programs more than offset the earnings contribution from higher
revenues and greater use of generic medications.

LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES

Liquidity

Introduction

We manage our liquidity and financial position in the context of our overall business strategy. We continually
forecast and manage our cash, investments, working capital balances and capital structure to meet the short- and
long-term obligations of our businesses while seeking to maintain liquidity and financial flexibility. Cash flows
generated from operating activities are principally from earnings before non-cash expenses.

Our regulated subsidiaries generate significant cash flows from operations and are subject to financial regulations
and standards in their respective jurisdictions. These standards, among other things, require these subsidiaries to
maintain specified levels of statutory capital, as defined by each jurisdiction, and restrict the timing and amount
of dividends and other distributions that may be paid to their parent companies. In the United States, most of
these regulations and standards are generally consistent with model regulations established by the NAIC. Except
in the case of extraordinary dividends, these standards generally permit dividends to be paid from statutory
unassigned surplus of the regulated subsidiary and are limited based on the regulated subsidiary’s level of
statutory net income and statutory capital and surplus. These dividends are referred to as “ordinary dividends”
and generally can be paid without prior regulatory approval. If the dividend, together with other dividends paid
within the preceding twelve months, exceeds a specified statutory limit or is paid from sources other than earned
surplus, the entire dividend is generally considered an “extraordinary dividend” and must receive prior regulatory
approval. In 2012, based on the 2011 statutory net income and statutory capital and surplus levels, the maximum
amount of ordinary dividends which could be paid by our U.S. regulated subsidiaries to their parent companies
was $4.6 billion.

In 2012, our regulated subsidiaries paid their parent companies dividends of $4.9 billion, including $1.2 billion of
extraordinary dividends. In 2011, our regulated subsidiaries paid their parent companies dividends of
$4.5 billion, including $1.1 billion of extraordinary dividends.

Our non-regulated businesses also generate cash flows from operations for general corporate use. Cash flows
generated by these entities, combined with dividends from our regulated entities and financing through the
issuance of long term debt as well as issuance of commercial paper or drawings under our committed credit
facility, further strengthen our operating and financial flexibility. We use these cash flows to expand our
businesses through acquisitions, reinvest in our businesses through capital expenditures, repay debt, and return
capital to our shareholders through shareholder dividends and/or repurchases of our common stock, depending on
market conditions.

51

Summary of our Major Sources and Uses of Cash

For the Years Ended
December 31,

Increase/
(Decrease)

Increase/
(Decrease)

(in millions) 2012 2011 2010 2012 vs. 2011 2011 vs. 2010

Sources of cash:
Cash provided by operating activities . . . . . . . . . $ 7,155 $ 6,968 $ 6,273 $ 187 $ 695
Proceeds from issuances of long-term debt and

commercial paper, net of repayments . . . . . . . 4,567 346 94 4,221 252
Proceeds from common stock issuances . . . . . . . 1,078 381 272 697 109
Net proceeds from customer funds

administered . . . . . . . . . . . . . . . . . . . . . . . . . . . — 37 974 (37) (937)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 391 20 (391) 371

Total sources of cash . . . . . . . . . . . . . . . . . . . . . . . . . . 12,800 8,123 7,633

Uses of cash:
Cash paid for acquisitions, net of cash assumed

and dispositions . . . . . . . . . . . . . . . . . . . . . . . . (6,280) (1,459) (2,304) (4,821) 845
Common stock repurchases . . . . . . . . . . . . . . . . . (3,084) (2,994) (2,517) (90) (477)
Purchases of investments, net of sales and

maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,299) (1,695) (2,157) 396 462
Purchases of property, equipment and capitalized

software, net of dispositions . . . . . . . . . . . . . . . (1,070) (1,018) (878) (52) (140)
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . (820) (651) (449) (169) (202)
Net cash paid for customer funds

administered . . . . . . . . . . . . . . . . . . . . . . . . . . . (324) — — (324) —
Acquisition of noncontrolling interest shares . . . (319) — — (319) —
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (627) — (5) (627) 5

Total uses of cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,823) (7,817) (8,310)

Net (decrease) increase in cash . . . . . . . . . . . . . . . . . . $ (1,023) $ 306 $ (677) $(1,329) $ 983

2012 Cash Flows Compared to 2011 Cash Flows

Cash flows from operating activities for 2012 increased $187 million, or 3% from 2011 due to increased net
income and related tax accruals, which were partially offset by the payment in 2012 of 2011 premium rebate
obligations as 2012 was the first year rebate payments were made under the Health Reform Legislation.

Cash flows used for investing activities increased $4.5 billion, or 107%, primarily due to increased investments
in acquisitions in 2012. See Note 6 of Notes to the Consolidated Financial Statements included in Item 8,
“Financial Statements” for further information on 2012 acquisitions.

Cash flows from financing activities increased $3.0 billion primarily due to increases in long-term debt,
commercial paper and common stock issuances, partially offset by increases in cash paid for customer funds
related to Part D and increased shareholder dividend payments. The increases in long-term debt, commercial
paper and common stock issuances were primarily related to the Amil acquisition.

2011 Cash Flows Compared to 2010 Cash Flows

Cash flows from operating activities increased $695 million, or 11%, from 2010. The increase was primarily
driven by growth in net earnings and changes in various working capital accounts, which were partially offset by
a reduction in unearned revenues due to the early receipt of certain 2011 state Medicaid premium payments in
2010, which increased 2010 cash from operating activities.

52

Cash flows used for investing activities decreased $1.2 billion, or 22%, primarily due to relatively lower
investments in acquisitions in 2011 and a decrease in net purchases of investments.

Cash flows used for financing activities increased $879 million, or 55%, primarily due to increased share
repurchases and cash dividends in 2011, partially offset by an increase in net borrowings.

Financial Condition

As of December 31, 2012, our cash, cash equivalent and available-for-sale investment balances of $28.3 billion
included $8.4 billion of cash and cash equivalents (of which $1.1 billion was held by non-regulated entities),
$19.2 billion of debt securities and $677 million of investments in equity securities and venture capital funds.
Given the significant portion of our portfolio held in cash equivalents, we do not anticipate fluctuations in the
aggregate fair value of our financial assets to have a material impact on our liquidity or capital position. The use
of different market assumptions or valuation methodologies, especially those used in valuing our $241 million of
available-for-sale Level 3 securities (those securities priced using significant unobservable inputs), may have an
effect on the estimated fair value amounts of our investments. Due to the subjective nature of these assumptions,
the estimates may not be indicative of the actual exit price if we had sold the investment at the measurement date.
Other sources of liquidity, primarily from operating cash flows and our commercial paper program, which is
supported by our bank credit facilities, reduce the need to sell investments during adverse market conditions. See
Note 4 of Notes to the Consolidated Financial Statements included in Item 8, “Financial Statements” for further
detail of our fair value measurements.

Our cash equivalent and investment portfolio had a weighted-average duration of 2.1 years and a weighted-average
credit rating of “AA” as of December 31, 2012. Included in the debt securities balance was $1.9 billion of state and
municipal obligations that are guaranteed by a number of third parties. Due to the high underlying credit ratings of
the issuers, the weighted-average credit rating of these securities with and without the guarantee was “AA” as of
December 31, 2012. We do not have any significant exposure to any single guarantor (neither indirect through the
guarantees, nor direct through investment in the guarantor). When multiple credit ratings are available for an
individual security, the average of the available ratings is used to determine the weighted-average credit rating.

Capital Resources and Uses of Liquidity

In addition to cash flow from operations and cash and cash equivalent balances available for general corporate
use, our capital resources and uses of liquidity are as follows:

Commercial Paper. We maintain a commercial paper borrowing program, which facilitates the private
placement of unsecured debt through third-party broker-dealers. The commercial paper program is supported by
the bank credit facilities described below. As of December 31, 2012, we had $1.6 billion of commercial paper
outstanding at a weighted-average annual interest rate of 0.3%.

Bank Credit Facilities. We have $3.0 billion five-year and $1.0 billion 364-day revolving bank credit facilities
with 21 banks, which mature in November 2017 and November 2013, respectively. These facilities provide
liquidity support for our $4.0 billion commercial paper program and are available for general corporate purposes.
There were no amounts outstanding under these facilities as of December 31, 2012. The interest rates on
borrowings are variable depending on term and are calculated based on the LIBOR plus a credit spread based on
our senior unsecured credit ratings. As of December 31, 2012, the annual interest rates on these facilities, had
they been drawn, would have ranged from 1.0% to 1.3%.

Our bank credit facilities contain various covenants, including requiring us to maintain a debt to debt-plus-equity
ratio of not more than 50%. Our debt to debt-plus-equity ratio, calculated as the sum of debt divided by the sum
of debt and shareholders’ equity, which reasonably approximates the actual covenant ratio, was 35.0% as of
December 31, 2012. We were in compliance with our debt covenants as of December 31, 2012.

53

Long-term debt. Periodically, we access capital markets and issue long-term debt for general corporate purposes,
for example, to meet our working capital requirements, to refinance debt, to finance acquisitions or for share
repurchases.

In connection with the Amil acquisition, we assumed variable rate debt denominated in Brazilian Reais, Amil’s
functional currency. The total Brazilian Real denominated long-term debt outstanding at December 31, 2012 was
$611 million, and had an aggregate weighted average interest rate of approximately 9%. For more detail on the
Amil debt see Note 8 of Notes to the Consolidated Financial Statements included in Item 8, “Financial
Statements.”

In October 2012, we issued $2.5 billion in senior unsecured notes, which included: $625 million of 0.850%
fixed-rate notes due October 2015, $625 million of 1.400% fixed-rate notes due October 2017, $625 million of
2.750% fixed-rate notes due February 2023 and $625 million of 3.950% fixed-rate notes due October 2042.

In August 2012, we completed an exchange of $1.1 billion of our zero coupon senior unsecured notes due
November 2022 for $0.5 billion additional issuance of our 2.875% notes due in March 2022, $0.1 billion
additional issuance of our 4.375% notes due March 2042 and $0.1 billion in cash. The transaction was
undertaken to increase financial flexibility and reduce interest expense.

In March 2012, we issued $1.0 billion in senior unsecured notes. The issuance included $600 million of 2.875%
fixed-rate notes due March 2022 and $400 million of 4.375% fixed-rate notes due March 2042.

Credit Ratings. Our credit ratings at December 31, 2012 were as follows:

Moody’s Standard & Poor’s Fitch A.M. Best

Ratings Outlook Ratings Outlook Ratings Outlook Ratings Outlook

Senior unsecured debt . . . . . . . . . . . A3 Negative A Stable A- Stable bbb+ Stable
Commercial paper . . . . . . . . . . . . . . P-2 n/a A-1 n/a F1 n/a AMB-2 n/a

The availability of financing in the form of debt or equity is influenced by many factors, including our
profitability, operating cash flows, debt levels, credit ratings, debt covenants and other contractual restrictions,
regulatory requirements and economic and market conditions. For example, a significant downgrade in our credit
ratings or conditions in the capital markets may increase the cost of borrowing for us or limit our access to
capital. We have adopted strategies and actions toward maintaining financial flexibility to mitigate the impact of
such factors on our ability to raise capital.

Share Repurchase Program. Under our Board of Directors’ authorization, we maintain a share repurchase
program. Repurchases may be made from time to time in open market purchases or other types of transactions
(including prepaid or structured share repurchase programs), subject to certain Board restrictions. In June 2012,
our Board renewed and expanded our share repurchase program with an authorization to repurchase up to
110 million shares of our common stock. As of December 31, 2012, we had Board authorization to purchase up
to an additional 85 million shares of our common stock. For details of our 2012 share repurchases, see Note 10 of
Notes to the Consolidated Financial Statements included in Item 8, “Financial Statements.”

Dividends. In June 2012, our Board of Directors increased our cash dividend to shareholders to an annual
dividend rate of $0.85 per share, paid quarterly. Since May 2011, we had paid an annual dividend of $0.65 per
share, paid quarterly. Declaration and payment of future quarterly dividends is at the discretion of the Board and
may be adjusted as business needs or market conditions change. For details of our dividend payments, see Note
10 of Notes to the Consolidated Financial Statements included in Item 8, “Financial Statements.”

Amil Tender Offer. During the fourth quarter of 2012, we purchased approximately 65% of the outstanding
shares of Amil for $3.5 billion. We expect to acquire an additional 25% ownership interest during the first half of
2013 through a tender offer for Amil’s publicly traded shares. The tender offer price will be at the same price

54

paid to Amil’s controlling shareholders, adjusted for statutory interest under Brazilian law from the date of
payment to the controlling shareholders to the date of payment to the tendering minority shareholders.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The following table summarizes future obligations due by period as of December 31, 2012, under our various
contractual obligations and commitments:

(in millions) 2013 2014 to 2015 2016 to 2017 Thereafter Total

Debt (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,413 $3,271 $3,384 $16,769 $26,837
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380 676 510 556 2,122
Purchase obligations (b) . . . . . . . . . . . . . . . . . . . . . . . . . 137 184 7 — 328
Future policy benefits (c) . . . . . . . . . . . . . . . . . . . . . . . . 135 256 265 1,923 2,579
Unrecognized tax benefits (d) . . . . . . . . . . . . . . . . . . . . 11 — — 60 71
Other liabilities recorded on the Consolidated Balance

Sheet (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 18 6 1,511 1,624
Other obligations (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 144 60 43 297
Redeemable noncontrolling interests (g) . . . . . . . . . . . . 1,393 182 546 — 2,121

Total contractual obligations . . . . . . . . . . . . . . . . . . . . . $5,608 $4,731 $4,778 $20,862 $35,979

(a) Includes interest coupon payments and maturities at par or put values. For variable rate debt, the rates in
effect at December 31, 2012 were used to calculate the interest coupon payments. The table also assumes
amounts are outstanding through their contractual term. See Note 8 of Notes to the Consolidated Financial
Statements included in Item 8, “Financial Statements” for more detail.

(b) Includes fixed or minimum commitments under existing purchase obligations for goods and services,
including agreements that are cancelable with the payment of an early termination penalty. Excludes
agreements that are cancelable without penalty and excludes liabilities to the extent recorded in our
Consolidated Balance Sheets as of December 31, 2012.

(c) Future policy benefits represent account balances that accrue to the benefit of the policyholders, excluding
surrender charges, for universal life and investment annuity products and for long-duration health policies
sold to individuals for which some of the premium received in the earlier years is intended to pay benefits to
be incurred in future years. See Note 2 of Notes to the Consolidated Financial Statements included in
Item 8, “Financial Statements” for more detail.

(d) As the timing of future settlements is uncertain, the long-term portion has been classified as “Thereafter.”
(e) Includes obligations associated with contingent consideration and other payments related to business

acquisitions, certain employee benefit programs, charitable contributions related to the PacifiCare
acquisition and various other long-term liabilities. Due to uncertainty regarding payment timing, obligations
for employee benefit programs, charitable contributions and other liabilities have been classified as
“Thereafter.”

(f) Includes remaining capital commitments for venture capital funds and other funding commitments.
(g) Includes commitments to purchase the remaining publicly traded Amil shares as well as the put/call for the

shares owned by Amil’s remaining non-public shareholders. See Note 6 of Notes to the Consolidated
Financial Statements included in Item 8, “Financial Statements” for more detail.

We do not have other significant contractual obligations or commitments that require cash resources; however,
we continually evaluate opportunities to expand our operations. This includes internal development of new
products, programs and technology applications, and may include acquisitions.

55

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2012, we were not involved in any off-balance sheet arrangements (as that phrase is defined
by SEC rules applicable to this report) which have or are reasonably likely to have a material adverse effect on
our financial condition, results of operations or liquidity.

RECENTLY ISSUED ACCOUNTING STANDARDS

We have determined that there have been no recently issued, but not yet adopted, accounting standards that will
have a material impact on our Consolidated Financial Statements.

CRITICAL ACCOUNTING ESTIMATES

Critical accounting estimates are those estimates that require management to make challenging, subjective or
complex judgments, often because they must estimate the effects of matters that are inherently uncertain and may
change in subsequent periods. Critical accounting estimates involve judgments and uncertainties that are
sufficiently sensitive and may result in materially different results under different assumptions and conditions.

Medical Costs Payable

Each reporting period, we estimate our obligations for medical care services that have been rendered on behalf of
insured consumers but for which claims have either not yet been received or processed and for liabilities for
physician, hospital and other medical cost disputes. We develop estimates for medical care services incurred but
not reported using an actuarial process that is consistently applied, centrally controlled and automated. The
actuarial models consider factors such as time from date of service to claim receipt, claim processing backlogs,
seasonal variances in medical care consumption, health care professional contract rate changes, medical care
utilization and other medical cost trends, membership volume and demographics, the introduction of new
technologies, benefit plan changes, and business mix changes related to products, customers and geography.
Depending on the health care professional and type of service, the typical billing lag for services can be up to
90 days from the date of service. Substantially all claims related to medical care services are known and settled
within nine to twelve months from the date of service. As of December 31, 2012, our days outstanding in medical
payables was 49 days.

Each period, we re-examine previously established medical costs payable estimates based on actual claim
submissions and other changes in facts and circumstances. As more complete claim information becomes
available, we adjust the amount of the estimates and include the changes in estimates in medical costs in the
period in which the change is identified. In every reporting period, our operating results include the effects of
more completely developed medical costs payable estimates associated with previously reported periods. If the
revised estimate of prior period medical costs is less than the previous estimate, we will decrease reported
medical costs in the current period (favorable development). If the revised estimate of prior period medical costs
is more than the previous estimate, we will increase reported medical costs in the current period (unfavorable
development). Medical costs in 2012, 2011, and 2010 included favorable medical cost development related to
prior years of $860 million, $720 million and $800 million, respectively.

In developing our medical costs payable estimates, we apply different estimation methods depending on the month
for which incurred claims are being estimated. For example, we actuarially calculate completion factors using an
analysis of claim adjudication patterns over the most recent 36-month period. A completion factor is an actuarial
estimate, based upon historical experience and analysis of current trends, of the percentage of incurred claims
during a given period that have been adjudicated by us at the date of estimation. For months prior to the most recent
three months, we apply the completion factors to actual claims adjudicated-to-date to estimate the expected amount
of ultimate incurred claims for those months. For the most recent three months, we estimate claim costs incurred
primarily by applying observed medical cost trend factors to the average per member per month (PMPM) medical

56

costs incurred in prior months for which more complete claim data is available, supplemented by a review of near-
term completion factors. This approach is consistently applied from period to period.

Completion Factors. Completion factors are the most significant factors we use in developing our medical costs
payable estimates for older periods, generally periods prior to the most recent three months. The completion
factor includes judgments in relation to claim submissions such as the time from date of service to claim receipt,
claim inventory levels and claim processing backlogs as well as other factors. If actual claims submission rates
from providers (which can be influenced by a number of factors including provider mix and electronic versus
manual submissions) or our claim processing patterns are different than estimated, our reserves may be
significantly impacted.

The following table illustrates the sensitivity of these factors and the estimated potential impact on our medical
costs payable estimates for those periods as of December 31, 2012:

Completion Factors
Increase (Decrease) in Factors

Increase (Decrease)
In Medical Costs Payable

(in millions)

(0.75)% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 261
(0.50) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
(0.25) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
0.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (86)
0.50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (172)
0.75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (257)

Medical cost PMPM trend factors. Medical cost PMPM trend factors are significant factors we use in
developing our medical costs payable estimates for the most recent three months. Medical cost trend factors are
developed through a comprehensive analysis of claims incurred in prior months, provider contracting and
expected unit costs, benefit design, and by reviewing a broad set of health care utilization indicators including,
but not limited to, pharmacy utilization trends, inpatient hospital census data and incidence data from the
National Centers for Disease Control. We also consider macroeconomic variables such as gross-domestic product
growth, employment and disposable income. A large number of factors can cause the medical cost trend to vary
from our estimates including: our ability and practices to manage medical costs, changes in level and mix of
services utilized, mix of benefits offered including the impact of co-pays and deductibles, changes in medical
practices, catastrophes and epidemics.

The following table illustrates the sensitivity of these factors and the estimated potential impact on our medical
costs payable estimates for the most recent three months as of December 31, 2012:

Medical Costs PMPM Trend
Increase (Decrease) in Factors

Increase (Decrease)
In Medical Costs Payable
(in millions)

3% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 505
2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337
1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (168)
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (337)
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (505)

The analyses above include outcomes that are considered reasonably likely based on our historical experience
estimating liabilities for incurred but not reported benefit claims.

Our estimate of medical costs payable represents management’s best estimate of our liability for unpaid medical
costs as of December 31, 2012, developed using consistently applied actuarial methods. Management believes

57

The following tables summarize the impact of hypothetical changes in market interest rates across the entire yield
curve by 1% or 2% as of December 31, 2012 and 2011 on our investment income and interest expense per
annum, and the fair value of our investments and debt (in millions, except percentages):

December 31, 2012

Increase (Decrease) in Market Interest Rate

Investment
Income Per
Annum (a)

Interest
Expense Per
Annum (a)

Fair Value of
Investments (b)

Fair Value of
Debt

2% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $189 $134 $(1,303) $(2,200)
1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 67 (656) (1,194)
(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) (14) 518 1,366
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . nm nm 686 2,747

December 31, 2011

Increase (Decrease) in Market Interest Rate
Investment
Income Per
Annum (a)
Interest
Expense Per
Annum (a)
Fair Value of
Investments (b)
Fair Value of
Debt

2% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $199 $ 28 $(1,239) $(1,946)
1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 14 (622) (1,082)
(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) (4) 586 1,086
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . nm nm 885 2,343

nm = not meaningful

(a) Given the low absolute level of short-term market rates on our floating-rate assets and liabilities as of
December 31, 2012 and 2011, the assumed hypothetical change in interest rates does not reflect the full
100 basis point reduction in interest income or interest expense as the rate cannot fall below zero and thus
the 200 basis point reduction is not meaningful.

(b) As of December 31, 2012, some of our investments had interest rates below 2% so the assumed hypothetical
change in the fair value of investments does not reflect the full 200 basis point reduction.

With the Amil acquisition, we have an exposure to changes in the value of the Brazilian Real to the U.S. Dollar
in translation of Amil’s operating results at the average exchange rate over the accounting period, and Amil’s
assets and liabilities at the spot rate at the end of the accounting period. The gains or losses resulting from
translating foreign currency financial statements into U.S. dollars are included in shareholders’ equity and
comprehensive income.

An appreciation of the U.S. dollar against the Brazilian Real reduces the carrying value of the net assets
denominated in Brazilian Real. For example, as of December 31, 2012 a hypothetical 10% increase in the value
of the U.S. Dollar against the Brazilian Real would cause a reduction in net assets of $510 million. We manage
exposure to foreign currency risk by conducting our international business operations primarily in their
functional currencies. We funded certain cash needs of Amil through intercompany notes. At December 31,
2012, we had currency swaps with a total notional amount of $256 million hedging the U.S. dollar to the
Brazilian Real to provide a cash flow hedge on the principal amount of the intercompany notes to Amil.

As of December 31, 2012, we had $677 million of investments in equity securities, including employee savings
plan related investments of $348 million and venture capital funds, a portion of which were invested in various
public and non-public companies concentrated in the areas of health care delivery and related information
technologies. Market conditions that affect the value of health care or technology stocks will impact the value of
our equity investments.

64

ITEM 8. FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Consolidated Statements of Changes in Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

1. Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

2. Basis of Presentation, Use of Estimates and Significant Accounting Policies . . . . . . . . . . . . . . . . . 72

3. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

4. Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

5. Property, Equipment and Capitalized Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

6. Goodwill and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

7. Medical Costs and Medical Costs Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

8. Commercial Paper and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

9. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

10. Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

11. Share-Based Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

12. Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

13. Segment Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

14. Quarterly Financial Data (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

65

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of UnitedHealth Group Incorporated and Subsidiaries:

We have audited the accompanying consolidated balance sheets of UnitedHealth Group Incorporated and
Subsidiaries (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of
operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period
ended December 31, 2012. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial
position of UnitedHealth Group Incorporated and Subsidiaries as of December 31, 2012 and 2011, and the results
of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in
conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of December 31, 2012, based on the
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 6, 2013, expressed an unqualified
opinion on the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Minneapolis, Minnesota

February 6, 2013

66

UnitedHealth Group

Consolidated Balance Sheets

(in millions, except per share data)
December 31,

2012
December 31,

2011

Assets
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,406 $ 9,429
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,031 2,577
Accounts receivable, net of allowances of $189 and $196 . . . . . . . . . . . . . . . . . . 2,709 2,294
Other current receivables, net of allowances of $206 and $72 . . . . . . . . . . . . . . . 2,889 2,255
Assets under management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,773 2,708
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 472
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781 615

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,052 20,350
Long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,711 16,166
Property, equipment and capitalized software, net of accumulated depreciation and

amortization of $2,564 and $2,440 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,939 2,515
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,286 23,975
Other intangible assets, net of accumulated amortization of $1,824 and $1,451 . . . . . 4,682 2,795
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,215 2,088

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $80,885 $67,889

Liabilities and shareholders’ equity
Current liabilities:

Medical costs payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,004 $ 9,799
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,984 6,853
Other policy liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,910 5,063
Commercial paper and current maturities of long-term debt . . . . . . . . . . . . . . . . . 2,713 982
Unearned revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,505 1,225

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,116 23,922
Long-term debt, less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,041 10,656
Future policy benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,444 2,445
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,450 1,351
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,535 1,223

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,586 39,597

Commitments and contingencies (Note 12)
Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,121 —
Shareholders’ equity:

Preferred stock, $0.001 par value — 10 shares authorized; no shares issued or
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

Common stock, $0.01 par value — 3,000 shares authorized;
1,019 and 1,039 issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 10

Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 —
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,664 27,821
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 438 461

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,178 28,292

Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $80,885 $67,889

See Notes to the Consolidated Financial Statements

67

UnitedHealth Group
Consolidated Statements of Operations

For the Years Ended December 31,

(in millions, except per share data)

2012 2011 2010

Revenues:
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 99,728 $ 91,983 $85,405
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,437 6,613 5,819
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,773 2,612 2,322
Investment and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 654 609

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,618 101,862 94,155

Operating costs:
Medical costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,226 74,332 68,841
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,306 15,557 14,270
Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,523 2,385 2,116
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,309 1,124 1,064

Total operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,364 93,398 86,291

Earnings from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,254 8,464 7,864
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (632) (505) (481)

Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,622 7,959 7,383
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,096) (2,817) (2,749)

Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,526 $ 5,142 $ 4,634

Earnings per share attributable to UnitedHealth Group common
shareholders:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5.38 $ 4.81 $ 4.14

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5.28 $ 4.73 $ 4.10

Basic weighted-average number of common shares outstanding . . . . . . . . . 1,027 1,070 1,120
Dilutive effect of common stock equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 19 17 11

Diluted weighted-average number of common shares outstanding . . . . . . . 1,046 1,087 1,131

Anti-dilutive shares excluded from the calculation of dilutive effect of
common stock equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 47 94

Cash dividends declared per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.8000 $ 0.6125 $0.4050

See Notes to the Consolidated Financial Statements
68

UnitedHealth Group
Consolidated Statements of Comprehensive Income

For the Years Ended December 31,

(in millions) 2012 2011 2010

Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,526 $5,142 $4,634

Other comprehensive (loss) income:
Gross unrealized holding gains on investment securities during the

period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 422 74
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78) (154) (26)

Total unrealized gains, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 268 48

Gross reclassification adjustment for net realized gains included in net
earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (156) (

113

) (71)

Income tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 41 26

Total reclassification adjustment, net of tax . . . . . . . . . . . . . . . . . . . . . . (99) (72) (45)

Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . (63) 13 (4)

Other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23) 209 (1)

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,503 $5,351 $4,633

See Notes to the Consolidated Financial Statements
69

UnitedHealth Group
Consolidated Statements of Changes in Shareholders’ Equity

Common Stock

Accumulated Other
Comprehensive Income

(Loss)

Additional
Paid-In Retained

Net
Unrealized
Gains on

Foreign
Currency

Translation
(Losses)

(in millions) Shares Amount Capital Earnings Investments Gains Total Equity

Balance at January 1, 2010 . . . . . 1,147 $11 $ — $23,342 $277 $(24) $23,606
Net earnings . . . . . . . . . . . . . . . . . . 4,634 4,634
Other comprehensive income . . . . 3 (4) (1)
Issuances of common stock, and

related tax effects . . . . . . . . . . . . 15 — 207 207
Share-based compensation, and

related tax benefits . . . . . . . . . . . 345 345
Common stock repurchases . . . . . . (76) — (552) (1,965) (2,517)
Cash dividends paid on common

stock . . . . . . . . . . . . . . . . . . . . . . (449) (449)

Balance at December 31, 2010 . . 1,086 11 — 25,562 280 (28) 25,825
Net earnings . . . . . . . . . . . . . . . . . . 5,142 5,142
Other comprehensive income . . . . 196 13 209
Issuances of common stock, and

related tax effects . . . . . . . . . . . . 18 — 308 308
Share-based compensation, and

related tax benefits . . . . . . . . . . . 453 453
Common stock repurchases . . . . . . (65) (1) (761) (2,232) (2,994)
Cash dividends paid on common

stock . . . . . . . . . . . . . . . . . . . . . . (651) (651)

Balance at December 31, 2011 . . 1,039 10 — 27,821 476 (15) 28,292
Net earnings . . . . . . . . . . . . . . . . . . 5,526 5,526
Other comprehensive income . . . . 40 (63) (23)
Issuances of common stock, and

related tax effects . . . . . . . . . . . . 37 — 704 704
Share-based compensation, and

related tax benefits . . . . . . . . . . . 594 594
Common stock repurchases . . . . . . (57) — (1,221) (1,863) (3,084)
Acquisition of noncontrolling

interest . . . . . . . . . . . . . . . . . . . . (11) (11)
Cash dividends paid on common

stock . . . . . . . . . . . . . . . . . . . . . . (820) (820)

Balance at December 31, 2012 . . 1,019 $10 $ 66 $30,664 $516 $(78) $31,178

See Notes to the Consolidated Financial Statements
70

UnitedHealth Group
Consolidated Statements of Cash Flows

For the Years Ended December 31,
(in millions) 2012 2011 2010

Operating activities
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,526 $ 5,142 $ 4,634
Non-cash items:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,309 1,124 1,064
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308 59 45
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 401 326
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (231) (67) 203

Net change in other operating items, net of effects from acquisitions and changes
in AARP balances:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (130) (267) (16)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (295) (121) 84
Medical costs payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 377 (88)
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 146 (341)
Other policy liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (81) 482 10
Unearned revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 (308) 352

Cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,155 6,968 6,273

Investing activities
Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,903) (9,895) (7,855)
Sales of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,794 3,949 2,593
Maturities of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,810 4,251 3,105
Cash paid for acquisitions, net of cash assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,280) (1,844) (2,323)
Cash received from dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 385 19
Purchases of property, equipment and capitalized software . . . . . . . . . . . . . . . . . . (1,070) (1,067) (878)
Proceeds from disposal of property, equipment and capitalized software . . . . . . . — 49 —

Cash flows used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,649) (4,172) (5,339)

Financing activities
Common stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,084) (2,994) (2,517)
Proceeds from common stock issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,078 381 272
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (820) (651) (449)
Proceeds from (repayments of) commercial paper, net . . . . . . . . . . . . . . . . . . . . . 1,587 (933) 930
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,966 2,234 747
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (986) (955) (1,583)
Interest rate swap termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 132 —
Customer funds administered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (324) 37 974
Checks outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (202) 206 (5)
Acquisition of noncontrolling interest shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (319) — —
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (425) 53 20

Cash flows from (used for) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . 471 (2,490) (1,611)

(Decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . (1,023) 306 (677)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . 9,429 9,123 9,800

Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,406 $ 9,429 $ 9,123

Supplemental cash flow disclosures
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 600 $ 472 $ 509
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,666 2,739 2,725

See Notes to the Consolidated Financial Statements
71

UnitedHealth Group
Notes to the Consolidated Financial Statements

1. Description of Business

UnitedHealth Group Incorporated (also referred to as “UnitedHealth Group” and “the Company”) is a diversified
health and well-being company whose mission is to help people live healthier lives and make health care work
better.

The Company helps individuals access quality care at an affordable cost; simplifying health care administration
and delivery; strengthening the physician/patient relationship; promoting evidence-based care; and empowering
physicians, health care professionals, consumers, employers and other participants in the health system with
actionable data to make better, more informed decisions.

Through the Company’s diversified family of businesses, it leverages core competencies in advanced, enabling
technology; health care data, information and intelligence; and clinical care management and coordination to
help meet the demands of the health system. See Note 13 for a description of the Company’s reportable segments
and how the segments generate their revenues.

2. Basis of Presentation, Use of Estimates and Significant Accounting Policies

Basis of Presentation

The Company has prepared the Consolidated Financial Statements according to United States of America (U.S.)
Generally Accepted Accounting Principles (GAAP) and has included the accounts of UnitedHealth Group and its
subsidiaries. The Company has eliminated intercompany balances and transactions.

Use of Estimates

These Consolidated Financial Statements include certain amounts based on the Company’s best estimates and
judgments. The Company’s most significant estimates relate to medical costs payable, premium rebates and risk-
adjusted and risk-sharing provisions related to revenues, valuation and impairment analysis of goodwill and other
intangible assets, estimates of other policy liabilities and other current receivables, valuations of investments, and
estimates and judgments related to income taxes and contingent liabilities. These estimates require the
application of complex assumptions and judgments, often because they involve matters that are inherently
uncertain and will likely change in subsequent periods. The impact of any changes in estimates is included in
earnings in the period in which the estimate is adjusted.

Revenues

Premium revenues are primarily derived from risk-based health insurance arrangements in which the premium is
typically at a fixed rate per individual served for a one-year period, and the Company assumes the economic risk
of funding its customers’ health care and related administrative costs.

Premium revenues are recognized in the period in which eligible individuals are entitled to receive health care
benefits. Health care premium payments received from its customers in advance of the service period are
recorded as unearned revenues. Effective in 2011, U.S. commercial health plans with medical loss ratios on fully
insured products, as calculated under the definitions in the Patient Protection and Affordable Care Act and a
reconciliation measure, the Health Care and Education Reconciliation Act of 2010 (together, Health Reform
Legislation) and implementing regulations, that fall below certain targets are required to rebate ratable portions
of their premiums annually. Premium revenues are recognized based on the estimated premiums earned net of
projected rebates because the Company is able to reasonably estimate the ultimate premiums of these contracts.
Each period, the Company estimates premium rebates based on the expected financial performance of the

72

For details on the Company’s Medicare Part D receivables see “Medicare Part D Pharmacy Benefits” below.

For details on the Company’s reinsurance receivable see “Future Policy Benefits and Reinsurance Receivable”
below.

Medicare Part D Pharmacy Benefits

The Company serves as a plan sponsor offering Medicare Part D prescription drug insurance coverage under
contracts with CMS. Under the Medicare Part D program, there are seven separate elements of payment received
by the Company during the plan year. These payment elements are as follows:

• CMS Premium. CMS pays a fixed monthly premium per member to the Company for the entire plan year.

• Member Premium. Additionally, certain members pay a fixed monthly premium to the Company for the
entire plan year.

• Low-Income Premium Subsidy. For qualifying low-income members, CMS pays some or all of the
member’s monthly premiums to the Company on the member’s behalf.

• Catastrophic Reinsurance Subsidy. CMS pays the Company a cost reimbursement estimate monthly to fund
the CMS obligation to pay approximately 80% of the costs incurred by individual members in excess of the
individual annual out-of-pocket maximum. A settlement is made with CMS based on actual cost experience,
after the end of the plan year.

• Low-Income Member Cost Sharing Subsidy. For qualifying low-income members, CMS pays on the
member’s behalf some or all of a member’s cost sharing amounts, such as deductibles and coinsurance. The
cost sharing subsidy is funded by CMS through monthly payments to the Company. The Company
administers and pays the subsidized portion of the claims on behalf of CMS, and a settlement payment is
made between CMS and the Company based on actual claims and premium experience, after the end of the
plan year.

• CMS Risk-Share. Premiums from CMS are subject to risk corridor provisions that compare costs targeted in
the Company’s annual bids by product and region to actual prescription drug costs, limited to actual costs
that would have been incurred under the standard coverage as defined by CMS. Variances of more than 5%
above or below the original bid submitted by the Company may result in CMS making additional payments
to the Company or require the Company to refund to CMS a portion of the premiums it received. The
Company estimates and recognizes an adjustment to premium revenues related to the risk corridor payment
settlement based upon pharmacy claims experience to date. The estimate of the settlement associated with
these risk corridor provisions requires the Company to consider factors that may not be certain, including
estimates of eligible pharmacy costs and member eligibility status differences with CMS. The Company
records risk-share adjustments to Premium Revenues in the Consolidated Statements of Operations and
Other Policy Liabilities or Other Current Receivables in the Consolidated Balance Sheets.

• Drug Discount. Beginning in 2011, Health Reform Legislation mandated a consumer discount of 50% on
brand name prescription drugs for Part D plan participants in the coverage gap. This discount is funded by
CMS and pharmaceutical manufacturers while the Company administers the application of these funds.
Amounts received are not reflected as premium revenues, but rather are accounted for as deposits. The
Company records a liability when amounts are received from CMS and a receivable when the Company
bills the pharmaceutical manufacturers. Related cash flows are presented as Customer Funds Administered
within financing activities in the Consolidated Statements of Cash Flows.

The CMS Premium, the Member Premium, and the Low-Income Premium Subsidy represent payments for the
Company’s insurance risk coverage under the Medicare Part D program and, therefore, are recorded as Premium
Revenues in the Consolidated Statements of Operations. Premium revenues are recognized ratably over the
period in which eligible individuals are entitled to receive prescription drug benefits. The Company records

76

premium payments received in advance of the applicable service period in Unearned Revenues in the
Consolidated Balance Sheets.

The Catastrophic Reinsurance Subsidy and the Low-Income Member Cost Sharing Subsidy (Subsidies) represent
cost reimbursements under the Medicare Part D program. Amounts received for these Subsidies are not reflected
as premium revenues, but rather are accounted for as receivables and/or deposits. Related cash flows are
presented as Customer Funds Administered within financing activities in the Consolidated Statements of Cash
Flows.

Pharmacy benefit costs and administrative costs under the contract are expensed as incurred and are recognized
in Medical Costs and Operating Costs, respectively, in the Consolidated Statements of Operations.

The final 2012 risk-share amount is expected to be settled during the second half of 2013, and is subject to the
reconciliation process with CMS.

The Consolidated Balance Sheets include the following amounts associated with the Medicare Part D program:

December 31, 2012 December 31, 2011

(in millions) Subsidies Drug Discount Risk-Share Subsidies Drug Discount Risk-Share

Other current receivables . . . . . . . . . . $461 $314 $ — $ — $509 $ —
Other policy liabilities . . . . . . . . . . . . . — 319 438 70 649 170

As of January 1, 2013, certain changes were made to the Medicare Part D coverage by CMS, including:

The initial coverage limit increased to $2,970 from $2,930 in 2012.

The catastrophic coverage begins at $6,734 as compared to $6,658 in 2012.

The annual out-of-pocket maximum increased to $4,750 from $4,700 in 2012.

The discounts on prescription drugs within the coverage gap increased to 52.5% from 50% in 2012 for
brand name drugs and to 21% from 14% in 2012 for generic drugs.

Property, Equipment and Capitalized Software

Property, equipment and capitalized software are stated at cost, net of accumulated depreciation and
amortization. Capitalized software consists of certain costs incurred in the development of internal-use software,
including external direct costs of materials and services and applicable payroll costs of employees devoted to
specific software development. The Company reviews property, equipment and capitalized software for events or
changes in circumstances that would indicate that it might not recover their carrying value. If the Company
determines that an asset may not be recoverable, an impairment charge is recorded.

The Company calculates depreciation and amortization using the straight-line method over the estimated useful
lives of the assets. The useful lives for property, equipment and capitalized software are:

Furniture, fixtures and equipment . . . . . . . . . . . 3 to 7 years
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 to 40 years
Leasehold improvements . . . . . . . . . . . . . . . . . . 7 years or length of lease term, whichever is shorter
Capitalized software . . . . . . . . . . . . . . . . . . . . . . 3 to 5 years

Goodwill

Goodwill represents the amount of the purchase price in excess of the fair values assigned to the underlying
identifiable net assets of acquired businesses. Goodwill is not amortized, but is subject to an annual impairment
test. Tests are performed more frequently if events occur or circumstances change that would more likely than
not reduce the fair value of the reporting unit below its carrying amount.

77

To determine whether goodwill is impaired, the Company performs a multi-step impairment test. First, the
Company can elect to perform a qualitative assessment of each reporting unit to determine whether facts and
circumstances support a determination that their fair values are greater than their carrying values. If the
qualitative analysis is not conclusive, or if the Company elects to proceed directly with quantitative testing, it
will then measure the fair values of the reporting units and compare them to their aggregate carrying values,
including goodwill. If the fair value is less than the carrying value of the reporting unit, then the implied value of
goodwill would be calculated and compared to the carrying amount of goodwill to determine whether goodwill is
impaired.

The Company estimates the fair values of its reporting units using discounted cash flows. To determine fair
values, the Company must make assumptions about a wide variety of internal and external factors. Significant
assumptions used in the impairment analysis include financial projections of free cash flow (including significant
assumptions about operations, capital requirements and income taxes), long-term growth rates for determining
terminal value, and discount rates. Comparative market multiples are used to corroborate the results of the
discounted cash flow test.

The Company elected to bypass the optional qualitative reporting-unit fair value assessment and completed its
annual quantitative test for goodwill impairment as of January 1, 2013. As of December 31, 2012, no reporting
unit had a fair value less than its carrying value and the Company concluded that there was no need for any
impairment of its goodwill balances.

Intangible assets

Separately-identifiable intangible assets are acquired in business combinations and are assets that represent future
expected benefits but lack physical substance (e.g., membership lists, customer contracts, trademarks and
technology). The Company’s intangible assets are initially recorded at their fair values. Finite-lived intangible
assets are amortized over their expected useful lives.

The Company’s intangible assets are subject to impairment tests when events or circumstances indicate that an
intangible asset’s (or asset group’s) may be impaired. The Company’s indefinite lived intangible assets are also
tested for impairment annually. There were no material impairments of intangible assets during the year ended
December 31, 2012.

Other Policy Liabilities

Other policy liabilities include the RSF associated with the AARP Program (described below), health savings
account deposits, deposits under the Medicare Part D program (see “Medicare Part D Pharmacy Benefits”
above), accruals for premium rebate payments under the Health Reform Legislation, the current portion of future
policy benefits and customer balances. Customer balances represent excess customer payments and deposit
accounts under experience-rated contracts. At the customer’s option, these balances may be refunded or used to
pay future premiums or claims under eligible contracts.

Underwriting gains or losses related to the AARP Program are directly recorded as an increase or decrease to
the RSF and accrue to the overall benefit of the AARP policyholders, unless cumulative net losses were to
exceed the balance in the RSF. The primary components of the underwriting results are premium revenue,
medical costs, investment income, administrative expenses, member service expenses, marketing expenses and
premium taxes. To the extent underwriting losses exceed the balance in the RSF, losses would be borne by the
Company. Deficits may be recovered by underwriting gains in future periods of the contract. To date, the
Company has not been required to fund any underwriting deficits. Changes in the RSF are reported in Medical
Costs in the Consolidated Statement of Operations. As of December 31, 2012 and 2011, the balance in the RSF
was $1.3 billion.

78

3. Investments

A summary of short-term and long-term investments by major security type is as follows:

(in millions)
Amortized

Cost

Gross
Unrealized

Gains

Gross
Unrealized

Losses

Fair

Value

December 31, 2012
Debt securities — available-for-sale:

U.S. government and agency obligations . . . . . . . . . . . . . . . . . $ 2,501 $ 38 $ (1) $ 2,538
State and municipal obligations . . . . . . . . . . . . . . . . . . . . . . . . . 6,282 388 (3) 6,667
Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,930 283 (4) 7,209
U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . . . . 2,168 70 — 2,238
Non-U.S. agency mortgage-backed securities . . . . . . . . . . . . . . 538 36 — 574

Total debt securities — available-for-sale . . . . . . . . . . . . . . . . . . . . . 18,419 815 (8) 19,226

Equity securities — available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . 668 10 (1) 677
Debt securities — held-to-maturity:

U.S. government and agency obligations . . . . . . . . . . . . . . . . . 168 6 — 174
State and municipal obligations . . . . . . . . . . . . . . . . . . . . . . . . . 30 — — 30
Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 641 2 — 643

Total debt securities — held-to-maturity . . . . . . . . . . . . . . . . . . . . . . 839 8 — 847

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,926 $833 $ (9) $20,750

December 31, 2011
Debt securities — available-for-sale:

U.S. government and agency obligations . . . . . . . . . . . . . . . . . $ 2,319 $ 54 $ — $ 2,373
State and municipal obligations . . . . . . . . . . . . . . . . . . . . . . . . . 6,363 403 (1) 6,765
Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,825 205 (23) 6,007
U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . . . . 2,279 74 — 2,353
Non-U.S. agency mortgage-backed securities . . . . . . . . . . . . . . 476 28 — 504

Total debt securities — available-for-sale . . . . . . . . . . . . . . . . . . . . . 17,262 764 (24) 18,002

Equity securities — available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . 529 23 (8) 544
Debt securities — held-to-maturity:

U.S. government and agency obligations . . . . . . . . . . . . . . . . . 166 7 — 173
State and municipal obligations . . . . . . . . . . . . . . . . . . . . . . . . . 13 — — 13
Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 — — 18

Total debt securities — held-to-maturity . . . . . . . . . . . . . . . . . . . . . . 197 7 — 204

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,988 $794 $(32) $18,750

81

The fair values of the Company’s mortgage-backed securities by credit rating (when multiple credit ratings are
available for an individual security, the average of the available ratings is used) and origination as of
December 31, 2012 were as follows:

(in millions) AAA AA A
Non-Investment

Grade
Total Fair

Value

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 123 $ — $ — $ — $ 123
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 — — — 27
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3 — — 3
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 — — 2 90
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 — 11 8 156
Pre-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 5 — 3 175
U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . . 2,238 — — — 2,238

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,780 $ 8 $ 11 $ 13 $2,812

The Company includes in the non-investment grade column in the table above any securities backed by Alt-A or
sub-prime mortgages and any commercial mortgage loans in default.

The amortized cost and fair value of available-for-sale debt securities as of December 31, 2012, by contractual
maturity, were as follows:

(in millions)
Amortized

Cost
Fair

Value

Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,107 $ 3,120
Due after one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,249 6,471
Due after five years through ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,695 5,039
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,662 1,784
U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,168 2,238
Non-U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538 574

Total debt securities — available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,419 $19,226

The amortized cost and fair value of held-to-maturity debt securities as of December 31, 2012, by contractual
maturity, were as follows:

(in millions)
Amortized
Cost
Fair
Value

Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $435 $436
Due after one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 129
Due after five years through ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 180
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 102

Total debt securities — held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $839 $847

82

The fair value of available-for-sale investments with gross unrealized losses by major security type and length of
time that individual securities have been in a continuous unrealized loss position were as follows:

Less Than 12 Months 12 Months or Greater Total

(in millions)
Fair

Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
December 31, 2012
Debt securities — available-for-sale:

U.S. government and agency obligations . . . $ 183 $ (1) $ — $ — $ 183 $ (1)
State and municipal obligations . . . . . . . . . . . 362 (3) — — 362 (3)
Corporate obligations . . . . . . . . . . . . . . . . . . . 695 (4) — — 695 (4)

Total debt securities — available-for-sale . . . . . . . $1,240 $ (8) $ — $ — $1,240 $ (8)

Equity securities — available-for-sale . . . . . . . . . . $ 13 $ (1) $ — $ — $ 13 $ (1)

December 31, 2011
Debt securities — available-for-sale:

State and municipal obligations . . . . . . . . . . . $ 85 $ (1) $ 21 $ — $

106

$ (1)
Corporate obligations . . . . . . . . . . . . . . . . . . . 1,496 (22) 28 (1) 1,524 (23)

Total debt securities — available-for-sale . . . . . . . $1,581 $(23) $ 49 $ (1) $1,630 $(24)

Equity securities — available-for-sale . . . . . . . . . . $ 24 $ (7) $ 3 $ (1) $ 27 $ (8)

The unrealized losses from all securities as of December 31, 2012 were generated from approximately 1,300 positions
out of a total of 18,000 positions. The Company believes that it will collect the principal and interest due on its
investments that have an amortized cost in excess of fair value. The unrealized losses were primarily caused by interest
rate increases and not by unfavorable changes in the credit ratings associated with these securities. At each reporting
period, the Company evaluates securities for impairment when the fair value of the investment is less than its
amortized cost. The Company evaluated the underlying credit quality and credit ratings of the issuers, noting neither a
significant deterioration since purchase nor other factors leading to an other-than-temporary impairment (OTTI). As of
December 31, 2012, the Company did not have the intent to sell any of the securities in an unrealized loss position.

A portion of the Company’s investments in equity securities and venture capital funds consists of investments
held in various public and nonpublic companies concentrated in the areas of health care services and related
information technologies. Market conditions that affect the value of health care and related technology stocks
will likewise impact the value of the Company’s equity portfolio. The equity securities and venture capital funds
were evaluated for severity and duration of unrealized loss, overall market volatility and other market factors.

Net realized gains included in Investment and Other Income on the Consolidated Statements of Operations were
from the following sources:

For the Year Ended December 31,
(in millions) 2012 2011 2010

Total OTTI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6) $ (12) $ (23)
Portion of loss recognized in other comprehensive income . . . . . . . . . . . . . . . . . . — — —

Net OTTI recognized in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) (12) (23)
Gross realized losses from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) (11) (6)
Gross realized gains from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 136 100

Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $156 $113 $ 71

83

4. Fair Value

Certain assets and liabilities are measured at fair value in the Consolidated Financial Statements or have fair
values disclosed in the Notes to the Consolidated Financial Statements. These assets and liabilities are classified
into one of three levels of a hierarchy defined by GAAP. In instances in which the inputs used to measure fair
value fall into different levels of the fair value hierarchy, the fair value measurement is categorized in its entirety
based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s
assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment,
including the consideration of inputs specific to the asset or liability.

The fair value hierarchy is summarized as follows:

Level 1 — Quoted prices (unadjusted) for identical assets/liabilities in active markets.

Level 2 — Other observable inputs, either directly or indirectly, including:

• Quoted prices for similar assets/liabilities in active markets;

• Quoted prices for identical or similar assets/liabilities in non-active markets (e.g., few transactions,
limited information, non-current prices, high variability over time);

• Inputs other than quoted prices that are observable for the asset/liability (e.g., interest rates, yield
curves, implied volatilities, credit spreads); and

• Inputs that are corroborated by other observable market data.

Level 3 — Unobservable inputs that cannot be corroborated by observable market data.

Transfers between levels, if any, are recorded as of the beginning of the reporting period in which the transfer
occurs; there were no transfers between Levels 1, 2 or 3 of any financial assets or liabilities during 2012 or 2011.

Non-financial assets and liabilities or financial assets and liabilities that are measured at fair value on a
nonrecurring basis are subject to fair value adjustments only in certain circumstances, such as when the Company
records an impairment. There were no significant fair value adjustments for these assets and liabilities recorded
during the years ended December 31, 2012, 2011, and 2010.

The following methods and assumptions were used to estimate the fair value and determine the fair value
hierarchy classification of each class of financial instrument included in the tables below:

Cash and Cash Equivalents. The carrying value of cash and cash equivalents approximates fair value as
maturities are less than three months. Fair values of cash equivalent instruments that do not trade on a regular
basis in active markets are classified as Level 2.

Debt and Equity Securities. Fair values of debt and equity securities are based on quoted market prices, where
available. The Company obtains one price for each security primarily from a third-party pricing service (pricing
service), which generally uses quoted or other observable inputs for the determination of fair value. The pricing
service normally derives the security prices through recently reported trades for identical or similar securities,
and, if necessary, makes adjustments through the reporting date based upon available observable market
information. For securities not actively traded, the pricing service may use quoted market prices of comparable
instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets
for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to,
benchmark yields, credit spreads, default rates, prepayment speeds and non-binding broker quotes. As the
Company is responsible for the determination of fair value, it performs quarterly analyses on the prices received
from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the
Company compares the prices received from the pricing service to a secondary pricing source, prices reported by
its custodian, its investment consultant and third-party investment advisors. Additionally, the Company compares

84

changes in the reported market values and returns to relevant market indices to test the reasonableness of the
reported prices. The Company’s internal price verification procedures and reviews of fair value methodology
documentation provided by independent pricing services have not historically resulted in adjustment in the prices
obtained from the pricing service.

Fair values of debt securities that do not trade on a regular basis in active markets but are priced using other
observable inputs are classified as Level 2.

Fair value estimates for Level 1 and Level 2 equity securities are based on quoted market prices for actively
traded equity securities and/or other market data for the same or comparable instruments and transactions in
establishing the prices.

The Company’s Level 3 equity securities are primarily investments in venture capital securities. The fair values
of Level 3 investments in venture capital portfolios are estimated using a market valuation technique that relies
heavily on management assumptions and qualitative observations. Under the market approach, the fair values of
the Company’s various venture capital investments are computed using limited quantitative and qualitative
observations of activity for similar companies in the current market. The Company’s market modeling utilizes, as
applicable, transactions for comparable companies in similar industries and having similar revenue and growth
characteristics; and similar preferences in their capital structure. Key significant unobservable inputs in the
market technique include implied earnings before interest, taxes, depreciation and amortization (EBITDA)
multiples and revenue multiples. Additionally, the fair value of certain of the Company’s venture capital
securities are based off of recent transactions in inactive markets for identical or similar securities. Significant
changes in any of these inputs could result in significantly lower or higher fair value measurements.

Throughout the procedures discussed above in relation to the Company’s processes for validating third party
pricing information, the Company validates the understanding of assumptions and inputs used in security pricing
and determines the proper classification in the hierarchy based on that understanding.

AARP Program-related Investments. AARP Program-related investments consist of debt and equity securities
held to fund costs associated with the AARP Program and are priced and classified using the same methodologies
as the Company’s debt and equity securities.

Interest Rate and Currency Swaps. Fair values of the Company’s swaps are estimated using the terms of the
swaps and publicly available information including market yield curves. Because the swaps are unique and not
actively traded but are valued using other observable inputs, the fair values are classified as Level 2.

Long-term debt. The fair value of the Company’s long-term debt is estimated and classified using the same
methodologies as the Company’s investments in debt securities.

AARP Program-related Other Liabilities. AARP Program-related other liabilities consist of liabilities that
represent the amount of net investment gains and losses related to AARP Program-related investments that
accrue to the benefit of the AARP policyholders.

85

The following table presents a summary of fair value measurements by level and carrying values for items
measured at fair value on a recurring basis in the Consolidated Balance Sheets excluding AARP related assets
and liabilities, which are presented in a separate table below:

(in millions)

Quoted Prices
in Active
Markets
(Level 1)

Other
Observable

Inputs
(Level 2)

Unobservable
Inputs

(Level 3)

Total
Fair and
Carrying

Value

December 31, 2012
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,615 $ 791 $ — $ 8,406
Debt securities — available-for-sale:

U.S. government and agency obligations . . . . . . . . . . . . . 1,752 786 — 2,538
State and municipal obligations . . . . . . . . . . . . . . . . . . . . — 6,667 — 6,667
Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7,185 11 7,209
U.S. agency mortgage-backed securities . . . . . . . . . . . . . — 2,238 — 2,238
Non-U.S. agency mortgage-backed securities . . . . . . . . . — 568 6 574

Total debt securities — available-for-sale . . . . . . . . . . . . . . . . 1,765 17,444 17 19,226
Equity securities — available-for-sale . . . . . . . . . . . . . . . . . . . 450 3 224 677

Interest rate swap assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 14 — 14

Total assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,830 $18,252 $241 $28,323

Percentage of total assets at fair value . . . . . . . . . . . . . . . . . . . 35% 64% 1% 100%

Interest rate and currency swap liabilities . . . . . . . . . . . . . . . . $ — $ 14 $ — $ 14

December 31, 2011
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,569 $ 860 $ — $ 9,429
Debt securities — available-for-sale:

U.S. government and agency obligations . . . . . . . . . . . . . 1,551 822 — 2,373
State and municipal obligations . . . . . . . . . . . . . . . . . . . . — 6,750 15 6,765
Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 5,805 186 6,007
U.S. agency mortgage-backed securities . . . . . . . . . . . . . — 2,353 — 2,353
Non-U.S. agency mortgage-backed securities . . . . . . . . . — 497 7 504

Total debt securities — available-for-sale . . . . . . . . . . . . . . . . 1,567 16,227 208 18,002
Equity securities — available-for-sale . . . . . . . . . . . . . . . . . . . 333 2 209 544

Total assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,469 $17,089 $417 $27,975

Percentage of total assets at fair value . . . . . . . . . . . . . . . . . . . 37% 61% 2% 100%

86

The following table presents a summary of fair value measurements by level and carrying values for certain
financial instruments not measured at fair value on a recurring basis in the Consolidated Balance Sheets:

(in millions)
Quoted Prices
in Active
Markets
(Level 1)
Other
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)

Total
Fair

Value

Total
Carrying

Value

December 31, 2012
Debt securities — held-to-maturity:

U.S. government and agency obligations . . . . $174 $ — $ — $ 174 $ 168
State and municipal obligations . . . . . . . . . . . . — 1 29 30 30
Corporate obligations . . . . . . . . . . . . . . . . . . . 10 346 287 643 641

Total debt securities — held-to-maturity . . . . . . . . $184 $ 347 $316 $ 847 $ 839

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $17,034 $ — $17,034 $15,167

December 31, 2011
Debt securities — held-to-maturity:

U.S. government and agency obligations . . . . $173 $ — $ — $ 173 $ 166
State and municipal obligations . . . . . . . . . . . . — 1 12 13 13
Corporate obligations . . . . . . . . . . . . . . . . . . . 9 9 — 18 18

Total debt securities — held-to-maturity . . . . . . . . $182 $ 10 $ 12 $ 204 $ 197

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $13,149 $ — $13,149 $11,638

The carrying amounts reported in the Consolidated Balance Sheets for accounts and other current receivables,
unearned revenues, commercial paper, accounts payable and accrued liabilities approximate fair value because of
their short-term nature. These assets and liabilities are not listed in the table above. A reconciliation of the
beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs is as
follows:

December 31, 2012 December 31, 2011 December 31, 2010

(in millions)
Debt

Securities
Equity

Securities Total

Debt

Securities
Equity
Securities Total
Debt
Securities
Equity
Securities Total

Balance at beginning of period . . . . $ 208 $209 $ 417 $141 $208 $349 $120 $ 312 $ 432
Purchases . . . . . . . . . . . . . . . . . . . . . 11 71 82 92 35 127 43 45 88
Sales . . . . . . . . . . . . . . . . . . . . . . . . — (34) (34) — (17) (17) (4) (167) (171)
Settlements . . . . . . . . . . . . . . . . . . . (1) — (1) (25) (7) (32) (20) — (20)
Net unrealized (losses) gains in

accumulated other comprehensive
income . . . . . . . . . . . . . . . . . . . . . — (14) (14) — (4) (4) — 9 9

Net realized gains (losses) in
investment and other income . . . — 13 13 — (6) (6) 2 9 11

Transfers to held-to-maturity . . . . . (201) (21) (222) — — — — — —

Balance at end of period . . . . . . . . . $ 17 $224 $ 241 $208 $209 $417 $141 $ 208 $ 349

87

The following table presents quantitative information regarding unobservable inputs that were significant to the
valuation of assets measured at fair value on a recurring basis using Level 3 inputs:

(in millions)
Fair

Value Valuation Technique Unobservable Input Low High

December 31, 2012
Equity securities — available-for-sale

Venture capital portfolios . . . . . . . . . . . . . $193 Market approach – comparable companies Revenue multiple 1.0 10.0
EBITDA multiple 8.0 10.0

31 Market approach – recent transactions Inactive market transactions N/A N/A

Total equity securities
available-for-sale . . . . . . . . . . . . . . . . . . $224

Also included in the Company’s assets measured at fair value on a recurring basis using Level 3 inputs were $17
million of available-for-sale debt securities at December 31, 2012, which were not significant.

The Company elected to measure the entirety of the AARP Assets Under Management at fair value pursuant to
the fair value option. See Note 2 for further detail on AARP. The following table presents fair value information
about the AARP Program-related financial assets and liabilities:

(in millions)
Quoted Prices
in Active
Markets
(Level 1)
Other
Observable
Inputs
(Level 2)
Total
Fair and
Carrying
Value

December 31, 2012
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $230 $ — $ 230
Debt securities:

U.S. government and agency obligations . . . . . . . . . . . . . . . . . . . 545 244 789
State and municipal obligations . . . . . . . . . . . . . . . . . . . . . . . . . . — 51 51
Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,

118

1,118
U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . . . . . . — 427 427
Non-U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . — 155 155

Total debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545 1,995 2,540
Equity securities — available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . — 3 3

Total assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $775 $1,998 $2,773

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23 $ 58 $ 81

December 31, 2011
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $257 $ 10 $ 267
Debt securities:

U.S. government and agency obligations . . . . . . . . . . . . . . . . . . . 566 214 780
State and municipal obligations . . . . . . . . . . . . . . . . . . . . . . . . . . — 25 25
Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,048 1,048
U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . . . . . . — 436 436
Non-U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . — 150 150

Total debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566 1,873 2,439
Equity securities — available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . — 2 2

Total assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $823 $1,885 $2,708

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27 $ 49 $ 76

88

5. Property, Equipment and Capitalized Software

A summary of property, equipment and capitalized software is as follows:

(in millions)
December 31,

2012
December 31,
2011

Land and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 358 $ 45
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,910 1,052
Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,447 1,345
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 488 274
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,542) (1,424)

Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,661 1,292

Capitalized software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,300 2,239
Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,022) (1,016)

Capitalized software, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,278 1,223

Total property, equipment and capitalized software, net . . . . . . . . . . . . . . . . . . . . . . . . $ 3,939 $ 2,515

Depreciation expense for property and equipment for 2012, 2011 and 2010 was $449 million, $386 million and
$398 million, respectively. Amortization expense for capitalized software for 2012, 2011 and 2010 was $412
million, $377 million and $349 million, respectively.

6. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill, by reportable segment, were as follows:

(in millions) UnitedHealthcare OptumHealth OptumInsight OptumRx Consolidated

Balance at January 1, 2011 . . . . . . . . . . . . . . . . . $17,837 $ 760 $3,308 $840 $22,745
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 1,353 — — 1,454
Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) — (214) — (216)
Adjustments, net . . . . . . . . . . . . . . . . . . . . . . . . . (4) — (4) — (8)

Balance at December 31, 2011 . . . . . . . . . . . . . . 17,932 2,113 3,090 840 23,975
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,557 705 98 — 7,360
Adjustments and foreign currency effects, net . . . (30) — (19) — (49)

Balance at December 31, 2012 . . . . . . . . . . . . . . $24,459 $2,818 $3,169 $840 $31,286

In October 2012, the Company purchased approximately 60% of the outstanding shares of Amil for
approximately $3.2 billion in a private transaction. Later in the fourth quarter of 2012, the Company purchased
an additional 17.8 million shares of Amil for $0.3 billion, bringing the stake in Amil attributable to the Company
to approximately 65% of Amil’s outstanding shares. Amil is a health care company located in Brazil, providing
health and dental benefits, hospital and clinical services, and advanced care management resources to more than
5 million people. The total consideration paid and fair value of the noncontrolling interest exceeded the estimated
fair value of the net tangible assets acquired by $5.9 billion, of which $1.0 billion has been allocated to finite-
lived intangible assets, $0.6 billion to indefinite-lived intangible assets and $4.3 billion to goodwill. To estimate
the acquisition date fair value of the noncontrolling interest of $2.2 billion, the Company utilized the public share
price as of the date of acquisition. Contingent liabilities were measured based on the probable amount that could
be reasonably estimated. The results of operations and financial condition of Amil have been included in the
Company’s consolidated results and the results of the UnitedHealthcare reportable segment since the acquisition
date. The pro-forma effects of this acquisition on the Company’s results of operations were not material. In
conjunction with the 2012 purchases, the Company generated Brazilian tax deductible goodwill of approximately
$2.7 billion.

89

Because of the acquisition of a controlling interest in Amil, the Company is required by Brazilian law to
commence a mandatory tender offer for the remaining publicly traded shares. The Company expects to acquire
an additional 25% ownership interest during the first half of 2013 through this tender offer. The tender offer price
will be at the same price paid to Amil’s controlling shareholders, adjusted for statutory interest under Brazilian
law from the date of payment to the controlling shareholders to the date of payment to the tendering minority
shareholders. The remaining 10% stake in Amil is held by shareholders, including Amil’s CEO, who has been a
member of the Company’s Board of Directors since October 2012, who have committed to retain the shares for at
least five years. They have the right to put the shares to the Company and the Company has the right to call these
shares upon expiration of the five year term, unless accelerated upon certain events, at fair market value. Related
to this acquisition, Amil’s CEO invested approximately $470 million in unregistered UnitedHealth Group
common shares in the fourth quarter of 2012 and has committed to hold those shares for the same five year term,
subject to certain exceptions.

Acquired net tangible assets and liabilities for Amil at acquisition date were:

(in millions)

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 240
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341
Accounts receivable and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
Property, equipment and other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,266
Medical costs payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638
Contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270
Long-term debt and other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569

Since the Amil acquisition occurred in the fourth quarter, the purchase price allocation is subject to adjustment as
valuation analyses, primarily related to intangible and fixed assets and contingent and tax liabilities, are finalized.

For the years ended December 31, 2012, 2011 and 2010, aggregate consideration paid, net of cash assumed, for
acquisitions excluding Amil was $3.3 billion, $1.8 billion and $2.3 billion, respectively. These acquisitions were
not material to the Company’s Consolidated Financial Statements.

The gross carrying value, accumulated amortization and net carrying value of other intangible assets were as
follows:

December 31, 2012 December 31, 2011
(in millions)

Gross
Carrying

Value
Accumulated
Amortization

Net
Carrying

Value
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value

Customer-related . . . . . . . . . . . . . . . . . . . . . $5,229 $(1,629) $3,600 $3,766 $(1,310) $2,456
Trademarks and technology . . . . . . . . . . . . . 445 (146) 299 368 (98) 270
Trademarks — indefinite-lived . . . . . . . . . . 611 — 611 — — —
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 (49) 172 112 (43) 69

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,506 $(1,824) $4,682 $4,246 $(1,451) $2,795

90

The acquisition date fair values and weighted-average useful lives assigned to finite-lived intangible assets
acquired in business combinations consisted of the following by year of acquisition:

2012 2011

(in millions, except years)
Fair

Value

Weighted-
Average

Useful Life

Fair

Value
Weighted-
Average
Useful Life

Customer-related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,530 8 years $187 9 years
Trademarks and technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 4 years 49 5 years
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

111

15 years 5 15 years

Total acquired finite-lived intangible assets . . . . . . . . . . . . . . . . . . . . . . . $1,720 9 years $241 9 years

Estimated full year amortization expense relating to intangible assets for each of the next five years ending
December 31 is as follows:

(in millions)

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $545
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 456

Amortization expense relating to intangible assets for 2012, 2011 and 2010 was $448 million, $361 million and
$317 million, respectively.

7. Medical Costs and Medical Costs Payable

The following table provides details of the Company’s favorable medical reserve development:

For the Years Ended December 31,
(in millions) 2012 2011 2010

Related to Prior Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $860 $720 $800

The favorable development for 2012, 2011 and 2010 was driven by lower than expected health system utilization
levels and increased efficiency in claims handling and processing. The favorable development for 2010 was also
impacted by a reduction in reserves needed for disputed claims from care providers; and favorable resolution of
certain state-based assessments.

The following table shows the components of the change in medical costs payable for the years ended
December 31:

(in millions) 2012 2011 2010

Medical costs payable, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,799 $ 9,220 $ 9,362
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,029 155 —
Reported medical costs:

Current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,086 75,052 69,641
Prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (860) (720) (800)

Total reported medical costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,226 74,332 68,841

Claim payments:
Payments for current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71,832) (65,763) (60,949)
Payments for prior year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,218) (8,145) (8,034)

Total claim payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (80,050) (73,908) (68,983)

Medical costs payable, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,004 $ 9,799 $ 9,220

91

8. Commercial Paper and

Long-Term Debt

Commercial paper and long-term debt consisted of the following:

December 31, 2012 December 31, 2011

(in millions, except percentages)
Par

Value
Carrying

Value
Fair

Value
Par

Value
Carrying
Value
Fair
Value

Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,587 $ 1,587 $ 1,587 $ — $ — $ —
5.500% senior unsecured notes due November 2012 . . . . . — — — 352 363 366
4.875% senior unsecured notes due February 2013 . . . . . . 534 534 536 534 540 556
4.875% senior unsecured notes due April 2013 . . . . . . . . . 409 411 413 409 421 427
4.750% senior unsecured notes due February 2014 . . . . . . 172 178 180 172 184 185
5.000% senior unsecured notes due August 2014 . . . . . . . . 389 411 414 389 423 424
4.875% senior unsecured notes due March 2015 (a) . . . . . . 416 444 453 416 458 460
0.850% senior unsecured notes due October 2015 (a) . . . . 625 623 627 — — —
5.375% senior unsecured notes due March 2016 . . . . . . . . 601 660 682 601 678 689
1.875% senior unsecured notes due November 2016 . . . . . 400 397 412 400 397 400
5.360% senior unsecured notes due November 2016 . . . . . 95 95 110 95 95 110
6.000% senior unsecured notes due June 2017 . . . . . . . . . . 441 489 528 441 499 518
1.400% senior unsecured notes due October 2017 (a) . . . . 625 622 626 — — —
6.000% senior unsecured notes due November 2017 . . . . . 156 170 191 156 173 183
6.000% senior unsecured notes due February 2018 . . . . . . 1,100 1,120 1,339 1,100 1,123 1,308
3.875% senior unsecured notes due October 2020 . . . . . . . 450 442 499 450 442 478
4.700% senior unsecured notes due February 2021 . . . . . . 400 417 466 400 419 450
3.375% senior unsecured notes due November 2021 (a) . . 500 512 533 500 497 517
2.875% senior unsecured notes due March 2022 . . . . . . . . 1,100 998 1,128 — — —
0.000% senior unsecured notes due November 2022 . . . . . 15 9 11 1,095 619 696
2.750% senior unsecured notes due February 2023 (a) . . . . 625 619 631 — — —
5.800% senior unsecured notes due March 2036 . . . . . . . . 850 845 1,025 850 844 1,017
6.500% senior unsecured notes due June 2037 . . . . . . . . . . 500 495 659 500 495 636
6.625% senior unsecured notes due November 2037 . . . . . 650 645 860 650 645 834
6.875% senior unsecured notes due February 2038 . . . . . . 1,100 1,084 1,510 1,100 1,084 1,475
5.700% senior unsecured notes due October 2040 . . . . . . . 300 298 364 300 298 359
5.950% senior unsecured notes due February 2041 . . . . . . 350 348 440 350 348 430
4.625% senior unsecured notes due November 2041 . . . . . 600 593 641 600 593 631
4.375% senior unsecured notes due March 2042 . . . . . . . . 502 486 521 — — —
3.950% senior unsecured notes due October 2042 . . . . . . . 625 611 622 — — —

Total U.S. Dollar denominated debt . . . . . . . . . . . . . . . . . . 16,

117

16,143 18,008 11,860 11,638 13,149

Cetip Interbank Deposit Rate (CDI) + 1.3% Subsidiary
floating debt due October 2013 . . . . . . . . . . . . . . . . . . . . 147 148 150 — — —

CDI + 1.45 % Subsidiary floating debt due October 2014 . . . 147 149 150 — — —
110% CDI Subsidiary floating debt due December 2014 . . . . 147 151 147 — — —
CDI + 1.6% Subsidiary floating debt due October 2015 . . . 74 76 76 — — —
Brazilian Extended National Consumer Price Index (IPCA) +

7.61% Subsidiary floating debt due October 2015 . . . . . . . 73 87 90 — — —

Total Brazilian Real denominated debt (in U.S. Dollars) . . 588 611 613 — — —

Total commercial paper and long-term debt . . . . . . . . . . . . $16,705 $16,754 $18,621 $11,860 $11,638 $13,149

(a) In 2012, the Company entered into interest rate swap contracts with a notional amount of $2.8 billion
hedging these fixed-rate debt instruments. See below for more information on the Company’s interest rate
swaps.

92

Maturities of commercial paper and long-term debt for the years ending December 31 are as follows:

(in millions)

2013 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,713
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 920
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,175
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,152
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,281
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,513

(a) Includes $33 million of debt subject to acceleration clauses.

Long-Term Debt

In August 2012, the Company completed an exchange of $1.1 billion of its zero coupon senior unsecured notes
due November of 2022 for $0.5 billion additional issuance of its 2.875% notes due in March 2022, $0.1 billion
additional issuance of its 4.375% notes due March 2042 and $0.1 billion in cash.

Commercial Paper and Bank Credit Facilities

Commercial paper consists of short-duration, senior unsecured debt privately placed on a discount basis through
broker-dealers. As of December 31, 2012, the Company’s outstanding commercial paper had a weighted-average
annual interest rate of 0.3%.

The Company has $3.0 billion five-year and $1.0 billion 364-day revolving bank credit facility with 21 banks,
which mature in November 2017 and November 2013, respectively. These facilities provide liquidity support for
the Company’s $4.0 billion commercial paper program and are available for general corporate purposes. There
were no amounts outstanding under these facilities as of December 31, 2012. The interest rates on borrowings are
variable based on term and are calculated based on the London Interbank Offered Rate (LIBOR) plus a credit
spread based on the Company’s senior unsecured credit ratings. As of December 31, 2012, the annual interest
rates on both of the credit facilities, had they been drawn, would have ranged from 1.0% to 1.3%.

Debt Covenants

The Company’s bank credit facilities contain various covenants including requiring the Company to maintain a
debt to debt-plus-equity ratio not more than 50%. The Company was in compliance with its debt covenants as of
December 31, 2012.

Interest Rate and Currency Swap Contracts

In 2012, the Company entered into interest rate swap contracts to convert a portion of its interest rate exposure
from fixed rates to floating rates to more closely align interest expense with interest income received on its cash
equivalent and variable rate investment balances. The floating rates are benchmarked to LIBOR. The swaps are
designated as fair value hedges on the Company’s fixed-rate debt. Since the critical terms of the swaps match
those of the debt being hedged, they are assumed to be highly effective hedges and all changes in fair value of the
swaps are recorded as an adjustment to the carrying value of the related debt with no net impact recorded in the
Consolidated Statements of Operations. Both the hedge fair value changes and the offsetting debt adjustments are
recorded in Interest Expense on the Consolidated Statements of Operations. The net fair value of these swaps was
$3 million at December 31, 2012 and is recorded in Other Long-Term Assets for $14 million and Other Long-
Term Liabilities for $11 million in the Consolidated Balance Sheets.

In December 2012, the Company entered into currency swap contracts to hedge the foreign currency exposure on
the principal amount of intercompany borrowings denominated in Brazilian Real. The currency swaps have a

93

notional amount of $256 million and mature on December 31, 2013. As of December 31, 2012, the fair value of
the currency swap liability was $3 million, which was recorded in Other Current Liabilities in the Company’s
Consolidated Balance Sheets.

9. Income Taxes

The components of the provision for income taxes for the years ended December 31 are as follows:

(in millions) 2012 2011 2010

Current Provision:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,638 $2,608 $2,524
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 150 180

Total current provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,788 2,758 2,704
Deferred provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308 59 45

Total provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,096 $2,817 $2,749

The reconciliation of the tax provision at the U.S. Federal Statutory Rate to the provision for income taxes for the
years ended December 31 is as follows:

(in millions, except percentages) 2012 2011 2010

Tax provision at the U.S. federal statutory rate . . . . . . . . . . . . $3,018 35.0% $2,785 35.0% $2,584 35.0%
State income taxes, net of federal benefit . . . . . . . . . . . . . . . . . 143 1.7 136 1.7 129 1.7
Settlement of state exams, net of federal benefit . . . . . . . . . . . 2 — (29) (0.4) (3) —
Tax-exempt investment income . . . . . . . . . . . . . . . . . . . . . . . . (59) (0.7) (63) (0.8) (65) (0.9)
Non-deductible compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 22 0.2 10 0.1 64 0.9
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30) (0.3) (22) (0.2) 40 0.5

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,096 35.9% $2,817 35.4% $2,749 37.2%

The higher effective income tax rate for 2012 as compared to 2011 resulted from the favorable resolution of
various tax matters in 2011. The 2010 effective income tax rates were at higher levels due to the cumulative
implementation of changes under the Health Reform Legislation.

94

The components of deferred income tax assets and liabilities as of December 31 are as follows:

(in millions) 2012 2011

Deferred income tax assets:
Accrued expenses and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 306 $ 259
U.S. Federal and State net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . 276 247
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 417
Long term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 155
Medical costs payable and other policy liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 166
Non-U.S. tax loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 —
Unearned revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 56
Unrecognized tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 44
Domestic other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 192
Foreign other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 —

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,579 1,536
Less: valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (271) (184)

Total deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,308 1,352

Deferred income tax liabilities:
U.S. Federal and State intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,335) (1,148)
Non-U.S. goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (640) —
Capitalized software development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (482) (465)
Net unrealized gains on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (296) (275)
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (249) (256)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (113) (86)
Foreign other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (179) —

Total deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,294) (2,230)

Net deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,986) $ (878)

Valuation allowances are provided when it is considered more likely than not that deferred tax assets will not be
realized. The valuation allowances primarily relate to future tax benefits on certain federal, state and non-U.S. net
operating loss carryforwards. Federal net operating loss carryforwards of $105 million expire beginning in 2019
through 2032, state net operating loss carryforwards expire beginning in 2013 through 2032. Substantially all of
the non-U.S. tax loss carryforwards have indefinite carryforward periods.

As of December 31, 2012 the Company had $94 million of undistributed earnings from non-U.S. subsidiaries that
are intended to be reinvested in non-U.S. operations. Because these earnings are considered permanently
reinvested, no U.S. tax provision has been accrued related to the repatriation of these earnings. It is not
practicable to estimate the amount of U.S. tax that might be payable on the eventual remittance of such earnings.

95

A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 31 is as
follows:

(in millions) 2012 2011 2010

Gross unrecognized tax benefits, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $129 $220 $220
Gross increases:

Current year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 11 13
Prior year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 10 30

Gross decreases:
Prior year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48) (34) —
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) (25) —
Statute of limitations lapses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) (53) (43)

Gross unrecognized tax benefits, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 81 $129 $220

The Company classifies interest and penalties associated with uncertain income tax positions as income taxes
within its Consolidated Financial Statements. The Company recognized tax benefits from the net reduction of
interest and penalties accrued of $20 million and $12 million during the years ended December 31, 2012 and
2011, respectively. During the year ended December 31, 2010, the Company recognized $15 million of interest
expense and penalties. The Company had $23 million and $41 million of accrued interest and penalties for
uncertain tax positions as of December 31, 2012 and 2011, respectively. These amounts are not included in the
reconciliation above. As of December 31, 2012, the total amount of unrecognized tax benefits that, if recognized,
would affect the effective tax rate, was $77 million.

The Company currently files income tax returns in the U.S., various states and foreign jurisdictions. The U.S.
Internal Revenue Service (IRS) has completed exams on the consolidated income tax returns for fiscal years
2011 and prior. The Company’s 2012 tax year is under advance review by the IRS under its Compliance
Assurance Program. With the exception of a few states, the Company is no longer subject to income tax
examinations prior to 2007. The Brazilian federal revenue service — Secretaria da Receita Federal (SRF) may
audit the Company’s Brazilian subsidiaries for a period of five years from the date on which corporate income
taxes should have been paid and/or the date when the tax return was filed. Estimated taxes are paid monthly or
quarterly with an annual return due on June 30 following the end of the taxable year.

The Company believes it is reasonably possible that its liability for unrecognized tax benefits will decrease in the
next twelve months by $37 million as a result of audit settlements and the expiration of statutes of limitations in
certain major jurisdictions.

10. Shareholders’ Equity

Regulatory Capital and Dividend Restrictions

The Company’s regulated subsidiaries are subject to regulations and standards in their respective jurisdictions.
These standards, among other things, require these subsidiaries to maintain specified levels of statutory capital,
as defined by each jurisdiction, and restrict the timing and amount of dividends and other distributions that may
be paid to their parent companies. In the United States, most of these regulations and standards are generally
consistent with model regulations established by the National Association of Insurance Commissioners. Except
in the case of extraordinary dividends, these standards generally permit dividends to be paid from statutory
unassigned surplus of the regulated subsidiary and are limited based on the regulated subsidiary’s level of
statutory net income and statutory capital and surplus. These dividends are referred to as “ordinary dividends”
and generally can be paid without prior regulatory approval. If the dividend, together with other dividends paid
within the preceding twelve months, exceeds a specified statutory limit or is paid from sources other than earned
surplus, it is generally considered an “extraordinary dividend” and must receive prior regulatory approval. In

96

2012, based on the 2011 statutory net income and statutory capital and surplus levels, the maximum amount of
ordinary dividends that could have been paid by the Company’s U.S. regulated subsidiaries to their parent
companies was $4.6 billion.

For the year ended December 31, 2012, the Company’s regulated subsidiaries paid their parent companies
dividends of $4.9 billion, including $1.2 billion of extraordinary dividends. For the year ended December 31,
2011, the Company’s regulated subsidiaries paid their parent companies dividends of $4.5 billion, including
$1.1 billion of extraordinary dividends. As of December 31, 2012, $1.1 billion of the Company’s $8.4 billion of
cash and cash equivalents was held by non-regulated entities.

The Company’s regulated subsidiaries had estimated aggregate statutory capital and surplus of approximately
$13 billion as of December 31, 2012; regulated entity statutory capital exceeded aggregate minimum capital
requirements.

Optum Bank must meet minimum requirements for Tier 1 leverage capital, Tier 1 risk-based capital, and Total
risk-based capital of the Federal Deposit Insurance Corporation (FDIC) to be considered “Well Capitalized”
under the capital adequacy rules to which it is subject. At December 31, 2012, the Company believes that Optum
Bank met the FDIC requirements to be considered “Well Capitalized.”

Share Repurchase Program

Under its Board of Directors’ authorization, the Company maintains a share repurchase program. The objectives
of the share repurchase program are to optimize the Company’s capital structure and cost of capital, thereby
improving returns to shareholders, as well as to offset the dilutive impact of share-based awards. Repurchases
may be made from time to time in open market purchases or other types of transactions (including prepaid or
structured share repurchase programs), subject to certain Board restrictions. In June 2012, the Board renewed and
expanded the Company’s share repurchase program with an authorization to repurchase up to 110 million shares
of its common stock. During the year ended December 31, 2012, the Company repurchased 57 million shares at
an average price of $54.45 per share and an aggregate cost of $3.1 billion. As of December 31, 2012, the
Company had Board authorization to purchase up to an additional 85 million shares of its common stock.

Dividends

In June 2012, the Company’s Board of Directors increased the Company’s cash dividend to shareholders to an
annual dividend rate of $0.85 per share, paid quarterly. Since May 2011, the Company had paid an annual
dividend of $0.65 per share, paid quarterly. Declaration and payment of future quarterly dividends is at the
discretion of the Board and may be adjusted as business needs or market conditions change.

The following table provides details of the Company’s dividend payments:

Payment Date
Amount

per Share Total Amount Paid

(in millions)

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.4050 $449
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6125 651
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.8000 820

11. Share-Based Compensation

The Company’s outstanding share-based awards consist mainly of non-qualified stock options, SARs and
restricted shares. As of December 31, 2012, the Company had 43 million shares available for future grants of
share-based awards under its share-based compensation plan, including, but not limited to, incentive or non-
qualified stock options, SARs and up to 16 million of awards in restricted shares. As of December 31, 2012, there
were also 20 million shares of common stock available for issuance under the ESPP.

97

Stock Options and SARs

Stock option and SAR activity for the year ended December 31, 2012 is summarized in the table below:

Shares

Weighted-
Average
Exercise

Price
Weighted-
Average

Remaining
Contractual Life

Aggregate
Intrinsic Value

(in millions) (in years) (in millions)

Outstanding at beginning of period . . . . . . . . . . . . . . . . . . 91 $42
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 55
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29) 36
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 43

Outstanding at end of period . . . . . . . . . . . . . . . . . . . . . . . 63 45 4.0 $625

Exercisable at end of period . . . . . . . . . . . . . . . . . . . . . . . 53 46 3.5 460
Vested and expected to vest, end of period . . . . . . . . . . . . 62 45 4.0 622

Restricted Shares

Restricted share activity for the year ended December 31, 2012 is summarized in the table below:

(shares in millions) Shares

Weighted-Average
Grant Date
Fair Value
per Share

Nonvested at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 $36
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 52
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) 37
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 44

Nonvested at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 46

Other Share-Based Compensation Data

(in millions, except per share amounts)

For the Years Ended
December 31,
2012 2011 2010

Stock Options and SARs
Weighted-average grant date fair value of shares granted, per share . . . . . . . . . . . . . . . . . . . $ 18 $ 15 $ 13
Total intrinsic value of stock options and SARs exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . 559 327 164
Restricted Shares
Weighted-average grant date fair value of shares granted, per share . . . . . . . . . . . . . . . . . . . 52 42 32
Total fair value of restricted shares vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 716 113 99
Employee Stock Purchase Plan
Number of shares purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3 4
Share-Based Compensation Items
Share-based compensation expense, before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $421 $401 $326
Share-based compensation expense, net of tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299 260 278
Income tax benefit realized from share-based award exercises . . . . . . . . . . . . . . . . . . . . . . . 461 170 78

(in millions, except years) December 31, 2012

Unrecognized compensation expense related to share awards . . . . . . . . . . . . . . . . . . . . . . . . . . . $307
Weighted-average years to recognize compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1

98

Share-Based Compensation Recognition and Estimates

The principal assumptions the Company used in calculating grant-date fair value for stock options and SARs
were as follows:

2012 2011 2010

Risk free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.7% – 0.9% 0.9% – 2.3% 1.0% – 2.1%
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.2% – 44.0% 44.3% – 45.1% 45.4% – 46.2%
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2% – 1.7% 1.0% -1.4% 0.1% -1.7%
Forfeiture rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0% 5.0% 5.0%
Expected life in years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 – 5.6 4.9 -5.0 4.6 -5.1

Risk-free interest rates are based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are
based on the historical volatility of the Company’s common stock and the implied volatility from exchange-
traded options on the Company’s common stock. Expected dividend yields are based on the per share cash
dividend paid by the Company’s Board of Directors. The Company uses historical data to estimate option and
SAR exercises and forfeitures within the valuation model. The expected lives of options and SARs granted
represents the period of time that the awards granted are expected to be outstanding based on historical exercise
patterns.

Other Employee Benefit Plans

The Company also offers a 401(k) plan for all employees. Compensation expense related to this plan was not
material for the years 2012, 2011 and 2010.

In addition, the Company maintains non-qualified, unfunded deferred compensation plans, which allow certain
members of senior management and executives to defer portions of their salary or bonus and receive certain
Company contributions on such deferrals, subject to plan limitations. The deferrals are recorded within Long-
Term Investments with an approximately equal amount in Other Liabilities in the Consolidated Balance Sheets.
The total deferrals are distributable based upon termination of employment or other periods, as elected under
each plan and were $348 million and $281 million as of December 31, 2012 and 2011, respectively.

12. Commitments and Contingencies

The Company leases facilities and equipment under long-term operating leases that are non-cancelable and
expire on various dates through 2028. Rent expense under all operating leases for 2012, 2011 and 2010 was $334
million, $295 million and $297 million, respectively.

As of December 31, 2012, future minimum annual lease payments, net of sublease income, under all non-
cancelable operating leases were as follows:

(in millions)
Future Minimum
Lease Payments

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $380
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556

The Company provides guarantees related to its service level under certain contracts. If minimum standards are
not met, the Company may be financially at risk up to a stated percentage of the contracted fee or a stated dollar

99

amount. None of the amounts accrued, paid or charged to income for service level guarantees were material as of
or for the years ended December 31, 2012, 2011 and 2010.

As of December 31, 2012, the Company had outstanding, undrawn letters of credit with financial institutions of
$45 million and surety bonds outstanding with insurance companies of $432 million, primarily to bond
contractual performance.

Legal Matters

Because of the nature of its businesses, the Company is frequently made party to a variety of legal actions and
regulatory inquiries, including class actions and suits brought by members, care providers, customers and
regulators, relating to the Company’s businesses, including management and administration of health benefit
plans and other services. These matters include medical malpractice, employment, intellectual property, antitrust,
privacy and contract claims, and claims related to health care benefits coverage and other business practices.

The Company records liabilities for its estimates of probable costs resulting from these matters where
appropriate. Estimates of costs resulting from legal and regulatory matters involving the Company are inherently
difficult to predict, particularly where the matters: involve indeterminate claims for monetary damages or may
involve fines, penalties or punitive damages; present novel legal theories or represent a shift in regulatory policy;
involve a large number of claimants or regulatory bodies; are in the early stages of the proceedings; or could
result in a change in business practices. Accordingly, the Company is often unable to estimate the losses or
ranges of losses for those matters where there is a reasonable possibility or it is probable that a loss may be
incurred.

Litigation Matters

Out-of-Network Reimbursement Litigation. The Company is involved in a number of lawsuits challenging
reimbursement amounts for non-network health care services based on the Company’s use of a database
previously maintained by Ingenix, Inc. (now known as OptumInsight), including putative class actions and
multidistrict litigation brought on behalf of members of Aetna and WellPoint. These suits allege, among other
things, that the database licensed to these companies by Ingenix was flawed and that Ingenix conspired with
these companies to underpay their members’ claims and seek unspecified damages and treble damages,
injunctive and declaratory relief, interest, costs and attorneys’ fees. The Company is vigorously defending these
suits. In 2012, the Company was dismissed as a party from a similar lawsuit involving Cigna and its members.
The Company cannot reasonably estimate the range of loss, if any, that may result from these matters due to the
procedural status of the cases, dispositive motions that remain pending, the absence of class certification in any
of the cases, the lack of a formal demand on the Company by the plaintiffs, and the involvement of other
insurance companies as defendants.

California Claims Processing Matter. On January 25, 2008, the California Department of Insurance (CDI)
issued an Order to Show Cause to PacifiCare Life and Health Insurance Company, a subsidiary of the Company,
alleging violations of certain insurance statutes and regulations related to an alleged failure to include certain
language in standard claims correspondence, timeliness and accuracy of claims processing, interest payments,
care provider contract implementation, care provider dispute resolution and other related matters. The matter has
been the subject of an administrative hearing before a California administrative law judge since December 2009.
Although the Company believes that CDI has never issued a penalty in excess of $8 million, CDI is seeking a
penalty of approximately $325 million in this matter. The Company is vigorously defending against the claims in
this matter and believes that the penalty requested by CDI is excessive and without merit. After the
administrative law judge issues a ruling at the conclusion of the administrative proceeding, expected in early
2013, the California Insurance Commissioner may accept, reject or modify the administrative law judge’s ruling,
issue his own decision, and impose a fine or penalty. The Commissioner’s decision is subject to challenge in
court. The Company cannot reasonably estimate the range of loss, if any, that may result from this matter given

100

Corporate and intersegment elimination amounts are presented to reconcile the reportable segment results to the consolidated
results. The following table presents the reportable segment financial information:

Optum

(in millions) UnitedHealthcare OptumHealth OptumInsight OptumRx Total Optum

Corporate and
Intersegment
Eliminations Consolidated

2012
Revenues — external customers:

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . $ 97,985 $ 1,743 $ — $ — $ 1,743 $ — $ 99,728
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,867 767 1,720 83 2,570 — 7,437
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . — 21 87 2,665 2,773 — 2,773

Total revenues — external customers . . . . . . . . 102,852 2,531 1,807 2,748 7,086 — 109,938

Total revenues — intersegment . . . . . . . . . . . . . — 5,503 1,075 15,611 22,189 (22,189) —
Investment and other income . . . . . . . . . . . . . . . 567 113 — — 113 — 680

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $103,419 $ 8,147 $ 2,882 $18,359 $ 29,388 $(22,189) $110,618

Earnings from operations . . . . . . . . . . . . . . . . . . $ 7,815 $ 561 $ 485 $ 393 $ 1,439 $ — $ 9,254
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . — — — — — (632) (632)

Earnings before income taxes . . . . . . . . . . . . . . $ 7,815 $ 561 $ 485 $ 393 $ 1,439 $ (632) $ 8,622

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,591 $ 8,274 $ 5,463 $ 3,466 $ 17,203 $ 91 $ 80,885
Purchases of property, equipment and

capitalized software . . . . . . . . . . . . . . . . . . . . $ 585 $ 184 $ 165 $ 136 $ 485 $ — $ 1,070
Depreciation and amortization . . . . . . . . . . . . . . $ 794 $ 193 $ 210 $ 112 $ 515 $ — $ 1,309

2011
Revenues — external customers:

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90,487 $ 1,496 $ — $ — $ 1,496 $ — $ 91,983
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,291 628 1,616 78 2,322 — 6,613
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . — 24 96 2,492 2,612 — 2,612

Total revenues — external customers . . . . . . . . 94,778 2,148 1,712 2,570 6,430 — 101,208

Total revenues — intersegment . . . . . . . . . . . . . — 4,461 958 16,708 22,127 (22,127) —
Investment and other income . . . . . . . . . . . . . . . 558 95 1 — 96 — 654

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $ 95,336 $ 6,704 $ 2,671 $19,278 $ 28,653 $(22,127) $101,862

Earnings from operations . . . . . . . . . . . . . . . . . . $ 7,203 $ 423 $ 381 $ 457 $ 1,261 $ — $ 8,464
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . — — — — — (505) (505)

Earnings before income taxes . . . . . . . . . . . . . . $ 7,203 $ 423 $ 381 $ 457 $ 1,261 $ (505) $ 7,959

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,618 $ 6,756 $ 5,308 $ 3,503 $ 15,567 $ (296) $ 67,889
Purchases of property, equipment and

capitalized software . . . . . . . . . . . . . . . . . . . . $ 635 $ 168 $ 175 $ 89 $ 432 $ — $ 1,067
Depreciation and amortization . . . . . . . . . . . . . . $ 680 $ 154 $ 195 $ 95 $ 444 $ — $ 1,124

2010
Revenues — external customers:

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . $ 84,158 $ 1,247 $ — $ — $ 1,247 $ — $ 85,405
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,021 331 1,403 64 1,798 — 5,819
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . — 19 93 2,210 2,322 — 2,322

Total revenues — external customers . . . . . . . . 88,179 1,597 1,496 2,274 5,367 — 93,546

Total revenues — intersegment . . . . . . . . . . . . . — 2,912 845 14,449 18,206 (18,206) —
Investment and other income . . . . . . . . . . . . . . . 551 56 1 1 58 — 609

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88,730 $ 4,565 $ 2,342 $16,724 $ 23,631 $(18,206) $ 94,155

Earnings from operations . . . . . . . . . . . . . . . . . . $ 6,740 $ 511 $ 84 $ 529 $ 1,124 $ — $ 7,864
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . — — — — — (481) (481)

Earnings before income taxes . . . . . . . . . . . . . . $ 6,740 $ 511 $ 84 $ 529 $ 1,124 $ (481) $ 7,383

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,913 $ 3,897 $ 5,435 $ 3,087 $ 12,419 $ (269) $ 63,063
Purchases of property, equipment and

capitalized software . . . . . . . . . . . . . . . . . . . . $ 525 $ 117 $ 156 $ 80 $ 353 $ — $ 878
Depreciation and amortization . . . . . . . . . . . . . . $ 725 $ 100 $ 159 $ 80 $ 339 $ — $ 1,064
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . $ — $ — $ 172 $ — $ 172 $ — $ 172

103

14. Quarterly Financial Data (Unaudited)

Selected quarterly financial information for all quarters of 2012 and 2011 is as follows:

For the Quarter Ended

(in millions, except per share data) March 31 June 30 September 30 December 31

2012
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,282 $27,265 $27,302 $28,769
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,965 25,039 24,692 26,668
Earnings from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,317 2,226 2,610 2,101
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,388 1,337 1,557 1,244
Net earnings per share attributable to UnitedHealth Group

common shareholders:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.34 1.30 1.52 1.22
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.31 1.27 1.50 1.20

2011
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,432 $25,234 $25,280 $25,916
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,211 23,135 23,210 23,842
Earnings from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,221 2,099 2,070 2,074
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,346 1,267 1,271 1,258
Basic net earnings per common share . . . . . . . . . . . . . . . . . . . . . 1.24 1.18 1.19 1.19
Diluted net earnings per common share . . . . . . . . . . . . . . . . . . . . 1.22 1.16 1.17 1.17

104

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (Exchange Act) that are designed to provide reasonable assurance that information
required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and
communicated to our management, including our principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.

In connection with the filing of this Form 10-K, management evaluated, under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and
operation of our disclosure controls and procedures as of December 31, 2012. Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were
effective at the reasonable assurance level as of December 31, 2012.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in our internal control over financial reporting during the quarter ended
December 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

105

Report of Management on Internal Control over Financial Reporting as of December 31, 2012

The Company’s management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The
Company’s internal control system is designed to provide reasonable assurance to our management and board of
directors regarding the reliability of financial reporting and the preparation of consolidated financial statements
for external purposes in accordance with generally accepted accounting principles. The Company’s internal
control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
consolidated financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the Company are being made only in accordance with authorizations of management and
directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the
consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2012. In making this assessment, we used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.
Management’s assessment of the effectiveness of our internal control over financial reporting excluded an
assessment of the effectiveness of our internal control over financial reporting of Amil Participações S.A and its
subsidiaries (Amil). Such exclusion was in accordance with Securities and Exchange Commission guidance that
an assessment of a recently acquired business may be omitted in management’s report on internal control over
financial reporting in the year of acquisition. We acquired a controlling interest in Amil during October 2012.
Amil represented 10% of our consolidated total assets and 1% of our consolidated total revenues as of and for the
year ended December 31, 2012. Based on our assessment and the COSO criteria, we believe that, as of
December 31, 2012, the Company maintained effective internal control over financial reporting.

The Company’s independent registered public accounting firm has audited the Company’s internal control over
financial reporting as of December 31, 2012, as stated in the Report of Independent Registered Public
Accounting Firm, appearing under Item 9A, which expresses an unqualified opinion on the effectiveness of the
Company’s internal controls over financial reporting as of December 31, 2012.

106

Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of UnitedHealth Group Incorporated and Subsidiaries:

We have audited the internal control over financial reporting of UnitedHealth Group Incorporated and
Subsidiaries (the “Company”) as of December 31, 2012, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. As described in Report of Management on Internal Control over Financial Reporting as of
December 31, 2012, management excluded from its assessment the internal control over financial reporting at
Amil Participações S.A and its subsidiaries (Amil), which was acquired during October 2012 and whose financial
statements collectively constitute approximately 10% of total assets and 1% of total revenues of the consolidated
financial statement amounts as of and for the year ended December 31, 2012. Accordingly, our audit did not
include the internal control over financial reporting at Amil. The Company’s management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Report of Management on Internal
Control Over Financial Reporting as of December 31, 2012. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the
company’s principal executive and principal financial officers, or persons performing similar functions, and
effected by the company’s board of directors, management, and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion
or improper management override of controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over
financial reporting to future periods are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2012, based on the criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements as of and for the year ended December 31, 2012 of the
Company and our reports dated February 6, 2013 expressed as an unqualified opinion on those consolidated
financial statements and financial statement schedule.

/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
February 6, 2013
107

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Pursuant to General Instruction G(3) to Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K,
information regarding our executive officers is provided in Item 1 of Part I of this Annual Report on Form 10-K
under the caption “Executive Officers of the Registrant.”

The remaining information required by Items 401, 405, 406 and 407(c)(3), (d)(4) and (d)(5) of Regulation S-K
will be included under the headings “Corporate Governance,” “Election of Directors” and “Section 16(a)
Beneficial Ownership Reporting Compliance” in our definitive proxy statement for our 2013 Annual Meeting of
Shareholders, and such required information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Items 402, 407(e)(4) and (e)(5) of Regulation S-K will be included under the
headings “Executive Compensation,” “Director Compensation,” “Corporate Governance—Risk Oversight” and
“Compensation Committee Interlocks and Insider Participation” in our definitive proxy statement for our 2013
Annual Meeting of Shareholders, and such required information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table sets forth certain information, as of December 31, 2012, concerning shares of common stock
authorized for issuance under all of our equity compensation plans:

Plan Category

(a)
Number of securities

to be issued upon
exercise of

outstanding
options, warrants

and rights (3)

(b)
Weighted-average

exercise
price of

outstanding
options, warrants
and rights (3)

(c)
Number of securities

remaining available for
future issuance under
equity compensation

plans (excluding
securities reflected in

column (a))

(in millions) (in millions)

Equity compensation plans approved by
shareholders(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 $43 63(4)

Equity compensation plans not approved by
shareholders(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —

Total(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 $43 63

(1) Consists of the UnitedHealth Group Incorporated 2011 Stock Incentive Plan, as amended, and the
UnitedHealth Group 1993 Employee Stock Purchase Plan, as amended.

(2) Excludes 0.1 million shares underlying stock options assumed by us in connection with our acquisition of
the companies under whose plans the options originally were granted. These options have a weighted-
average exercise price of $41 and an average remaining term of approximately 2.1 years. The options are
administered pursuant to the terms of the plan under which the option originally was granted. No future
awards will be granted under these acquired plans.

108

(3) Excludes stock appreciation rights (SARs) to acquire 12 million shares of common stock of the Company
with exercise prices above $54.24, the closing price of a share of our common stock as reported on the
NYSE on December 31, 2012.

(4) Includes 20 million shares of common stock available for future issuance under the Employee Stock
Purchase Plan as of December 31, 2012, and 43 million shares available under the 2011 Stock Incentive
Plan as of December 31, 2012. Shares available under the 2011 Stock Incentive Plan may become the
subject of future awards in the form of stock options, SARs, restricted stock, restricted stock units,
performance awards and other stock-based awards, except that only 16 million of these shares are available
for future grants of awards other than stock options or SARs.

The information required by Item 403 of Regulation S-K will be included under the heading “Security
Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for our 2013
Annual Meeting of Shareholders, and such required information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information required by Items 404 and 407(a) of Regulation S-K will be included under the headings
“Certain Relationships and Transactions” and “Corporate Governance” in our definitive proxy statement for our
2013 Annual Meeting of Shareholders, and such required information is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 9(e) of Schedule 14A will be included under the heading “Independent
Registered Public Accounting Firm” in our definitive proxy statement for our 2013 Annual Meeting of
Shareholders, and such required information is incorporated herein by reference.

109

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) 1. Financial Statements

The financial statements are included under Item 8 of this report:

• Reports of Independent Registered Accounting Firm.

• Consolidated Balance Sheets as of December 31, 2012 and 2011.

• Consolidated Statement of Operations for the years ended December 31, 2012, 2011, and 2010.

• Consolidated Statement of Comprehensive Income for the years ended December 31, 2012, 2011,
and 2010.

• Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2012,
2011, and 2010.

• Consolidated Statement of Cash Flows for the years ended December 31, 2012, 2011, and 2010.

• Notes to the Consolidated Financial Statements.

2. Financial Statement Schedules

The following financial statement schedule of the Company is included in Item 15(c):

•

Schedule I — Condensed Financial Information of Registrant (Parent Company Only).

All other schedules for which provision is made in the applicable accounting regulations of the SEC are
not required under the related instructions, are inapplicable, or the required information is included in the
consolidated financial statements, and therefore have been omitted.

(b) The following exhibits are filed in response to Item 601 of Regulation S-K.

EXHIBIT INDEX**

3.1 Third Restated Articles of Incorporation of UnitedHealth Group Incorporated (incorporated by
reference to Exhibit 3.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K dated
May 29, 2007)

3.2 Fourth Amended and Restated Bylaws of UnitedHealth Group Incorporated (incorporated by reference
to Exhibit 3.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K dated
October 23, 2009)

4.1 Senior Indenture, dated as of November 15, 1998, between United HealthCare Corporation and The
Bank of New York (incorporated by reference to Exhibit 4.1 to UnitedHealth Group Incorporated’s
Registration Statement on Form S-3/A, SEC File Number 333-66013, filed on January 11, 1999)

4.2 Amendment, dated as of November 6, 2000, to Senior Indenture, dated as of November 15, 1998,
between the UnitedHealth Group Incorporated and The Bank of New York (incorporated by reference
to Exhibit 4.1 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter
ended September 30, 2001)

4.3 Instrument of Resignation, Appointment and Acceptance of Trustee, dated January 8, 2007, pursuant
to the Senior Indenture, dated November 15, 1988, amended November 6, 2000, among UnitedHealth
Group Incorporated, The Bank of New York and Wilmington Trust Company (incorporated by
reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2007)

110

4.4 Indenture, dated as of February 4, 2008, between UnitedHealth Group Incorporated and U.S. Bank
National Association (incorporated by reference to Exhibit 4.1 to UnitedHealth Group Incorporated’s
Registration Statement on Form S-3, SEC File Number 333-149031, filed on February 4, 2008)

*10.1 UnitedHealth Group Incorporated 2011 Stock Incentive Plan, effective May 23, 2011 (incorporated
by reference to Exhibit A to UnitedHealth Group Incorporated’s Definitive Proxy Statement dated
April 13, 2011)

*10.2 Form of Agreement for Non-Qualified Stock Option Award to Executives under UnitedHealth Group
Incorporated’s 2011 Stock Incentive Plan, effective as of May 24, 2011 (incorporated by reference to
Exhibit 10.2 to UnitedHealth Group Incorporated’s Current Report on Form 8-K dated
May 23, 2011)

*10.3 Form of Agreement for Restricted Stock Award to Executives under UnitedHealth Group
Incorporated’s 2011 Stock Incentive Plan, effective as of May 24, 2011 (incorporated by reference to
Exhibit 10.5 to UnitedHealth Group Incorporated’s Current Report on Form 8-K dated
May 23, 2011)

*10.4 Form of Agreement for Restricted Stock Unit Award to Executives under UnitedHealth Group
Incorporated’s 2011 Stock Incentive Plan, effective as of May 24, 2011 (incorporated by reference to
Exhibit 10.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K dated
May 23, 2011)

*10.5 Form of Agreement for Stock Appreciation Rights Award to Executives under UnitedHealth Group
Incorporated’s 2011 Stock Incentive Plan, effective as of May 24, 2011 (incorporated by reference to
Exhibit 10.4 to UnitedHealth Group Incorporated’s Current Report on Form 8-K dated
May 23, 2011)

*10.6 Form of Agreement for Performance-based Restricted Stock Unit Award to Executives under
UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan, effective as of May 24, 2011
(incorporated by reference to Exhibit 10.3 to UnitedHealth Group Incorporated’s Current Report on
Form 8-K dated May 23, 2011)

*10.7 Form of Agreement for Initial Deferred Stock Unit Award to Non-Employee Directors under
UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan, effective as of May 24, 2011
(incorporated by reference to Exhibit 10.7 to UnitedHealth Group Incorporated’s Current Report on
Form 8-K dated May 23, 2011)

*10.8 Form of Agreement for Deferred Stock Unit Award to Non-Employee Directors under UnitedHealth
Group Incorporated’s 2011 Stock Incentive Plan, effective as of May 24, 2011 (incorporated by
reference to Exhibit 10.6 to UnitedHealth Group Incorporated’s Current Report on Form 8-K dated
May 23, 2011)

*10.9 Amended and Restated UnitedHealth Group Incorporated Executive Incentive Plan (2009 Statement),
effective as of December 31, 2008 (incorporated by reference to Exhibit 10.12 to UnitedHealth
Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2008)

*10.10 Amended and Restated UnitedHealth Group Incorporated 2008 Executive Incentive Plan, effective as
of December 31, 2008 (incorporated by reference to Exhibit 10.13 to UnitedHealth Group
Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2008)

*10.11 Amendment, dated as of December 21, 2012, of Amended and Restated UnitedHealth Group
Incorporated 2008 Executive Incentive Plan

*10.12 UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to
Exhibit 10(e) of UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended
December 31, 2003)

111

*10.13 First Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by
reference to Exhibit 10.3 to UnitedHealth Group Incorporated’s Current Report on Form 8-K dated
October 31, 2006)

*10.14 Second Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated
by reference to Exhibit 10.13 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for
the year ended December 31, 2007)

*10.15 Third Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by
reference to Exhibit 10.17 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for
the year ended December 31, 2008)

*10.16 Fourth Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated
by reference to Exhibit 10.1 of UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2010)

*10.17 Summary of Non-Management Director Compensation, effective as of July 1, 2009 (incorporated by
reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2009)

*10.18 UnitedHealth Group Directors’ Compensation Deferral Plan (2009 Statement) (incorporated by
reference to Exhibit 10.18 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for
the year ended December 31, 2008)

*10.19 Amendment to the UnitedHealth Group Directors’ Compensation Deferral Plan, effective as of
January 1, 2010 (incorporated by reference to Exhibit 10.20 to UnitedHealth Group Incorporated’s
Annual Report on Form 10K for the year ended December 31, 2009)

*10.20 First Amendment to UnitedHealth Group Directors’ Compensation Deferral Plan (incorporated by
reference to Exhibit 10.2 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2010)

*10.21 Employment Agreement, dated as of November 7, 2006, between UnitedHealth Group Incorporated
and Stephen J. Hemsley (incorporated by reference to Exhibit 10.1 to UnitedHealth Group
Incorporated’s Current Report on Form 8-K dated November 7, 2006)

*10.22 Agreement for Supplemental Executive Retirement Pay, effective April 1, 2004, between
UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference to
Exhibit 10(b) to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2004)

*10.23 Amendment to Agreement for Supplemental Executive Retirement Pay, dated as of November 7,
2006, between UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference
to Exhibit A to Exhibit 10.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K
dated November 7, 2006)

*10.24 Amendment to Employment Agreement and Agreement for Supplemental Executive Retirement Pay,
effective as of December 31, 2008, between United HealthCare Services, Inc. and Stephen J.
Hemsley (incorporated by reference to Exhibit 10.22 to UnitedHealth Group Incorporated’s Annual
Report on Form 10-K for the year ended December 31, 2008)

*10.25 Letter Agreement, effective as of February 19, 2008, by and between UnitedHealth Group
Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit 10.22 to UnitedHealth
Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2007)

*10.26 Amendment to Employment Agreement, dated as of December 14, 2010, between UnitedHealth
Group Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit 10.1 to
UnitedHealth Group Incorporated’s Current Report on Form 8-K dated December 15, 2010)

112

*10.27 Amended and Restated Employment Agreement, dated as of August 8, 2011, between
United HealthCare Services, Inc. and Gail K. Boudreaux (incorporated by reference to Exhibit 10.1
to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2011)

*10.28 Amended and Restated Employment Agreement, dated as of October 25, 2011, between
United HealthCare Services, Inc. and Larry C. Renfro (incorporated by reference to Exhibit 10.2 to
UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2011)

*10.29 Employment Agreement, effective as of December 1, 2006, between United HealthCare Services,
Inc. and David S. Wichmann (incorporated by reference to Exhibit 10.2 to UnitedHealth Group
Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008)

*10.30 Amendment to Employment Agreement, effective as of December 31, 2008, between
United HealthCare Services, Inc. and David S. Wichmann (incorporated by reference to Exhibit
10.37 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended
December 31, 2008)

*10.31 Amended and Restated Employment Agreement, dated as of March 26, 2012, between
United HealthCare Services, Inc. and Larry C. Renfro (incorporated by reference to Exhibit 10.1 to
UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2012)

*10.32 Amended Employment Agreement, effective as of November 1, 2012, between Amil Assistência
Médica Internacional S.A. and Dr. Edson de Godoy Bueno

*10.33 Employment Agreement, effective as of June 29, 2007, and amendment thereto, effective as of
December 31, 2008, between United HealthCare Services, Inc. and Lori Sweere

*10.34 Employment Agreement, effective as of April 12, 2007, between United HealthCare Services, Inc.
and Anthony Welters (incorporated by reference to Exhibit 10.28 to UnitedHealth Group
Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2007)

*10.35 Amendment to Employment Agreement, effective as of December 31, 2008, between United
HealthCare Services, Inc. and Anthony Welters (incorporated by reference to Exhibit 10.35 to
UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31,
2008)

*10.36 Form of Agreement for Non-Qualified Stock Option Award for International Participants under
UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan

*10.37 Form of Addendum for Non-Qualified Stock Option Award Agreement for International Participants
under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan

11.1 Statement regarding computation of per share earnings (incorporated by reference to the information
contained under the heading “Net Earnings Per Common Share” in Note 2 of Notes to the
Consolidated Financial Statements included in Item 8, “Financial Statements”)

12.1 Ratio of Earnings to Fixed Charges

21.1 Subsidiaries of UnitedHealth Group Incorporated

23.1 Consent of Independent Registered Public Accounting Firm

24.1 Power of Attorney

31.1 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

113

101 The following materials from UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the
year ended December 31, 2012, filed on February 6, 2013, formatted in XBRL (eXtensible Business
Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii)
Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in
Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to the Consolidated
Financial Statements.

* Denotes management contracts and compensation plans in which certain directors and named executive
officers participate and which are being filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.

** Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of instruments defining the rights of certain
holders of long-term debt are not filed. The Company will furnish copies thereof to the SEC upon request.

(c) Financial Statement Schedule

Schedule I — Condensed Financial Information of Registrant (Parent Company Only).

114

Schedule I

Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of UnitedHealth Group Incorporated and Subsidiaries:

We have audited the consolidated financial statements of UnitedHealth Group Incorporated and Subsidiaries (the
“Company”) as of December 31, 2012 and 2011, and for each of the three years in the period ended
December 31, 2012, and the Company’s internal control over financial reporting as of December 31, 2012, and
have issued our reports thereon dated February 6, 2013; such consolidated financial statements and reports are
included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedule of
the Company listed in Item 15. This consolidated financial statement schedule is the responsibility of the
Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, the
consolidated financial statement schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
February 6, 2013

115

Schedule I

Condensed Financial Information of Registrant
(Parent Company Only)

UnitedHealth Group
Condensed Balance Sheets

(in millions, except per share data)
December 31,
2012
December 31,
2011
Assets
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,025 $ 1,506
Notes receivable from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,889 —
Deferred income taxes, prepaid expenses and other current assets . . . . . . . . . . . . 225 179

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,139 1,685
Equity in net assets of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,724 38,688
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 77

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $47,969 $40,450

Liabilities and shareholders’ equity
Current liabilities:

Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 356 $ 351
Note payable to subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 145
Commercial paper and current maturities of long-term debt . . . . . . . . . . . . . . . . . 2,541 982

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,072 1,478
Long-term debt, less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,602 10,656
Deferred income taxes and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 24

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,791 12,158

Commitments and contingencies (Note 4)
Shareholders’ equity:

Preferred stock, $0.001 par value —10 shares authorized; no shares issued or
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

Common stock, $0.01 par value — 3,000 shares authorized; 1,019 and 1,039
issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 10

Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 —
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,664 27,821
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 438 461

Total UnitedHealth Group shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,178 28,292

Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $47,969 $40,450

See Notes to the Condensed Financial Statements of Registrant

116

Schedule I
Condensed Financial Information of Registrant
(Parent Company Only)

UnitedHealth Group
Condensed Statements of Comprehensive Income

For the Years Ended December 31,
(in millions) 2012 2011 2010

Revenues:
Investment and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28 $ 3 $ 2

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3 2

Operating costs:
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) 25 54
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566 451 433

Total operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 564 476 487

Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (536) (473) (485)
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192 167 180

Loss of parent company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (344) (306) (305)
Equity in undistributed income of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,870 5,448 4,939

Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,526 5,142 4,634
Other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23) 209 (1)

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,503 $5,351 $4,633
See Notes to the Condensed Financial Statements of Registrant
117

Schedule I
Condensed Financial Information of Registrant
(Parent Company Only)

UnitedHealth Group
Condensed Statements of Cash Flows

For the Years Ended December 31,
(in millions) 2012 2011 2010

Operating activities
Cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,116 $ 5,560 $ 3,731

Investing activities
Cash paid for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,737) (2,081) (2,470)
Capital contributions to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (99) (171) (104)

Cash flows used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,836) (2,252) (2,574)

Financing activities
Common stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,084) (2,994) (2,517)
Issuance of notes to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,149) — —
Proceeds from common stock issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,078 381 272
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (820) (651) (449)
Proceeds from commercial paper, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,587 (933) 930
Proceeds from issuance of long term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,966 2,234 747
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (986) (955) (1,583)
Interest rate swap termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 132 —
Proceeds of note from subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 15 30
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (383) 53 20

Cash flows used for financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,761) (2,718) (2,550)

(Decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . (481) 590 (1,393)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . 1,506 916 2,309

Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,025 $ 1,506 $ 916

Supplemental cash flow disclosures
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 547 $ 418 $ 459
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,666 2,739 2,725

See Notes to the Condensed Financial Statements of Registrant
118

Schedule I
Condensed Financial Information of Registrant
(Parent Company Only)

UnitedHealth Group
Notes to Condensed Financial Statements

1. Basis of Presentation

UnitedHealth Group’s parent company financial information has been derived from its consolidated financial
statements and should be read in conjunction with the consolidated financial statements included in this
Form 10-K. The accounting policies for the registrant are the same as those described in the Summary of
Significant Accounting Policies in Note 2 of Notes to the Consolidated Financial Statements included in Item 8,
“Financial Statements.”

2. Subsidiary Transactions

Investment in Subsidiaries. UnitedHealth Group’s investment in subsidiaries is stated at cost plus equity in
undistributed earnings of subsidiaries.

Notes Receivable from Subsidiaries. Notes issued to subsidiaries were used primarily to fund acquisitions.
During 2012, the parent company completed a non-cash exchange of a $3.9 billion intercompany note to a
subsidiary for a new term note of $2.6 billion and an equity interest of $1.3 billion.

Dividends. Cash dividends received from subsidiaries and included in Cash Flows from Operating Activities in
the Condensed Statements of Cash Flows were $7.8 billion, $5.6 billion and $4.3 billion in 2012, 2011 and 2010,
respectively.

3. Commercial Paper and Long-Term Debt

Maturities of commercial paper and long-term debt for the years ending December 31 are as follows:
(in millions)

2013 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,541
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,067
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,152
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,281
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,513

(a) Includes $9 million of debt subject to acceleration clauses.

Long-term debt obligations of the parent company do not include Brazilian real denominated debt of a subsidiary
with a total par value of $588 million. Further information on commercial paper and long-term debt can be found
in Note 8 of Notes to the Consolidated Financial Statements included in Item 8, “Financial Statements.”

4. Commitments and Contingencies

For a summary of commitments and contingencies, see Note 12 of Notes to the Consolidated Financial
Statements included in Item 8, “Financial Statements.”

119

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: February 6, 2013

UNITEDHEALTH GROUP INCORPORATED

By /s/ STEPHEN J. HEMSLEY

Stephen J. Hemsley

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/S/ STEPHEN J. HEMSLEY

Stephen J. Hemsley

Director, President and
Chief Executive Officer

(principal executive officer)

February 6, 2013

/S/ DAVID S. WICHMANN

David S. Wichmann

Executive Vice President and
Chief Financial Officer of
UnitedHealth Group and

President of UnitedHealth Group
Operations

(principal financial officer)

February 6, 2013

/S/ ERIC S. RANGEN

Eric S. Rangen

Senior Vice President and
Chief Accounting Officer

(principal accounting officer)

February 6, 2013
*

William C. Ballard, Jr.

Director February 6, 2013

*

Richard T. Burke

Director February 6, 2013
*

Edson Bueno

Director February 6, 2013
*

Robert J. Darretta

Director February 6, 2013
*

Michele J. Hooper

Director February 6, 2013
*

Rodger A. Lawson

Director February 6, 2013
*

Douglas W. Leatherdale

Director February 6, 2013
*

Glenn M. Renwick

Director February 6, 2013
*

Kenneth I. Shine

Director February 6, 2013
*

Gail R. Wilensky

Director February 6, 2013

*By /s/ MARIANNE D. SHORT

Marianne D. Short,
As Attorney-in-Fact

120

<< /ASCII85EncodePages false /AllowTransparency false /AutoPositionEPSFiles true /AutoRotatePages /None /Binding /Left /CalGrayProfile (Dot Gain 20%) /CalRGBProfile (sRGB IEC61966-2.1) /CalCMYKProfile (U.S. Web Coated \050SWOP\051 v2) /sRGBProfile (sRGB IEC61966-2.1) /CannotEmbedFontPolicy /Error /CompatibilityLevel 1.4 /CompressObjects /Off /CompressPages true /ConvertImagesToIndexed true /PassThroughJPEGImages true /CreateJDFFile false /CreateJobTicket false /DefaultRenderingIntent /Default /DetectBlends true /DetectCurves 0.1000 /ColorConversionStrategy /CMYK /DoThumbnails false /EmbedAllFonts true /EmbedOpenType false /ParseICCProfilesInComments true /EmbedJobOptions true /DSCReportingLevel 0 /EmitDSCWarnings false /EndPage -1 /ImageMemory 1048576 /LockDistillerParams true /MaxSubsetPct 100 /Optimize false /OPM 1 /ParseDSCComments true /ParseDSCCommentsForDocInfo true /PreserveCopyPage true /PreserveDICMYKValues true /PreserveEPSInfo true /PreserveFlatness true /PreserveHalftoneInfo false /PreserveOPIComments false /PreserveOverprintSettings true /StartPage 1 /SubsetFonts true /TransferFunctionInfo /Preserve /UCRandBGInfo /Preserve /UsePrologue false /ColorSettingsFile (None) /AlwaysEmbed [ true ] /NeverEmbed [ true ] /AntiAliasColorImages false /CropColorImages true /ColorImageMinResolution 300 /ColorImageMinResolutionPolicy /OK /DownsampleColorImages true /ColorImageDownsampleType /Bicubic /ColorImageResolution 300 /ColorImageDepth -1 /ColorImageMinDownsampleDepth 1 /ColorImageDownsampleThreshold 2.00000 /EncodeColorImages true /ColorImageFilter /DCTEncode /AutoFilterColorImages true /ColorImageAutoFilterStrategy /JPEG /ColorACSImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >>
/ColorImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >>
/JPEG2000ColorACSImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >>
/JPEG2000ColorImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >>
/AntiAliasGrayImages false
/CropGrayImages true
/GrayImageMinResolution 300
/GrayImageMinResolutionPolicy /OK
/DownsampleGrayImages true
/GrayImageDownsampleType /Bicubic
/GrayImageResolution 300
/GrayImageDepth -1
/GrayImageMinDownsampleDepth 2
/GrayImageDownsampleThreshold 2.00000
/EncodeGrayImages true
/GrayImageFilter /DCTEncode
/AutoFilterGrayImages true
/GrayImageAutoFilterStrategy /JPEG
/GrayACSImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >>
/GrayImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >>
/JPEG2000GrayACSImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >>
/JPEG2000GrayImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >>
/AntiAliasMonoImages false
/CropMonoImages true
/MonoImageMinResolution 1200
/MonoImageMinResolutionPolicy /OK
/DownsampleMonoImages true
/MonoImageDownsampleType /Bicubic
/MonoImageResolution 800
/MonoImageDepth -1
/MonoImageDownsampleThreshold 1.50000
/EncodeMonoImages true
/MonoImageFilter /CCITTFaxEncode
/MonoImageDict << /K -1 >>
/AllowPSXObjects false
/CheckCompliance [
/None
]
/PDFX1aCheck false
/PDFX3Check false
/PDFXCompliantPDFOnly false
/PDFXNoTrimBoxError true
/PDFXTrimBoxToMediaBoxOffset [
0.00000
0.00000
0.00000
0.00000
]
/PDFXSetBleedBoxToMediaBox true
/PDFXBleedBoxToTrimBoxOffset [
0.00000
0.00000
0.00000
0.00000
]
/PDFXOutputIntentProfile (None)
/PDFXOutputConditionIdentifier ()
/PDFXOutputCondition ()
/PDFXRegistryName ()
/PDFXTrapped /Unknown
/Description << /CHS
/CHT
/DAN
/DEU
/ESP
/FRA
/ITA
/JPN
/KOR
/NLD (Gebruik deze instellingen om Adobe PDF-documenten te maken die zijn geoptimaliseerd voor prepress-afdrukken van hoge kwaliteit. De gemaakte PDF-documenten kunnen worden geopend met Acrobat en Adobe Reader 5.0 en hoger.)
/NOR
/PTB
/SUO
/SVE
/ENU (RRD High Resolution \(Letter Page Size\))
>>
/Namespace [
(Adobe)
(Common)
(1.0)
]
/OtherNamespaces [
<< /AsReaderSpreads false /CropImagesToFrames true /ErrorControl /WarnAndContinue /FlattenerIgnoreSpreadOverrides false /IncludeGuidesGrids false /IncludeNonPrinting false /IncludeSlug false /Namespace [ (Adobe) (InDesign) (4.0) ] /OmitPlacedBitmaps false /OmitPlacedEPS false /OmitPlacedPDF false /SimulateOverprint /Legacy >>
<< /AddBleedMarks false /AddColorBars false /AddCropMarks false /AddPageInfo false /AddRegMarks false /ConvertColors /ConvertToCMYK /DestinationProfileName () /DestinationProfileSelector /DocumentCMYK /Downsample16BitImages true /FlattenerPreset << /PresetSelector /MediumResolution >>
/FormElements false
/GenerateStructure false
/IncludeBookmarks false
/IncludeHyperlinks false
/IncludeInteractive false
/IncludeLayers false
/IncludeProfiles false
/MultimediaHandling /UseObjectSettings
/Namespace [
(Adobe)
(CreativeSuite)
(2.0)
]
/PDFXOutputIntentProfileSelector /DocumentCMYK
/PreserveEditing true
/UntaggedCMYKHandling /LeaveUntagged
/UntaggedRGBHandling /UseDocumentProfile
/UseDocumentBleed false
>>
]
>> setdistillerparams
<< /HWResolution [2400 2400] /PageSize [612.000 792.000] >> setpagedevice

FINANCIAL DATA

00’s)

2008 2007 2006

2008 2007 2006 2008 2007 2006

,195

.1%

Assets

.0%

0 0

0 0 0 0 0 0

0 0 5,493 14,099 49,831 113,584

0.93

7.5%

6.0%

2.1%

0 0 0 0 0 0

4.3%

2.1%

0 0 0 0 0 0

0 0 0 0 0 0

129,639 108,635 92,437 185,207 142,345 116,078

0 0 50

0 0 0 0 0 0

0 0

0 0

0 0 0 0 0

Other 0 0 0 0 0

306,605 538,844 448,983 362,168 592,100 520,448

1,326,011

0 0 0

Other

Other

0

0

0

0 0

13 0 0 0 0

175

																																																																																																																												Company A (																																																														0	Company B (000’s)
MHS (Dec 31)	SMC (Dec 31)
Balance Sheet									2008									2007									2006	Liquidity Ratios
Cash and Cash Equivalents	159,105	38,827	25,096	66,775	38,037	8,080	Current	580.5%	77	6.0%	521.7%	285.6%	388.9%	441.9%
Marketable Securities	191,354	402,362	269,529	228,447	315,768	317,060	Quick	570.9%	765.7%	510.4%	279.4%	38		2.1%	43	7.5%
Accounts Receivable	123,835	1	13	106,774	186,239	184,969	176,972	Cash Flow	323.8%	513.4%	431.5%	814.2%	1021.1%	1	175
Inventories	12,434	11,252	10,423	11,552	9,738	5,177
Prepaid Expenses/			Other	265,791	277,384	70,425	35,933	5,079	5,710	Leverage Ratios
Total Current Assets	752,519	843,020	482,247	528,946	553,591	512,999	Debt/Asset	76.5%	59.4%		50	71.6%	53.4%	56.0%
LT-Debt/Capitalization	73.9%	55.7%	4	4.3%	66.7%	47.5%	51.3%
Other Investments		5,493		14,099		49,831		113,584
Equity Investments	Activity Ratios
Total Long-Term Investments	Average AR Days	7.48	7.89	7.59	6.73	6.38	6.25
Fixed Asset Turnover	1.68	1.85	1.97	1.72	1.77	1.98
Property, Plant, and Equipment (net)	552,478	482,991	410,806	730,340	666,655	557,264	Total Asset Turnover	0.71	0.67	0.90	0.98		0.93
Total Assets		1,304,997			1,326,011		898,546		1,273,385		1,270,077		1,183,847	Profitability Ratios
Operating Profit Margin	13.0%	12.9%	3.2%	6.8%
Accounts Payable and Accruals		129,639		108,635		92,437		185,207		142,345		116,078	Net Profit Margin	6.1%	11.0%	11.4%	5.2%	4.7%
Loans and Notes Payable	Return on Assets	7.4%	10.3%	4.8%	4.4%
Accrued Taxes	Cash Flow Margin	102.8%	95.1%	93.9%	98.9%	93.7%	94.2%
Other Short-Term Payables	Cash Ret on Assets	73.0%	64.1%	84.7%	97.3%	87.1%	88.0%
Total Current Liabilities
Secured Mortgages	2,502	2,599	2,689
Long-Term Debt	578,445	585,980	277,190	406,542	411,279	415,524
Other Long-Term Payables	287,809	89,953	77,248	319,470	124,355	131,750
Deferred Income Taxes
Total Long-Term Liabilities	868,756	678,532	357,127	726,012	535,634	547,324
Total Liabilities	998,395	787,167	449,564	911,219	677,979	663,402
Common Stock
Paid-in Capital
Fund Balances		306,605		538,844		448,983		362,168		592,100		520,448
Treasury Stock
Total Owners’ Equity
Total Liabilities & Owners’ Equity	1,305,000	898,547	1,273,387	1,270,079	1,183,850
Income Statement
Revenues		925,997		893,562		809,991	1,252,715	1,179,460	1,105,335
Operating Expenses
Salaries and Benefits	469,797	419,514	372,772	635,630	579,839	544,548
Provision for bad debts	54,753	55,769	46,834	41,512	42,500	40,638
Depreciation and Amortization	62,185	53,163	48,127	82,469	64,598	58,482
Payroll Tax	26,293	22,801	20,106	34,719	31,888	28,184
Supplies	186,888	173,902	177,291
243,625	225769	217,901	231,428	206,895	189,724
Total Operating Expense	856,653	777,016	705,740	1,212,646	1,099,622	1,038,867
Operating Income	69,344	116,546	104,251	40,069	79,838	66,468
Program Service Revenue	952,310	849,670	760,791	1,239,015	1,105,732	1,041,536
Non-Operating Income/Expense
Interest Expense	(13,057)	(18,197)	(11,762)	-13,526	-18,789	-14,467
Investment Income	15,371	24,233	7,509	9,753	14,958	10,636
Gifts & Contributions	17,511	11,428	11,482	10,717	5,271	8,082
(1,039)	6,785	40,641	34,515
Gain (loss) from Sales of Assets	(58,136)	8,212	23,449	12,859	14,692
Income (loss) from Sales of Inventory	(33)	(11)	(26)	-6,769
Net rental income (loss)	-4,127
(39,370)	25,665	37,437	54,940	49,331
Net Gain/Loss	56,287	98,319	92,488	26,544	61,050	52,000

Christopher:
Line 23: “Secured mortgages and notes payable to unrelated third parties”
Christopher:
Line 20: “Tax-exempt bond liabilities”
Christopher:
Line 2: “Savings and temporary cash investments”
Should this also include Line 27: “Unrestricted net assets”? ($306,605)
Christopher:
Line 11: “Investments-publicly traded securities”
Christopher:
Line 9: “Prepaid expenses and deferred charges”
-plus-
“Other Assets”
Christopher:
Line 25: “Other liabilities”
Christopher:
Revenue Statement
Line 3: “Investment Income”
-plus-
Line 4: Income from investment of tax-exempt bond proceeds
Christopher:
Line 6d: “Net rental income or (loss)”
Christopher:
Line 10c: “Net Iincome or (loss) from sales of inventory”
Christopher:
Line 7d: “Net gain or (loss) from sales of assets other than inventory”
Christopher:
Line 11e: “Other income + loss on bond refinance”
Christopher:
Line 12: “Total Revenue”
Christopher:
Line 5: Compensation of current officers, directors, trustees, and key employees
– plus-
Line 7: Other salaries and wages
-plus-
Line 8: Pension, etc.
-plus-
Line 9: Other employee benefits
Christopher:
Line 20: “Interest”
Christopher:
Line 22: “Depreciation, depletion, and amortization”
Christopher:
Line 24a: “Provision for bad debts”
Christopher:
Retained Earnings
Christopher:
Line 33
Christopher:
Program Service Revenue + Contributions from gifts, grants and other similar amounts
Christopher:
This spike compared to previous and subsequent years was apparently due to a series of adjustments to MHS’s marketable securities.
Although there was an increase in Current Liabilities between ’06 to ’07, the increase in Current Assets increased at a higher rate c/t to the subsequent year (’08)

Sheet2

Purchase Svcs	44690
Prof Svcs	20910
Dues	857
Books	390
Recruiting	2769
Insurance	11677
Licenses	11433
Prop Bus Tax	1449
Ad	994
Pub Rel	664
Admin Alloc	-3984
Demo	561
92410

Chart

2006 2007 2008

809,991 893,562 925,997

898,546 1,326,011 1,304,997

1,183,847 1,270,077 1,273,385

MHS-TR
SMC-TR	1105335	1179460	1252715
MHS-TA
SMC-TA

Chart

2006 2006 2006 2006
2007 2007 2007 2007
2008 2008 2008 2008

MHS-Total Revenue
SMC-Total Revenue
MHS-Total Assets
SMC-Total Assets
809991
1105335
898546
1183847
893562
1179460
1326011
1270077
925997
1252715
1304997
1273385
Christopher:
Line 12: “Total Revenue”

Comparative Analysis of

Two Non-Profit Health Care Systems in Western Washington

Why these two companies?

I chose my own healthcare employer, MultiCare Health System (MHS) in Tacoma, WA, and Swedish Medical Center in Seattle, WA because they are similar in their multi-specialty multi-facility composition.

MHS and SMC are often times compared locally in terms of overall strategy and business development.

What I learned overall

Since stepping into my administrative position in 2007, I have had an opportunity to view some of our key financials for MHS but have never completely understood the complexity and detail. Every month, at our Management Forum, our CFO presents our financial performance which has been very strong in recent years despite the impact of the market on our non-operating revenue. In completing this exercise, I learned much more about how the Finance Department calculates these ratios that our management team has come to rely on as a measure of our sustainability as an emerging healthcare system in the Puget Sound area.

In general, I have learned (though certainly am not proficient in):

· a better understanding of how to identify and translate data from a 990 into Financial Statements for the purposes of analysis

· how to use ratios to paint a clearer picture of how one organization compares to another in financial performance

· more about the many different types of ratios that exist and what they mean

· how to us Excel more efficiently and effectively for the purposes of data analysis

More specifically, I learned more about these two organizations by choosing a cross-section of ratios in the following areas:

· Liquidity (current, quick, cash flow) to gain a better understanding of how these two organizations manage their cash and how quickly and easily (or not) they could cover additional activities.

· Leverage (debt, LTD to Cap) to learn more about how much each organization has used debt to finance activities.

· Activity (A/R turnover, fixed asset turnover, total asset turnover) to learn more about the level of efficiency of each organization.

· Profitability (operating profit margin, net profit margin, cash flow margin, return on assets, cash return on assets) to observe how well each organization earns revenue.

Conclusions

My overall impressions at the end of this exercise were:

· SMC by nature of its size and reach generates a considerable amount of cash from operating activities compared to MHS

· MHS has demonstrated financial activity that could be a reflection of considerably greater major investments in capital projects compared to SMC

· MHS has demonstrated greater efficiency in operations to offset the rapid acquisition of assets over the three year period compared to SMC

· Both organizations appear to be solidly positioned financially

· It will be interesting to see if financial performance over the subsequent three year period (’09-’11) demonstrates a level of return on investment for MHS’s activities during the ’06-’08 period – preliminary observation from monthly updates suggest that it is and will

Observations by ratio
Liquidity Ratios
Current

MHS

SMC

This spike compared to previous and subsequent years was apparently due to a series of adjustments to MHS’s marketable securities.
Although there was an increase in Current Liabilities between ’06 to ’07, the increase in Current Assets increased at a higher rate c/t to the subsequent year (’08)

There did not appear to be a commensurate increase to SMC’s Current Assets compared to the increase in its Current Liabilities during this three year period. It appears that there is a decrease in Marketable Securities over the three year period with an increase in inventories which essentially neutralized any major increase in Assets without the infusion of new Cash or Cash Equivalents which appears to occur in ’08.

COMPARISON: Overall, it appears that MHS has a higher performance in terms of its short-term liquidity compared to SMC

DEFINITIONS:

Current Ratio = Current Assets/Current Liabilities

Measures short-term liquidity, the ability of a firm to meet needs for cash as they arise. (Fraser & Ormiston 2010)

Quick Ratio

MHS

SMC

Deducting Inventory from the equation does not seem to have a significant impact on the overall performance in this area. The trend remains consistent as with the Current Ratio.

By taking Inventory out of the equation, this suggests that the increase in Current Liabilities was likely a primary driver for the decrease in Liquidity for SMC over this three year period.
Accounts Payable appears to be playing a larger role in driving this trend

COMPARISON: Overall, as with the Current Ratio, it appears that MHS has a higher performance in terms of its short-term liquidity compared to SMC

DEFINITIONS:

Quick or acid-test = Current assets – inventory/Current liabilities

Measures short-term liquidity more rigorously than the current ratio by eliminating inventory, usually the least liquid current asset (Fraser & Ormiston 2010)

Cash Flow

MHS

SMC

Overall strong performance though a trend over the three year period to suggest that Cash Equivalents (e.g. Marketable Securities) were being consumed for other projects (2008 marked the implementation of hospital-inpatient EMR CPOE/Clinical Documentation). Other major projects during that time horizon included the completion of the Steam Plant, ongoing construction of the new Emergency Services Building, and the new patient care tower at Good Samaritan Hospital)

Also maintaining a strong performance (likely due to strong cash flows from operations) but still demonstrating a decline as with MHS likely for similar reasons.

COMPARISON: SMC Cash Flow performance outstripped MHS by about 2.5 to 1.

DEFINITIONS:

Cash flow = Cash + marketable securities + cash flow from operating activities/Current liabilities

Measures short-term liquidity by considering as cash resources (numerator) cash plus cash equivalents plus cash flow from operating activities. (Fraser & Ormiston 2010).

Leverage Ratios
Debt/Asset

MHS

SMC

Despite the unfortunate timing of what was occurring in the market during 2008, MHS remained committed to completing its strategic business plan for capital expansion (as described above) which is what likely drove the assumption of increasing debt. As of 2010, all but one of the major capital projects was complete so it will be interesting to see if the hypothesis that these projects and the need to assume additional debt to finance is reflected in ’09 and ’10 performance.

Similar to MHS, there seems to be a relatively parallel trend for SMC in this area. Not being as privy to activities at SMC, I can only speculate that similar needs to finance major projects or activities were occurring.

COMPARISON: Overall, it appears that MHS and SMC had very similar performance related to the proportion of Total Liabilities to Total Assets.

DEFINITIONS:

Debt Ratio = Total liabilities/Total assets

Shows proportion of all assets that are financed with debt (Fraser & Ormiston 2010).

LT-Debt/Capitalization

MHS

SMC

There appears to be a trend indicative of a greater reliance on Long Term Debt (Liabilities) to finance capital projects and operating activities. This may be a reflection of the major construction projects and the EMR implementation.

There is a decrease from ’06-’07 in LTD to Cap but an increase from ’07-’08 which may also be indicative of what was occurring in the market in terms of non-operating financial performance. The need to assume additional LTD to finance ongoing projects may have been a driver for the increase between ’07-’08.

COMPARISON: Overall, it appears that MHS was more aggressive in assuming LTD compared to SMC during this time period.

DEFINITIONS:

LT-Debt/Cap = Long-term debt/Long-term debt + stockholders’ equity

Measures the extent to which long-term debt is used for permanent financing (Fraser & Ormiston 2010).

Activity Ratios
Average AR Days

MHS

SMC

Relatively steady performance in this area. Much effort has been invested in improving efficiency with our Revenue Cycle ranging from more stringent payment terms in our contracts with payors and improving on point of service collection (though the latter has only been implemented in ’10).

There appears to be an increasing trend for SMC in the number of time receivable are collected on average.

COMPARISON: Overall, it appears that MHS has a slightly higher performance in Average AR Days

DEFINITIONS:

Accounts Receivable Turnover = Total Revenue/Net accounts receivable

Indicates how many times receivable are collected during a year, on average (Fraser & Ormiston 2010).

Fixed Asset Turnover

MHS

SMC

There appears to be a trend of decreasing ratios in this area for MHS. This is likely due to a considerable investment in bringing additional PP&E online during this time frame.
It will be interesting to see if the investment in PP&E is offset by improving Total Revenue as a result of the increasing PP&E. Given the time horizons for each of these projects, benefits realization is unlikely to be reflected in MHS financial statements until ’10.

There also appears to be a trend of decreasing efficiency in the management of its fixed assets. Given the relatively strong consistent performance in Total Revenue and increase in PP&E over the three year period, there is also likely to be a similar phenomenon of capital investments as described for MHS.

COMPARISON: Overall, there appears to be a fairly comparable trend of performance between these two organizations as it relates to efficiency of managing fixed assets.

DEFINITIONS:

Fixed asset turnover = Total Revenue/Net PP&E

Measures efficiency of the firm in managing fixed assets (Fraser & Ormiston 2010).

Total Asset Turnover

MHS

SMC

There appears to be an overall trend for MHS in a decreasing efficiency in managing total assets.
Potential explanation for this trend include the capital projects described above in conjunction with the reaction to market as it relates to redistribution of MHS liquid assets. This appears to be disproportionate to the rate of increase in Total Revenue.

The trend for SMC appears to be relatively stable with what appears to be an improvement in ’08 – uncertain whether or not this is an isolated event or part of a trend.

COMPARISON: MHS appears to have experienced a significant jump in assets disproportionate to increase in Total Revenue compared to SMC – see Chart 1 below.

DEFINITIONS:

Total asset turnover = Total Revenue/Total Assets

Measures efficiency of the firm in managing all assets (Fraser & Ormiston 2010).

Chart 1. Total Revenue Compared to Total Assets

Profitability Ratios
Operating Profit Margin

MHS

SMC

MHS has been applying a significant amount of discipline related to cost containment and efficiency which is likely to be a large contributor to the overall high performance in this area.

SMC has also enjoyed a respectable operating margin. Interestingly, there was considerable change within SMC in 2008 when several executive and administrative positions were redlined out of the budget. This dramatic move reverberated throughout the local health care community and was fairly public knowledge within hours of execution.

(As a sidebar note, having been involved in a major collaborative project with SMC at the time, it was very disconcerting to suddenly discover that our three counterparts with whom we were working were gone within 24 hours).

COMPARISON: Both organizations demonstrate healthy margins in comparison to benchmarks such as Moody’s for Single-State Stand-Alone hospital systems with a median benchmark of 1.8%-2.4% for this three year period[footnoteRef:1] though MHS demonstrates a significantly higher level of performance compared to SMC. [1: Moody’s Investors Service, Not-for-Profit Healthcare Medians for Fiscal Year 2009 Shows Improvement Across All Major Ratios and All Rating Categories, 2009.]

DEFINITIONS:

Operating profit margin = operating profit/Total revenue

Measures profit generated after consideration of operating expenses (Fraser & Ormiston 2010).

Net Profit Margin

MHS

SMC

A large contributor to performance in this area has been ongoing growth in the area of revenue generation in conjunction with increasing operational efficiencies.
These two focus areas were of particular importance in ’08 to offset the impact of non-operating income which plummeted in the face of market.

The trend for SMC reflects a similar impact in ’08 likely the result of market on non-operating revenues.

COMPARISON: Despite market impact on non-operating revenue, MHS managed to perform remarkably well compared to SMC.

DEFINITIONS:

Net profit margin = Net profit/Total revenue

Measures profit generated after consideration of all expenses and revenues (Fraser & Ormiston 2010).

Return on Assets

MHS

SMC

Overall strong performance though clearly a decreasing trend over the three year period. As has been postulated in the observations above under “Fixed” & “Total Asset Turnover”, there has been considerable shift in acquisition of PP&E and shifting of liquid assets in response to market that are likely contributing to this trend.

SMC demonstrates a similar declining trend during this three year period. However, the performance is more on par with median of Single-State Stand-Alone hospital systems according to Moody’s 2009 report.

COMPARISON: MHS continues with strong performance compared to median benchmarks (Moody’s 2009) of 3.7-4.5 during this same period. MHS outperforms SMC. It appears that this discrepancy is in large part due to a higher net earnings compared to total assets for MHS compared to SMC.

DEFINITIONS:

Return on assets = Net earnings/Total assets

Measure overall efficiency of firm in managing assets and generating profits (Fraser & Ormiston 2010).

Cash Flow Margin

MHS

SMC

MHS demonstrates an increasing trend over the three year period suggesting that it is generating higher revenue from services compared to operating expenses and non-operating losses. This is particularly more pronounced in 2008.
Cash flow from operations may have also been collected more efficiently for MHS due to a successful implementation of the EMR as it relates to charge work queues at the end of 2008.

SMC has a solid performance in this area as well with an overall increasing trend. Given performance ratios for AR turnover, this may also be a contributing factor for performance in this area.

COMPARISON: MHS slightly outperforms SMC – there may be an association with MHS higher AR Receivable Turnover compared to SMC. Operational efficiency may also play a role.

DEFINITIONS:

Cash flow margin = Cash flow from operating activities/Total revenue

Measures the ability of the firm to generate cash from sales (Fraser & Ormiston 2010).

Cash Return on Assets

MHS

SMC

There appears to be an overall decline in this area between ’06-’08. This may be explained by the same hypotheses as described above.
In other words, capital project investments in conjunction with the reaction to market as it relates to redistribution of MHS liquid assets. This appears to be disproportionate to the rate of increase in Total Revenue. As suggested above, this shift may be reversed over subsequent years as benefits of capital investment are realized.

SMC demonstrated overall strong performance consistent with performance in areas of Fixed and Total Asset Turnover suggesting higher efficiency at leveraging assets as it relates to generating cash flows from operations.

COMPARISON: Overall, as before, SMC appears to have a stronger level of performance related to leveraging its assets to generate cash flow from operations. The distinction may be a reflection of these two organizations existing in different time periods of the investment and benefits realization cycle.

DEFINITIONS:

Cash return on assets = Cash flow from operating activities/Total assets

Measures the return on assets on a cash basis (Fraser & Ormiston 2010).