cigna11k.htm
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 


FORM 11-K



(Mark One)
 
 
[X]
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
   
For the fiscal year ended December 31, 2011

OR

 
[  ]
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
    For the transition period from ___ to ___


Commission File Number 1-08323

   
A.
Full title of the plan and the address of the plan, if different from that of the issuer named below:
   
  Cigna 401(k) Plan
 
B.
Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
   
 
Cigna Corporation
Two Liberty Place
1601 Chestnut Street
Philadelphia, PA  19192

 
 
 
 
 
 

 

 

 
Required Information

Financial statements and schedules for the Cigna 401(k) Plan, prepared in accordance with the financial reporting requirements of the Employee Retirement Income Security Act of 1974, are contained in this Annual Report on Form 11-K.



Exhibits

Exhibits are listed in the Index to Exhibits.


 

 
 
 

 


 
CIGNA 401(k) PLAN

Financial Statements and
Supplemental Schedule

December 31, 2011 and 2010
 
 
 
 
 
 

 

 
 
 
CIGNA 401(k) PLAN
 
TABLE OF CONTENTS
   
 
 
 
Page
   
 
Report of Independent Registered Public Accounting Firm
 
1
   
 
Financial Statements
 
 
     Statements of Net Assets Available for Benefits as of December 31, 2011 and 2010
 
2
 
     Statements of Changes in Net Assets Available for Benefits for the Years Ended December 31, 2011 and 2010
 
3
 
     Notes to the Financial Statements
4
   
 
Supplemental Schedule
 
 
     Form 5500 Schedule H, Line 4i - Schedule of Assets (Held at End of Year) as of December 31, 2011
 
17
   
 
 
 
 
 
 
   
   

 



 
 

 

 
Report of Independent Registered Public Accounting Firm

 

To the Participants and Administrator of
the Cigna 401(k) Plan:

 
In our opinion, the accompanying Statements of Net Assets Available for Benefits and the related Statements of Changes in Net Assets Available for Benefits present fairly, in all material respects, the net assets available for benefits of the Cigna 401(k) Plan (the “Plan”) at December 31, 2011 and 2010, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.  These financial statements are the responsibility of the Plan’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits of these statements in accordance with 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 financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.  The supplemental Schedule of Assets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.  This supplemental schedule is the responsibility of the Plan's management.  The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.


 
/s/ PricewaterhouseCoopers LLP
 
Philadelphia, Pennsylvania
 
June 28, 2012
 
 
 

 
 
 

 

 
CIGNA 401(k) PLAN
 
 
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
 
   
As of
 
   
 
December 31,
 
 
   
2011
   
2010
 
   
 
(In thousands)
 
Assets
 
           
Investments, at fair value (See Notes 3 and 4)
  $ 2,811,646     $ 2,721,415  
                 
Notes receivable
    57,131       54,853  
                 
Employer contribution receivable
    3,101       2,428  
                 
Net assets available for benefits, at fair value
    2,871,878       2,778,696  
                 
Adjustment from fair value to contract value for
    (69,061 )     (71,293 )
                 
fully benefit-responsive investment contracts (See Note 2)
               
                 
Net assets available for benefits
  $ 2,802,817     $ 2,707,403  
                 
The accompanying Notes to the Financial Statements are an integral part of these statements.
 
 
 
 
 
2

 
 

 
 
CIGNA 401(k) PLAN
 
             
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
 
 
   
For the Years Ended
 
 
   
December 31,
 
 
   
2011
   
2010
 
   
 
(In thousands)
 
Investment income
 
           
   Net appreciation in fair value
           
             
        of investments (See Note 4)
  $ 13,816     $ 163,780  
                 
   Interest
    64,025       64,005  
                 
   Dividends
    319       350  
                 
        Net investment income
    78,160       228,135  
                 
Contributions
               
                 
   Employee contributions
    125,254       119,855  
                 
   Employer contributions
    71,299       68,086  
                 
   Rollover contributions
    11,608       11,042  
                 
        Total contributions
    208,161       198,983  
                 
Benefits paid to participants and other expenses
    (190,907 )     (162,583 )
                 
Net increase
    95,414       264,535  
                 
Net assets available for benefits
               
                 
   Beginning of year
    2,707,403       2,442,868  
                 
   End of year
  $ 2,802,817     $ 2,707,403  
                 
                 
The accompanying Notes to the Financial Statements are an integral part of these statements.
 
 
 
 
 
 
3

 
 

 
 
CIGNA 401(k) PLAN
 
NOTES TO THE FINANCIAL STATEMENTS
Note 1 – Description of the Plan

The following description of the Cigna 401(k) Plan (the Plan) provides general information only.  A more complete explanation of the features and benefits available under the Plan, a defined contribution plan, is contained in the Cigna 401(k) Plan Summary Plan Description and Prospectus.  Generally, all U.S.-based employees of Cigna Corporation (Cigna) and its participating subsidiaries are eligible to participate in the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).

Plan Administration

Until April 25, 2012, the Corporate Benefit Plan Committee (Committee) was the primary Plan fiduciary.  The Committee was comprised of several members of Cigna's management.  The Committee delegated responsibility for administration of the Plan to the Plan Administrator, a Cigna employee, and responsibility for the Plan’s financial management to Cigna's Chief Financial Officer (CFO).  The Plan Administrator and CFO, in turn, have arranged with Prudential Retirement Insurance and Annuity Company (PRIAC) to perform the primary administrative, recordkeeping and asset management functions.  A group of Cigna financial and benefits management employees monitors the Plan’s investment objectives and performance of the Plan’s investment options.

Effective April 25, 2012, the Corporate Benefit Plan Committee was replaced as the primary Plan fiduciary by a new Retirement Plan Committee comprised of different members of Cigna's management; however, responsibility for Plan administration and financial management remain the responsibility of the Plan Administrator and CFO, respectively.

Investments

The Plan’s investment options include a fixed group annuity contract (the Fixed Income Fund), which is a benefit-responsive investment contract (see Note 6); the Cigna Stock Fund that invests in Cigna common stock; and pooled separate accounts that invest in a variety of underlying funds.  Participants may transfer assets among the investment options, subject to certain restrictions.  See Note 3 and Note 4 for additional information.

Employee Contributions

The Plan permits employees to make pre-tax (regular and catch-up), after-tax (Puerto Rico participants only) and Roth contributions (regular and catch-up).  Effective for the 2010 Plan year, the contribution rate maximum was raised from 25% to 80% of a participant’s eligible pay.  This is a total limit that applies to all employee contributions.  As a result of the Plan’s adopting a “qualified automatic contribution arrangement” safe harbor as of 2010, highly-compensated employees are no longer subject to a separate contribution rate limit.

Effective January 1, 2010, the Plan implemented the new automatic contribution rate increase program called Contribution Accelerator.  If an eligible participant’s pre-tax contribution rate is at least 1% but less than 6%, the contribution rate is automatically increased 1% at the beginning of each year until it reaches 6%.  Eligible participants can opt out of Contribution Accelerator or change the date when the increase would go into effect each year.  The first automatic contribution rate increases occurred at the beginning of 2011.

All employees, however, are still subject to the annual dollar limit set by the Internal Revenue Service (IRS).  Employee contributions may be invested in any combination of investment
 
 
 
 
4

 


CIGNA 401(k) PLAN
NOTES TO THE FINANCIAL STATEMENTS

options offered by the Plan subject to certain other Internal Revenue Code (IRC) limitations and any restrictions imposed under Cigna Corporation’s Policy on Securities Transactions and Insider Trading.

Employer Contributions

Since January 1, 2010, all employees become eligible for employer-matching contributions as soon as they join the Plan.
  
The Plan provides for several kinds of matching contributions, including a regular match and a variable match.  Regular matching contributions are made at the same time employee contributions are made, typically bi-weekly.

Effective with the 2010 Plan year, the Plan also provides a “true-up” matching contribution after the close of each Plan year.  The true-up match is an added employer contribution, if needed to make the year’s total matching contributions equal to what they would have been if made only once, after the close of a year on a “look-back” basis.  That is, the true-up match provides otherwise missed regular matching contributions for eligible participants caused by changes in an employee’s contributions rates during the year.

All types of matching contributions (regular, variable, true-up) are collectively referred to as "employer contributions."

Beginning in 2010, the maximum effective regular matching contribution is equal to 4.5% of a participant’s eligible earnings.  The actual match rate is equal to: 100% of the participant’s first 3% of pay contributed (a 3% of pay match), plus 50% of the participant’s next 3% of pay contributed (a 1.5% of pay match).  The company match rate applies to pre-tax, after-tax (if Puerto Rico), Roth contributions and catch-up contributions – to the extent those contributions are part of an employee’s first 6% of pay contributed.
 
The variable matching contribution is an annually-determined discretionary contribution that may be up to 2% of a participant’s eligible earnings. There were no variable matching contributions for the years ended December 31, 2011 and 2010.

Before 2010, for most participants, half of the regular matching contributions were required to be invested in the Cigna Stock Fund and, for all participants, all variable matching contributions were required to be invested in the Cigna Stock Fund.  Any matching contributions not subject to this requirement were invested automatically in the same manner as employee contributions.  Effective January 1, 2010, the requirement that any company matching contributions be invested in the Cigna Stock Fund was eliminated.

The Plan allows participants to transfer any automatically-invested (i.e. nonparticipant-directed) employer contributions and related investment results out of the Cigna Stock Fund and into any other Plan investment option at any time, subject to any restrictions imposed under Cigna Corporation’s Policy on Securities Transactions and Insider Trading.

Rollover Contributions

The Plan may accept rollover contributions.  Rollover contributions represent distributions received from other “eligible retirement plans,” as defined in IRC section 401(a)(31)(E).  Distributions from other plans are subject to certain conditions to be eligible for rollover into the Plan.

 
 
 
5

 
 
 
CIGNA 401(k) PLAN
 
NOTES TO THE FINANCIAL STATEMENTS

Participant Accounts

Each participant’s account is credited with the participant’s contribution and allocations of a) the employer contribution and b) investment earnings, net of expenses.  The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account balance.

Vesting

Employee contributions and related investment earnings are fully vested at all times.

Employer contributions made after 2009 and related investment earnings become fully vested upon completion of two years of service for employees hired after December 31, 2009.  For employees hired before January 1, 2010, such employer contributions vest 20% after one year of service, and 100% after two years of service.  Employer contributions made before January 1, 2010 continue to vest gradually at the rate of 20% for each year of vesting service and are fully vested after five years. Employer contributions made at any time and related investment earnings become fully vested earlier when an employee reaches age 65; dies; becomes totally and permanently disabled; or continues to be employed by a participating Cigna company that is sold and does not maintain a successor plan.  Early vesting also would occur if Cigna discontinues matching contributions or terminates the Plan.

Participants earn a year of vesting service if they have at least 1,000 hours of service during the calendar year.

Forfeitures

A participant who is not fully vested forfeits any unvested employer contributions and related investment earnings upon termination of employment.  Forfeited amounts are restored if a participant returns to Cigna before incurring five consecutive one-year breaks in service.  Otherwise, forfeited amounts are used to reduce future employer contributions.  Employer contributions were reduced by forfeited amounts of approximately $1.4 million in 2011 and $1.0 million in 2010.

Participant Loans

The Plan permits participants to borrow a portion of their vested Plan account, subject to certain limitations, at an annual rate of interest with a specified repayment period.  The minimum amount that may be borrowed is $1,000; the maximum total loan amount is the lesser of $50,000 or 50% of the participant’s vested account balance.  A participant may have no more than two outstanding loans.  Loan terms range from 12 to 60 months or up to 120 months if the loan is used to buy or build a participant’s primary residence.  The annual interest rate for a Plan loan is 2% plus the yield of actively traded U.S. Treasury securities, adjusted by the U.S. Treasury Department to 3-year or 7-year constant maturities.  The maximum Plan loan interest rate is the bank prime loan rate that is in effect on the same date that the applicable Treasury rate is determined.  Loan interest rates remain fixed during the term of the loan.  The loan is secured by the participant’s account balance.  Effective January 1, 2010, PRIAC began to charge a $50 fee to process Plan loans.


 
 
 
 

 
 
6

 

CIGNA 401(k) PLAN
 
NOTES TO THE FINANCIAL STATEMENTS
 
Payment of Benefits
 
Participants may withdraw funds subject to the requirements of the Plan.  Upon termination of employment for any reason, a participant may elect to receive either a lump-sum amount equal to the value of the participant’s vested account balance, monthly installments over a period of years, an annuity, or a combination of these forms of payment.  If the vested account balance is more than $1,000 but not more than $5,000 and the participant does not agree within 80 days to accept a lump sum, the amount will automatically be rolled over to an Individual Retirement Account or Individual Retirement Annuity (IRA) sponsored by a Prudential Retirement affiliate.  The IRA will be invested in an investment product designed to preserve principal and provide a reasonable rate of return and liquidity. All related expenses will be charged to the IRA.
 
To the extent a participant’s account is invested in the Cigna Stock Fund, the participant may elect to receive such amounts in shares of Cigna common stock.
 
Plan Expenses
 
Before April 1, 2010, the investment results of all funds except for the Cigna Stock Fund were net of management fees, investment expenses, risk charges and administrative costs charged by PRIAC.  Since April 1, 2010, administrative expenses and investment management fees have become separate, and participant accounts are now directly charged, on a quarterly basis, with the same administrative fee regardless of their investment options.  The annualized fee is 0.09% of a participant’s account balance up to a maximum of $210.  In 2010, because the new fee structure was in place for only nine months, the maximum annual fee was $157.50.
 
Brokers’ commissions resulting from buying or selling stock in the Cigna Stock Fund are paid from the participants’ accounts and have been reflected as a reduction of the Cigna Stock Fund’s investment income in these financial statements.  Other costs associated with the operation of the Plan, including trustee and legal fees, are paid by Cigna.
 
Plan Termination

Cigna intends to continue the Plan indefinitely, but reserves the right to discontinue employer contributions or terminate the Plan in whole or in part at any time.  If contributions are discontinued or the Plan is terminated, affected participants will become fully vested.  Upon Plan termination, net assets of the Plan will be distributed in the manner Cigna elects in accordance with the Plan document and in accordance with ERISA and its related regulations.

Plan Trustee

As of December 31, 2011 and 2010, Prudential Bank & Trust, FSB, was the Trustee for the Plan.
 
 
 
 
 
 
7

 


CIGNA 401(k) PLAN
 
NOTES TO THE FINANCIAL STATEMENTS
Note 2 - Significant Accounting Policies

Recent Accounting Pronouncements

Participant Loans.  In 2010, the Plan adopted the Financial Accounting Standards Board’s (FASB) new requirements for the reporting of participant loans (ASU No. 2010-25, “Reporting Loans to Participants by Defined Contribution Pension Plans”), that requires participant loans to be classified as notes receivable from participants separate from plan investments and measured at their unpaid principal balance plus accrued interest.  There was no impact on the measurement of overall Plan assets as a result of this implementation.

Updated Fair Value Guidance. In May 2011, the FASB issued ASU 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which changes certain principles or requirements for measuring fair value and for disclosing information about fair value measurements. The update is effective on January 1, 2012.   Plan management does not expect the adoption of this update to have a material impact on the measurement of Plan assets.

In addition, the Plan adopted the FASB’s updated guidance on fair value measurements (ASU 2010-06) in 2011, which requires separate disclosures of significant transfers between levels in the fair value hierarchy.  See Note 3 for additional information.

Basis of Presentation

The financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (GAAP).  Certain reclassifications have been made to prior period amounts to conform to the current presentation.

As required by ASC 962 “Defined Contribution Pension Plans,” the Plan reports fully benefit-responsive investment contracts at fair value in the Statement of Net Assets Available for Benefits.  The adjustment of the fully benefit-responsive investment contracts from fair value to contract value is separately disclosed on the Statement to determine net assets available for benefits.  Contract value represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities.  Actual results could differ from those estimates.

 
 
 
 
 
8

 

CIGNA 401(k) PLAN
 
NOTES TO THE FINANCIAL STATEMENTS
 
 
Valuation of Investments and Income Recognition
 
Plan investments are reported at fair value.  The fair value of Cigna common stock is based upon its quoted market price.  Fair value of pooled separate accounts is measured by the net unit value, which is based on the fair value of the underlying assets of the account.  Plan management determines the estimated fair value of the Fixed Income Fund by approximating the market value of the underlying investments by discounting expected future investment cash flow from both investment income and repayment of principal. The estimate of fair value is then adjusted back to contract value to reflect the fact that withdrawals from the Fixed Income Fund are at contract value.
 
Purchases and sales of securities are recorded on a trade-date basis.  Interest is recognized when earned.  Dividends are recognized on the declared date of record.
 
Payment of Benefits
 
Benefits are recorded when paid.
 
Note 3 - Fair Value Measurements
 
The Plan carries financial instruments, except participant loans, at fair value in the financial statements.

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.

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 Plan estimates fair value using methods, models and assumptions that the Plan 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 Plan which becomes significant with increasingly complex instruments or pricing models.  For pooled separate accounts, fair value is based on net unit value as reported by PRIAC.  PRIAC has represented that the net unit value in the pooled separate accounts represents the amount the Plan would have received in an orderly transaction at the balance sheet date. 
 
The Plan’s financial assets 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 (Level 1) and the lowest ranking to fair values determined using methodologies and models with significant unobservable inputs (Level 3). An asset’s classification is based on the lowest level input that is significant to its measurement.  For example, a financial asset 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).
 
 
 
 
 
9

 
 
 
CIGNA 401(k) PLAN
 
NOTES TO THE FINANCIAL STATEMENTS
Financial Assets Carried at Fair Value

The following table provides information as of December 31, 2011 and 2010 about the Plan’s financial assets carried at fair value.

                         
2011
 
 
   
 
   
 
   
 
 
 
 
Quoted Prices in Active
   
Significant Other
   
Significant
   
 
 
  Markets for Identical Assets    
Observable Inputs
   
Unobservable
 Inputs
   
 
 
(In thousands)
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
 
Assets at fair value:
 
 
   
 
   
 
   
 
 
Corporate stocks
  $ 317,056     $ -     $ -     $ 317,056  
Pooled separate accounts:
                               
     Fixed maturities
    -       57,099       -       57,099  
     Equity securities
    -       941,112       -       941,112  
Fixed Income Fund
    -       -       1,496,379       1,496,379  
     Total assets at fair value
  $ 317,056     $ 998,211     $ 1,496,379     $ 2,811,646  
2010
                               
 
 
Quoted Prices in Active
   
Significant Other
   
Significant
         
 Markets for Identical Assets    
Observable Inputs
   
Unobservable Inputs
         
(In thousands)
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
 
Assets at fair value:
                               
Corporate stocks
  $ 300,374     $ -     $ -     $ 300,374  
Pooled separate accounts:
                               
     Fixed maturities
    -       53,199       -       53,199  
     Equity securities
    -       961,382       -       961,382  
Fixed Income Fund
    -       -       1,406,460       1,406,460  
     Total assets at fair value
  $ 300,374     $ 1,014,581     $ 1,406,460     $ 2,721,415  

 
 
Level 1 Financial Assets

Inputs 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.

Level 1 assets consist of shares of Cigna common stock valued at the closing price reported on the active markets on which Cigna stock is traded.

Level 2 Financial Assets

Inputs include quoted prices for similar assets in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument.  Such inputs include market interest rates and volatilities, spreads and yield curves. An instrument is classified in Level 2 if the Plan determines that unobservable inputs are insignificant.

Level 2 assets consist of investments in pooled separate accounts of PRIAC, investing in fixed
 
 
 
 
10

 
 
 
CIGNA 401(k) PLAN
 
NOTES TO THE FINANCIAL STATEMENTS
 
income and equity security mutual funds.  Such investments are valued at the net asset value of shares held by the Plan at the end of the year.  The net asset value is the exit price. There have been no significant transfers between Level 1 and Level 2 assets for the years ended December 31, 2011 and 2010.

Level 3 Financial Assets

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 Plan’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset at the reporting date.

Level 3 assets consist of the fixed income fund.  The fund invests in publicly-traded and privately-placed debt securities, mortgage loans, real estate and other equity investments, and is valued on an aggregate basis.  Because some of the inputs into the fund’s valuation are not readily observable in the market, the fund is classified in Level 3.

Changes in Level 3 Financial Assets Carried at Fair Value

The following table summarizes the changes in financial assets classified in Level 3 for the years ended December 31, 2011 and 2010.  Changes in fair value reported in this table may include amounts attributable to both observable and unobservable inputs.
 

 
           
Level 3 Assets
 
     
 
 
(In thousands)
 
2011
   
2010
 
 
 
Fixed Income Fund
 
Fixed Income Fund
 
 
Balance, beginning of year
  $ 1,406,460     $ 1,273,373  
                 
Net change in fair value
    (2,232 )     51,317  
                 
Purchases
    188,806       162,741  
                 
Sales
    (158,804 )     (143,016 )
                 
Reinvestment of income on investments still held
    42,789       46,728  
                 
Reinvestment of income on investments sold
    19,360       15,317  
                 
Balance, end of year
  $ 1,496,379     $ 1,406,460  
                 

 
 
 
 
11

 
 
 
CIGNA 401(k) PLAN
 
NOTES TO THE FINANCIAL STATEMENTS
Note 4 - Investments

The following table presents investments that represent 5% or more of the Plan’s net assets.
 
       
(In thousands)
 
As of December 31,
 
 
 
2011
   
2010
 
PRIAC Fixed Income Fund
 
 
   
 
 
     (contract interest rate: 4.60% in 2011 and 4.92% in 2010)
  $ 1,496,379     $ 1,406,460  
Cigna Stock Fund*
               
     (7,548,962 shares in 2011 and 8,193,194 shares in 2010)
  $ 317,056     $ 300,374  
PRIAC Dryden S&P 500 Index Fund
  $ 184,167     $ 185,155  
*Includes nonparticipant-directed investments (See Note 5)
               
 
During 2011 and 2010, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value as follows:
 
 
 
 
(In thousands)
 
For the Years Ended December 31,
 
 
 
2011
   
2010
 
Cigna common stock
  $ 45,422     $ 11,159  
PRIAC pooled separate accounts
    (31,606 )     152,621  
          Net appreciation
  $ 13,816     $
163,780
 
 
               

 
 
 
 
 
 
12

 
 
 
 
CIGNA 401(k) PLAN
 
NOTES TO THE FINANCIAL STATEMENTS

 
Note 5 - Nonparticipant-Directed Investments

The following presents information about the investments that are not participant-directed -- representing automatically-invested employer contributions and related investment results and the significant components of the changes therein. (See Note 1 for additional information):
 
     
(In thousands)   As of December 31,
 
 
2011
   
2010
 
Investment:
 
 
   
 
 
     Cigna Stock Fund
  119,992    
116,015
 
 
 
               
(In thousands)
 
For the Years Ended December 31,
 
    2011       2010  
Changes in investment:
               
     Dividends
  122     137  
     Net appreciation in fair value of investments     17,596       4,171  
     Benefits paid
    (9,270 )     (6,548 )
     Loan activity (net of repayments and interest)
    (306 )     (597 )
     Net transfers to participant-directed investments
    (4,165 )     (4,226 )
          Net increase (decrease)
  3,977     (7,063 )
 
               
 
 
 
 
 
 
 
13

 
 
 
CIGNA 401(k) PLAN
 
NOTES TO THE FINANCIAL STATEMENTS
Note 6 - Investment Contract with Insurance Company

The Plan has a benefit-responsive investment contract with PRIAC for the Fixed Income Fund. PRIAC maintains the contributions in a general account. The account is credited with interest, whose rate is set by PRIAC, on the underlying investments and charged for participant withdrawals and administrative expenses. The issuer is contractually obligated to repay the principal and accumulated interest which are guaranteed to the Plan.  Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value. There are no reserves against contract value for credit risk of the contract issuer or otherwise.

The interest rate may be changed at any time (but may not be less than 1.5%).  PRIAC must give advance notice of any change in the interest rate to the Plan Administrator. PRIAC sets the interest rate based on the expected investment performance of a pool of assets owned by PRIAC and held in its general account.  Average yields for the Fixed Income Fund are as follows:

   
2011
   
2010
 
             
Average earnings yield
    4.53 %     4.62 %
Average crediting rate yield
    4.38 %     4.66 %

A Plan sponsor initiated termination of the contract is an event that could limit the ability of the Plan to transact at contract value within 90 days of termination. In this instance contract value would be paid over time or, at the Plan sponsor's discretion, paid immediately after applying a market value adjustment.  The Plan Administrator does not believe that the occurrence of such event is probable.

Note 7 - Tax Status
 
The Plan's design and current operations are consistent with all IRS requirements for tax exemption.  This was confirmed by the IRS through issuance to Cigna of a Determination Letter dated March 22, 2011.  Further, management believes that no transaction, plan alteration or other action has been undertaken since issuance of this IRS determination which compromises the Plan's exempt status.  The Plan may be subject to IRS audit but there is no such audit currently in progress, nor has there been one in the recent past.
 
Note 8 - Related Party Transactions

The Plan invests in Cigna common stock.  During the year ended December 31, 2011, the Plan purchased shares of Cigna common stock for approximately $16.9 million and sold shares of Cigna common stock for approximately $45.6 million, and experienced net appreciation of approximately $45.4 million.  During the year ended December 31, 2010, the Plan purchased shares of Cigna common stock for approximately $14.5 million, sold shares of Cigna common stock for approximately $38.1 million, and experienced net appreciation of approximately $11.2 million.

Note 9 – Risks and Uncertainties

The Plan invests in various investment securities.  Investment securities are exposed to various risks such as interest rate, market and credit risks.  Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in values of investment



 
14

 

 
 
CIGNA 401(k) PLAN
 
NOTES TO THE FINANCIAL STATEMENTS
 
 
securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits.


 
 
 
 
15

 


SUPPLEMENTAL SCHEDULE
 
 
 
 
 
 
 
 
 
 

 

 
CIGNA 401(k) PLAN
 
FORM 5500 SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS
 
(HELD AT END OF YEAR)
 
As of December 31, 2011
 
(In thousands)
 
 
Identity of issue, borrower, lessees or similar party
Description
 
Current Value
 
*
PRIAC  Fixed Income Fund (contract interest rate: 4.60%)
General Account Contract
$
 1,496,379
         
*
Cigna Stock Fund
Common Stock
$
 317,056
 
     Cigna common stock (Cost, $200,595)
 
 
 
         
*
PRIAC  Dryden S&P 500 Index Fund
Pooled Separate Account
$
 184,167
         
*
PRIAC  Large Cap Growth Fund
 
 
 
 
Large Cap Growth Fund / American Century Fund
Pooled Separate Account
$
 68,763
 
Large Cap Growth / Neuberger Berman Investment Fund
Pooled Separate Account
 
 68,762
 
 
 
$
 137,525
*
PRIAC  Large Cap Value Fund
 
 
 
 
Large Cap Value Fund / Wellington Management Fund
Pooled Separate Account
$
 51,422
 
Large Cap Value / Barrow, Hanley, Mehwinney & Strauss Fund
Pooled Separate Account
 
 51,422
 
 
 
$
 102,844
*
PRIAC International Stock Fund
 
 
 
 
International Growth/Artisan Partners Fund
Pooled Separate Account
$
 49,128
 
International Blend/Artio II
Pooled Separate Account
 
 49,127
 
 
 
$
 98,255
*
PRIAC Small Cap Growth Fund
 
 
 
 
Small Cap Growth/TimesSquare Fund
Pooled Separate Account
$
 41,647
 
Small Cap Growth/Essex Investment Management Fund
Pooled Separate Account
 
 41,646
 
 
 
$
 83,293
*
PRIAC  Mid Cap Value Fund
 
 
 
 
 
Mid Cap Value / Cooke & Bieler Fund
Pooled Separate Account
$
 38,738
 
Mid Cap Value / Integrity Asset Management Fund
Pooled Separate Account
 
 38,738
 
 
 
$
 77,476
*
PRIAC Mid Cap Growth Fund
 
 
 
 
Mid Cap Growth / Artisan Partners Fund
Pooled Separate Account
$
 36,374
 
Mid Cap Growth / Westfield Capital Management Fund
Pooled Separate Account
 
 36,374
 
 
 
$
 72,748
         
*
PRIAC  Blackrock Extended Equity Market Index Fund
Pooled Separate Account
$
 64,879
         
*
PRIAC  Small Cap Value Fund
 
 
 
 
Small Cap Value / American Century Fund
Pooled Separate Account
$
 32,318
 
Small Cap Value / Opus Capital Management Fund
Pooled Separate Account
 
 32,318
 
 
 
$
 64,636
         
*
PRIAC  High Yield Bond Fund
Pooled Separate Account
$
 57,099
         
*
PRIAC Foreign Stock Index Fund
Pooled Separate Account
$
 55,289
         
 
Notes receivable from participants
Participant Loans
$
 57,131
 
     (interest rate: 2.37% to 11.50%; maturities 2012-2021)
 
 
 
         
*
Indicates party-in-interest to the Plan
 
 
 
 
 
 
17

 
 
 
 
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.


 
   
CIGNA 401(k) PLAN
         
         
         
Date:  June 28, 2012
 
By:
/s/ James Wolf                   
       
James Wolf
       
Plan Administrator
 
 

 
 
 

 
 

 
 
Index to Exhibits


                                                                                                            
Number
Description
Method of Filing
 
23
Filed herewith.