ITEM 1   Business

A.   Description of Business

Cigna Corporation, incorporated in the State of Delaware in 1981, 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.

Cigna had consolidated shareholders’ equity of $8.3 billion and assets of $51.0 billion as of December 31, 2011, and revenues of $22.0 billion for the year then ended.

Cigna’s revenues are derived principally from premiums, fees, mail order pharmacy, other revenues and investment income. The financial results of Cigna’s businesses are reported in the following segments:

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Health Care;

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Disability and Life;

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International;

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Run-off Reinsurance; and

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Other Operations, including Corporate-owned Life Insurance.

Available Information

Cigna’s annual, quarterly and current reports, proxy statements and other filings, and any amendments to these filings, are made available free of charge on its website (http://www.cigna.com, under the “Investors—Quarterly Reports and SEC Filings” captions) as soon as reasonably practicable after the Company electronically files these materials with, or furnishes them to, the Securities and Exchange Commission (the “SEC”). The Company uses its website as a channel of distribution for material company information. Important information, including news releases, analyst presentations and financial information regarding Cigna is routinely posted on and accessible at www.cigna.com. See “Code of Ethics and Other Corporate Governance Disclosures” in Part III, Item 11 beginning on page 169 of this Form 10-K for additional available information.

B.   Financial Information about Business Segments

The financial information included herein is in conformity with accounting principles generally accepted in the United States of America (“GAAP”), unless otherwise indicated. Certain reclassifications have been made to prior years’ financial information to conform to the 2011 presentation. Industry rankings and percentages set forth herein are for the year ended December 31, 2011, unless otherwise indicated. Unless otherwise noted, statements set forth in this document concerning Cigna’s rank or position in an industry or particular line of business have been developed internally, based on publicly available information.

Financial data for each of Cigna’s business segments is set forth in Note 22 to the Consolidated Financial Statements beginning on page 156 of this Form 10-K.

CIGNA CORPORATION – 2011 Form 10-K – 1

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C.   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:

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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.

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GO GLOBAL: Cigna delivers a range of differentiated products and superior service to meet the distinct needs of a growing global middle class and a globally mobile workforce through expansion in existing international markets as well as extension of the Company’s business model to new geographic areas.

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GO INDIVIDUAL: Cigna strives to establish a deep understanding of its customers’ unique needs and to be a highly customer-centric organization through simplifying the buying process by providing choice, transparency of information, and a personalized customer experience. The Company’s goal is to build long-term relationships with each of the individuals it serves and meet their needs throughout the stages of their lives.

Cigna is also focused on improving its strategic and financial flexibility by driving further cost reductions in its Health Care operating expenses, improving its medical cost competiveness in targeted markets and effectively managing balance sheet exposures. For further discussion of the Company’s actions to manage its balance sheet exposures, see the section on “Run-off Operations” in the Introduction section of Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) beginning on page 48.

Key to the Company’s strategy is effectively deploying capital in pursuing additional opportunities in high-growth markets. Consistent with this objective, Cigna achieved a significant milestone with the acquisition of HealthSpring, Inc. in January 2012. HealthSpring, a leading provider of medical benefits to the 65+ population through the Medicare Advantage program, strengthens Cigna’s ability to serve individuals across their life stages as well as deepens Cigna’s presence in a number of geographic markets. The addition of HealthSpring brings industry leading physician partnership capabilities and creates the opportunity to deepen Cigna’s existing client and customer relationships, as well as facilitates a broader deployment of Cigna’s range of health and wellness capabilities and product offerings.

CIGNA CORPORATION – 2011 Form 10-K – 2

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In each of Cigna’s ongoing businesses, the Company strives to differentiate itself in the marketplace and provide sustained value to its customers, as more fully described below:

Health Care Segment: In the National market segment (consisting of companies with 5,000 or more employees), Cigna focuses on large employers that value the Company’s wellness programs, integrated clinical approach and national network of health care providers. In the Middle Market segment (companies with over 250 and less than 5,000 employees), Cigna focuses on clients that value the Company’s integrated product suite, broad range of funding options, and competitive medical costs. In the Select market segment (companies with over 50 and under 250 employees), Cigna features unique self-funded plan options and competitive product offerings. Cigna is also pursuing continued growth in the Individual segment. An important part of the Company’s growth strategy is to identify and capitalize on opportunities for growth that extend Cigna’s reach, particularly in the Seniors and Individual markets. Cigna’s acquisition of HealthSpring in January 2012 (described above) is an example of the execution of this strategy.

Disability and Life Segment: Cigna focuses on returning employees to work quickly, resulting in a better quality of life for employees and higher productivity and lower cost for employers. Cigna seeks growth in this business with the Company’s market-leading return-to-work program, which is based on early outreach and engagement, a full suite of clinical and return-to-work resources, and specialized case management services tailored to individual situations. Cigna’s value-based products are aligned with employers’ growing recognition of the link between employee health and productivity/profitability. Along with these products, Cigna’s consultative selling approach brings solutions to clients and builds long-term relationships.

International Segment: Cigna continues to expand its supplemental health, life and accident and global health benefits businesses in existing markets, including South Korea and China. Where the opportunity to bring the Company’s product and health solutions to new markets is attractive, Cigna enters new markets. In 2011, Cigna entered the new market of Turkey and signed an agreement to establish a health joint venture in India. Additionally, the 2010 acquisition of Vanbreda International significantly expanded the Company’s presence in the global health benefits market, while the 2011 acquisition of FirstAssist in the U.K. added a travel accident insurance product line and expanded the Company’s distribution channels.

CIGNA CORPORATION – 2011 Form 10-K – 3

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D.   Health Care

Cigna’s Health Care segment (“Cigna HealthCare”) 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.

Cigna HealthCare believes the most sustainable approach to enhancing quality and managing health care costs is to fully engage customers in the decisions that affect their health and the health care services they receive. Accordingly, to assist customers in making informed choices about health care for themselves and their families, Cigna HealthCare provides personalized, actionable information about health and advocacy programs as well as about the cost and quality of health care services.

Underlying Cigna HealthCare’s operations is a foundation of clinical expertise and the ability to provide holistic, personal service. Cigna HealthCare’s strengths include its ability to:

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combine medical and specialty product offerings to achieve a more integrated approach to customers’ health and promote consistent care management;

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provide predictive modeling and other analytical tools to assist in providing targeted information for those customers with the greatest health and lifestyle risks;

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leverage Cigna’s investment in care management technology (HealthEview ^SM ) to create personalized care plans that adapt to each customer’s preferences and individual health goals so that they can make healthier lifestyle and health choices; and

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collaborate with health care professionals through accountable care organizations with the objective of improving the quality of care and service experience for customers while lowering costs and improving overall value.

Principal Products and Services

Cigna offers a variety of products and services to employers and other groups that sponsor group health plans. With the exception of Health Maintenance Organization (“HMO”), Medicare, Voluntary and stop loss products, each of Cigna HealthCare’s products is offered with alternative funding options (described below). Cigna may sell multiple products under the same funding arrangement to the same employer. Approximately 85% of the Company’s medical customers are enrolled in self-insured plans, with the remainder split relatively evenly between guaranteed cost and experience-rated insured plans. Approximately 90% of our medical customers are enrolled in self-insured and experience-rated plans, where lower medical costs directly benefit our corporate clients and their employees.

Cigna also offers guaranteed cost medical and dental insurance to individuals; see the “markets and distribution” section for additional information about the Company’s offerings in the individual and family market segment.

In January 2012, Cigna acquired HealthSpring, Inc. (“HealthSpring”), which is one of the largest Medicare Advantage providers in the U.S. HealthSpring offers Medicare-eligible beneficiaries health care benefits, including prescription drugs, through managed care health plans. HealthSpring also operates a national stand-alone prescription drug plan in accordance with Medicare Part D.

Commercial Medical

Cigna HealthCare provides a wide array of products and services to meet the needs of employers, other sponsors of health benefit plans and their plan participants (i.e., employees/customers and their eligible dependents), and individuals, including:

Network, Network Open Access and Open Access Plus Plans

Cigna HealthCare offers a product line of indemnity managed care benefit plans on an insured (guaranteed cost or experience-rated) or self-insured basis. Premiums for insurance policies written on a guaranteed cost or experience-rated basis are reported in the appropriate premium category in the revenue table included in the Health Care section of the MD&A beginning on page 62 of this Form 10-K. For self-insured plans, where a majority of the Company’s customers are enrolled, revenues consist of administrative fees and are included in fees in the revenue table.

CIGNA CORPORATION – 2011 Form 10-K – 4

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These plans use meaningful coinsurance differences to encourage the use of “in-network” versus “out-of-network” health care providers. They also encourage the use of and give customers the option to select a primary care physician and use a national provider network, which is somewhat smaller than the national network used with the preferred provider (“PPO”) plan product line. The Network, Network Open Access, and Open Access Plus In-Network products cover only those services provided by Cigna HealthCare participating health care professionals (“in-network”) and emergency services provided by non-participating health care professionals (“out-of-network”). The Network point of service (“POS”), Network POS Open Access and Open Access Plus plans (“OAP”) cover health care services provided by participating, and non-participating health care professionals, but the customers’ cost-sharing obligation is generally greater for out-of-network care.

Preferred Provider Plans

Cigna HealthCare also offers a PPO product line that features a national network with even broader access than the Network and Open Access Plans with a somewhat higher medical cost, no option to designate a primary care physician, and in-network and out-of-network coverage with greater member cost-sharing for out-of-network services. Like Network and Open Access Plus Plans, the PPO product line is offered on an insured (guaranteed cost or experience-rated) or self-insured basis, with a majority of the customers being in self-insured plans.

Health Maintenance Organizations

In most states, Commercial and Medicare HMOs are required by law to provide coverage for all basic health services and plans may only be offered on a guaranteed cost basis. They use various tools to facilitate the appropriate use of health care services through employed and/or contracted health care professionals. HMOs control unit costs by negotiating rates of reimbursement with health care professionals and facilities and by requiring advanced authorization for coverage of certain treatments. Cigna HealthCare offers HMO plans that require customers to obtain all non-emergency services from participating health care professionals as well as POS HMO plans that provide some level of coverage for out-of-network care from non-participating health care professionals and facilities. The out-of-network coverage is generally provided through separate insurance coverage that is sold with the HMO benefits.

Choice Fund® suite of Consumer-Driven Products

In connection with many of the products described above, Cigna HealthCare offers the Cigna Choice Fund suite of consumer-driven products, including Health Reimbursement Accounts (“HRA”), Health Savings Accounts (“HSA”) and Flexible Spending Accounts (“FSA”). These plans are designed to shift employee thinking and behaviors without the need to shift cost by motivating employees to understand and manage their health and health benefits.

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Cigna’s Choice Fund HRA covers employees through an account funded by employer contributions. Within the HRA, employers can choose from innovative plan design options, including self-funding and fully-insured. HRA dollars can be rolled over from year to year at the plan sponsors’ discretion. The HRA is often combined with a high deductible plan.

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HSA plans allow plan sponsors to choose from a variety of benefit plan designs and funding options. They combine a federally qualified high deductible health plan with a tax-advantaged savings account that offers mutual fund investment options. Funds in an HSA can be used to pay the deductible and other IRS approved health care expenses. The health savings account is portable and funds roll over from year to year.

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An FSA allows customers to pay for IRS approved health care expenses with pre-tax employee contributions. Unused funds in an FSA cannot be rolled over from year to year; they are forfeited by the employee.

Stop Loss Coverage

Cigna HealthCare offers stop loss insurance coverage for self-insured plans. This stop loss coverage reimburses the plan for claims in excess of a predetermined amount, either for individuals (“specific”) or the entire group (“aggregate”), or both. Cigna HealthCare also includes stop loss features in its experience-rated policies (discussed below).

Shared Administration Services

Cigna HealthCare provides Taft-Hartley trusts and other entities access to its national provider network and provides claim re-pricing and other services (e.g., utilization management).

Voluntary

Cigna HealthCare’s voluntary medical products are offered to employers with 51 or more eligible employees and are designed to provide hourly and part-time employees with limited coverage that is more affordable than comprehensive medical plans. Cigna Voluntary products currently have annual and, in some cases, lifetime maximums, which are prohibited under the Patient Protection and Affordable Care Act effective September 23, 2010. However, the Department of Health & Human Services (HHS) has approved a waiver of these limitations for plans in effect as of September 23, 2010. Annual benefit limits are prohibited beginning January 1, 2014, and Cigna expects to cease offering these products at that time.

CIGNA CORPORATION – 2011 Form 10-K – 5

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Medicare

Medicare Advantage

The Company’s acquisition of HealthSpring in January 2012 significantly expands Cigna’s presence in the Seniors segment. As a result of the acquisition, beginning in 2012, Cigna operates Medicare Advantage coordinated care plans in 11 states and the District of Columbia. Under the Medicare program, Medicare-eligible beneficiaries may receive health care benefits, including prescription drugs, through a managed care health plan such as the Company’s coordinated care plans, and The Centers for Medicare and Medicaid Services reimburse the Company pursuant to a risk adjustment payment methodology. Cigna’s coordinated care plans bring together networks of local hospitals and physicians, typically centered around a primary care physician, who is experienced and effective in managing the health care needs of the Medicare population. Cigna utilizes a physician engagement strategy that aims to create mutually beneficial and collaborative arrangements with providers, aligning their interests with the objective of providing high-quality, cost-effective healthcare, and ultimately encouraging providers to deliver a level of care that promotes customer wellness, reduces avoidable catastrophic outcomes, and improves clinical results.

Other Medicare Plans

Cigna also offers group Medicare Supplement plans that provide retirees with a combination of the simplicity of Medigap-style plans with flexible funding and plan design options allowing clients to customize plans to meet their unique needs. Retirees may visit any health care professional or facility that accepts Medicare throughout the country – with no referrals required.

Medicare Part D

Cigna’s Medicare Part D prescription drug program, Cigna Medicare Rx®, provides a number of plan options as well as service and information support to Medicare and Medicaid eligible customers. Cigna Medicare Rx is available in all 50 states and the District of Columbia. Cigna’s Part D plans offer the savings of Medicare combined with the flexibility to provide enhanced benefits and a drug list tailored to clients’ specific needs. Retirees benefit from broad network access and value-added services that help keep them well and save them money. As a result of the acquisition of HealthSpring, Cigna will now offer Medicare Part D prescription drug benefits through its Medicare Advantage plans, and also expand its stand-alone Medicare Part D prescription drug plan.

Specialty

Medical Specialty

Health Advocacy

Cigna HealthCare offers medical management, disease management, and other health advocacy services to employers and other plan sponsors. These services are offered to customers covered under Cigna HealthCare administered plans as well as individuals covered under plans insured and/or administered by competing insurers/third-party administrators. Cigna offers seamless integration of services that address the clinical and administrative challenges inherent in coordinating multiple vendors. Through its health advocacy programs, Cigna HealthCare works to help healthy people stay healthy; help people change behaviors that put their health at risk; and assist those with existing health problems in accessing quality care.

Cigna HealthCare offers a wide array of health advocacy programs and services to help individuals improve their health, well-being and sense of security, including:

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early intervention by Cigna’s network of clinical professionals;

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Cigna’s online health assessment, powered by analytics from the University of Michigan Health Management Research Center, which helps customers identify potential health risks and learn what they can do to live a healthier life;

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the Cigna Your Health First® program, a holistic coaching program to help customers better manage chronic health conditions;

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Cigna Health Advisor®, which provides customers with access to a personal health coach to help them reach their health and wellness goals;

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Cigna’s Well Informed program, which uses clinical rules-based software to identify potential gaps and omissions in customers’ health care by analyzing integrated medical, behavioral, pharmacy and lab data allowing Cigna HealthCare to communicate the gaps to customers and their doctors; and

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Cigna’s online coaching capabilities.

CIGNA CORPORATION – 2011 Form 10-K – 6

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Cigna Onsite Health

Over the past four years, Cigna has built an extensive suite of onsite capabilities that include health centers, dedicated health advocates at employer sites across the country, hourly coaching services, wellness seminars and onsite biometric screenings through the acquisition of Kronos Optimal Health. Cigna’s onsite programs enable better engagement through face-to-face interaction and intervention to help individuals improve their health, resulting in cost savings for employers.

Cigna’s onsite services include more than 75 health centers and the annual administration of more than 400,000 biometric screenings as well as approximately 2,200 wellness seminars each year. As a result of the acquisition of HealthSpring, Cigna now operates three LivingWell Health Centers, where Medicare customers can receive care from an expanded care team including physicians, nurse practitioners, nurses, pharmacists, and nurses educators. The Centers also offer a range of social and community events tailored to meet the needs of seniors. Cigna also runs six LivingWell “practices” that incorporate the principles of the larger stand-alone Centers while allowing the customer to continue to see his or her primary care physician in an office setting.

Cost Containment Service

Cigna administers cost containment programs with respect to health care services/supplies that are covered under benefit plans. These programs, which may involve contracted vendors, are designed to control health costs by reducing out-of-network utilization, auditing provider bills and recovering overpayments from other insurance carriers or health care professionals. Cigna earns fees for providing or arranging these services.

Behavioral Specialty

Behavioral Health

Cigna arranges for behavioral health care services for customers through its nationwide network of participating behavioral health care professionals. Cigna offers behavioral health care case management services, employee assistance programs (EAP), and work/life programs to employers, government entities and other groups sponsoring health benefit plans. Cigna Behavioral Health focuses on integrating its programs and services with medical, pharmacy and disability programs to facilitate customized, holistic care.

As of December 31, 2011, Cigna’s behavioral national network had approximately 108,000 access points to independent psychiatrists, psychologists and clinical social workers and approximately 9,000 facilities and clinics that are reimbursed on a contracted fee-for-service basis.

Cigna Pharmacy Management

Cigna Pharmacy Management

Cigna Pharmacy Management offers prescription drug plans to its insured and self-funded customers both in conjunction with its medical products and on a stand-alone basis. With a nationwide network of over 62,000 contracted pharmacies, Cigna Pharmacy Management is a comprehensive pharmacy benefits manager (PBM) offering clinical integration programs, specialty pharmacy solutions, and fast, efficient home delivery of prescription medicines.

Programs that facilitate this integration of medical, behavioral and pharmacy offerings include the previously discussed Well Informed program, which focuses on chronic conditions that require strict compliance with prescription drug therapy such as asthma, diabetes, back pain and high cholesterol, as well as Step Therapy, which encourages customers to use generic and/or preferred brand drugs rather than higher cost brand-named drugs. Step Therapy is implemented through claim management protocols, which may include communications with customers and their physicians. The Company coordinates pharmacy management with all of Cigna’s health advocacy programs and tools by focusing on patient education, including emphasizing the importance of adherence to medication instructions.

Cigna Specialty Pharmacy Management

Cigna’s administered medical and pharmacy coverage can meet the needs of customers with complex conditions that require specialty pharmaceuticals. These types of medications are covered under both pharmacy and medical benefits and can be expensive, often requiring associated lab work and administration by a health care professional. Therefore, coordination is critical in improving affordability and outcomes. Clients with Cigna-administered medical and pharmacy coverage benefit from continuity of care, integrated reporting, and aggressive unit cost discounts on all specialty drugs – regardless of where they are administered.

TheraCare Program

Cigna’s specialty pharmacy outcome management program, TheraCare, manages specialty conditions by seeking to lower costs and improve the health and satisfaction of our customers. Cigna has a comprehensive list of conditions covered regardless of the pharmacy used to fill the respective prescription, or under which benefit the prescription falls. TheraCare is coordinated with other Cigna health advocacy programs and all data is captured for analysis and reporting.

CIGNA CORPORATION – 2011 Form 10-K – 7

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Cigna Home Delivery Pharmacy

Cigna also offers cost-effective mail order, telephone and on-line pharmaceutical fulfillment services through its home delivery operation. Cigna Home Delivery Pharmacy provides a high-quality, efficient home delivery pharmacy distinguished by individual care relating to compliance and specialty medications. Orders may be submitted through the mail, via phone or through the internet at myCigna.com.

Dental and Vision

Dental

Cigna Dental Health offers a variety of dental care products including dental health maintenance organization plans (“Dental HMO”), dental preferred provider organization (“DPPO”) plans, dental exclusive provider organization plans, traditional dental indemnity plans and a dental discount program. Employers and other groups can purchase Cigna Dental Health products as stand-alone products or integrated with Cigna HealthCare’s medical products. Additionally, as of June 1, 2011, individual customers can purchase DPPO plans in conjunction with individual medical policies. As of December 31, 2011, Cigna Dental Health customers totaled approximately 10.9 million, representing employees at approximately 33% of all Fortune 100 companies. Most of these customers are in self-insured plans. All of Cigna’s dental HMO customers participate in guaranteed cost insured plans. Managed dental care products are offered in 38 states for Dental HMO and 43 states and the District of Columbia for Dental PPO through a network of independent health care professionals that have contracted with Cigna Dental Health to provide dental services.

Cigna Dental Health customers access care from the largest dental PPO network in the U.S. and one of the largest dental HMO networks in the U.S., with approximately 235,500 DPPO-contracted access points (approximately 92,000 unique health care professionals) and approximately 58,000 dental HMO-contracted access points (approximately 16,500 unique health care professionals).

Cigna Dental Health stresses preventive dentistry; it believes that promoting preventive care contributes to a healthier workforce, an improved quality of life, increased productivity and fewer treatment claims and associated costs over time. Cigna Dental Health offers customers a dental treatment cost estimator to educate customers on oral health and aid them in their dental health care decision-making.

Vision

Cigna Vision offers flexible, cost-effective PPO coverage that includes a range of both in and out-of-network benefits for routine vision services. Cigna’s national vision care network, which consists of approximately 53,000 health care professionals in approximately 22,800 locations, includes private practice ophthalmologist and optometrist offices, as well as retail eye care centers. Routine vision products are offered in conjunction with Cigna HealthCare’s medical and dental product offerings.

Funding Arrangements, Pricing, Reserves and Reinsurance

The segment’s health care products and services are offered through the following funding arrangements:

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Insured - Guaranteed Cost;

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Insured - Shared Returns ^SM (also referred to as “experience-rated”); and

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Administrative Services Only.

Premiums and fees charged for HMO and most health insurance products are generally set in advance of the policy period and are typically guaranteed for one year (unless specified events occur, such as changes in benefits, significant changes in enrollment or laws affecting the coverage or costs). Premium rates for fully insured products are established either on a guaranteed cost or retrospectively experience-rated basis.

CIGNA CORPORATION – 2011 Form 10-K – 8

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Since January 1, 2011, the Patient Protection and Affordable Care Act (“Health Care Reform”) has required Cigna HealthCare’s comprehensive medical insurance products to meet a minimum medical loss ratio (“MLR”) of 85% for large groups (generally defined as employers with more than 50 employees) and 80% for small groups and individuals. The United States Department of Health and Human Services has issued interim final regulations that specify how the MLR is to be calculated. These regulations currently require the MLR to be calculated on a state-by-state basis for each separate insurance company or HMO, and then separately within each state for large groups, small groups and individuals. The MLR is determined generally as the sum of claims plus expenses that improve health care quality divided by premiums less taxes and assessments. To the extent the MLR minimums are not met for large groups, small groups or individual segments within each state, premium rebates are paid to both employers and customers enrolled in the plans based on the portion of the premium each has contributed. Approximately 15% of Cigna HealthCare’s customers are enrolled in insured plans subject to the MLR requirements.

Insured - Guaranteed Cost

Charges to policyholders under an insured, guaranteed cost policy are established at the beginning of the policy period and are not adjusted to reflect actual claim experience during the policy period. Accordingly, Cigna HealthCare bears the risk for claims and costs. The HMO product is offered only on a guaranteed cost basis. Summarized below are the key elements of an insured, guaranteed cost funding arrangement:

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A guaranteed cost pricing methodology reflects assumptions about future claims, health care inflation (unit cost, location of delivery of care and utilization), effective medical cost management, expenses, enrollment mix, investment returns, and profit margins.

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Claim and expense assumptions may be based in whole or in part on prior experience of the policyholder or on a pool of accounts, depending on the policyholder’s size and the statistical credibility of the experience.

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Generally, guaranteed cost policyholders are smaller and less statistically credible than retrospectively experience-rated groups.

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Pricing for insurance/HMO products that use networks of contracted health care professionals reflects assumptions about the future claims impact on the reimbursement rates in the provider contracts.

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Premium rates may vary among policyholders to reflect the underlying plan benefits, anticipated contract and demographic mix, family size, geography, industry, renewal date, and other cost-predictive factors.

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In some states, premium rates must be approved by the state insurance department and state laws may restrict or limit the use of rating methods.

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Premium rates for groups and individuals are subject to state and/or HHS review for unreasonable increases.

Insured - Shared Returns ^SM (also referred to as experience-rated)

The key features of a Shared Returns funding arrangement are summarized below:

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The premium, determined at the beginning of the policy period, typically includes a margin to partially protect against adverse claim fluctuations. Premiums may be adjusted for the actual claim and, in some cases, administrative cost experience of the policyholder through an experience settlement process after the policy period as discussed below.

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If cost experience is favorable in relation to the premium rates, a portion of the initial premiums may be credited to the policyholder as an experience refund. However, if claims and expenses exceed the initial premiums (an “experience deficit”), Cigna HealthCare generally bears the risk.

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Cigna HealthCare may recover an experience deficit, according to contractual provisions, through future premiums and experience settlements, provided the policy remains in force. If premiums exceed claims and expenses, any surplus amount is generally first used to offset prior deficits and otherwise generally returned to the policyholder.

Minimum premium funding arrangements combine insurance protection with an element of self-funding. Key features of insurance policies using a minimum premium funding arrangement are summarized below:

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The policyholder is responsible for funding all claims up to a predetermined aggregate, maximum monthly amount, and Cigna HealthCare bears the risk for claim costs incurred in excess of that amount.

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Instead of paying a fixed monthly premium, the group policyholder establishes and funds a bank account and must maintain an agreed-upon amount in the account. The policyholder authorizes the insurer to draw upon funds in the account to pay claims and other authorized expenses.

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The policyholder pays a significantly reduced monthly “residual” premium while the policy is in effect and a supplemental premium (to cover reserves for run-out claims and administrative expenses) upon termination.

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As with other Shared Returns (experience-rated) insurance products, Cigna HealthCare may recover deficits from margins in future years if the policy is renewed.

CIGNA CORPORATION – 2011 Form 10-K – 9

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Liabilities are established for estimated experience refunds based on the results of Shared Returns (retrospectively experience-rated) policies and applicable contract terms. Cigna HealthCare credits interest on experience refund balances to these policyholders using rates that are set at Cigna HealthCare’s discretion, taking investment performance and market rates into consideration. Higher rates are credited to funds with longer expected payout terms, reflecting the fact that higher yields are generally available on investments with longer maturities. For 2011, the rates of interest credited ranged from 0.8% to 3.5%, with a weighted average rate of approximately 1.5%.

Administrative Services Only

Cigna HealthCare contracts with employers, unions and other groups sponsoring self-insured plans on an administrative services only (“ASO”) basis to administer claims and perform other plan related services. The key features of an ASO funding arrangement are summarized below:

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Cigna HealthCare collects administrative service fees in exchange for providing these self-insured plans with access to Cigna HealthCare’s applicable participating provider network and for providing other services and programs including: claim administration; quality management; utilization management; cost containment; health advocacy; 24-hour help line; 24/7 call center; case management; disease management; pharmacy benefit management; behavioral health care management services (through its provider networks); or any combination of these services.

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The self-insured plan sponsor is responsible for self-funding all claims, but may purchase stop loss insurance from Cigna HealthCare or other insurers for claims in excess of a predetermined amount, for either individuals (“specific”), the entire group (“aggregate”), or both.

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In some cases, Cigna HealthCare provides performance guarantees associated with meeting certain service related and other performance standards. If these standards are not met, Cigna HealthCare may be financially at risk up to a stated percentage of the contracted fee or a stated dollar amount. Cigna HealthCare establishes liabilities for estimated payouts associated with these guarantees. See Note 23 to the Consolidated Financial Statements beginning on page 159 of this Form 10-K for details about these guarantees.

Pricing

Premium rates for insured funding arrangements are based on assumptions about the expected utilization levels of medical services, costs of medical services and the Company’s administrative costs. The profitability of these arrangements will vary by the actual utilization level of medical services, the cost of the services provided and the costs to administer the benefit programs and the premium charged. Additionally, beginning in 2011, overall margin is effectively capped by the minimum loss ratio rebates required by Health Care Reform, as favorable experience in a market generates premium rebates instead of offsetting any unfavorable experience in other markets.

Pricing for self-funded arrangements is generally based on the expected cost to administer those arrangements and will vary by the services provided and the size and complexity of the benefit programs, among other factors.

Reserves

In addition to paying current benefits and expenses under HMO and health insurance policies, Cigna HealthCare establishes reserves for amounts estimated to fund reported claims not yet paid, as well as claims incurred, but not yet reported. As of December 31, 2011, approximately $1.4 billion, or 61% of the reserves of Cigna HealthCare’s operations comprised liabilities that are likely to be paid within one year, primarily for medical and dental claims, as well as certain group disability and life insurance claims. The reserve amount expected to be paid within one year includes $194 million that is recoverable from certain ASO customers and from minimum premium policyholders. The remaining reserves relate primarily to contracts that are short term in nature, but have long term payouts and include liabilities for group long-term disability insurance benefits and group life insurance benefits for disabled and retired individuals, benefits paid in the form of both life and non-life contingent annuities to survivors and contract holder deposit funds.

Reinsurance

Cigna HealthCare reduces its exposure to large catastrophic losses under group life, disability and accidental death contracts by purchasing reinsurance from unaffiliated reinsurers.

Financial information, including premiums and fees, is presented in the Health Care section of the MD&A beginning on page 62 and in Note 22 to Cigna’s Consolidated Financial Statements beginning on page 156 of this Form 10-K.

CIGNA CORPORATION – 2011 Form 10-K – 10

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Service and Quality

Customer Service

Cigna HealthCare operates 16 service centers that together processed approximately 136 million medical claims in 2011. Satisfying customers is a primary business objective and critical to the Company’s success. To further this objective, in 2009, the Company made its call centers available 24 hours a day, seven days a week, 365 days a year. As of December 31, 2011, Cigna operated 10 call centers and a virtual call team that customers can call toll-free about their health care benefits, wellness programs and claims. Cigna recognizes that customers with significant health events may have additional customer service needs. Therefore, Cigna has developed the “My Personal Champion” program, which provides qualified customers with a dedicated point of contact. Personal Champions serve as a resource for benefits and claims questions, assist with navigating the complex health care industry and offers education and support to customers and their families. As of December 31, 2011, approximately 4 million Cigna customers had access to the My Personal Champion program.

Technology

Cigna HealthCare understands the important role that information technology plays in improving the level of service that Cigna can provide to its customers, which is critical to the continued growth of the Company’s health care business and its focus on customer-centricity. Accordingly, Cigna HealthCare continues to invest in its information technology infrastructure and capabilities including tools and Internet-enabled technology that support Cigna HealthCare’s focus on providing customers with a personalized experience in making health care decisions. Examples include:

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myCigna.com, Cigna’s consumer Internet portal. The newly redesigned portal is personalized with customers’ medical, dental and pharmacy plan information. Customers can use online tools to understand their benefits, track their claims and finances and manage their health. MyCigna is a multi-media portal with video content, social networking capabilities, podcasts and other interactive tools to help customers achieve their health and financial goals. Cigna customers can now access much of this information through their mobile phones, making it easier to get the information customers need when and where they need it;

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myCignaPlans.com, a website that allows prospective customers who purchase medical coverage through their employer to compare plan coverage and pricing options, before enrolling, based on a variety of factors. The application gives customers information on the total health care cost to them and their employer;

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Health Risk Assessment, an online interactive tool that helps customers identify potential health risks and monitor their health status;

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social media, including dedicated YouTube and Facebook pages that allow individuals to participate in online communities specific to Cigna and their interest in health awareness and improvement;

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a number of interactive online cost and quality information tools that compare hospital quality and efficiency information, prescription drug choices and average price estimates and member-specific average out-of-pocket cost estimates for certain medical procedures; and

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a special website designed for seniors, with large font and documents designed for the visually impaired, sections focused on understanding Medicare with educational information and a Medicare “Toolkit”, as well as easy access to plan information in English and Spanish.

Benefit/Claim Resolution

Cigna HealthCare customer service representatives are empowered to immediately resolve a wide range of issues to help customers obtain the most from their benefit plans. If an issue cannot be resolved informally, Cigna HealthCare has a formal appeals process that can be initiated by telephone or in writing and involves two levels of internal review. For those matters not resolved by internal reviews, Cigna HealthCare customers are offered the option of a voluntary external review of claims. The Cigna HealthCare formal appeals process addresses member inquiries and appeals concerning initial coverage determinations based on medical necessity and other benefits/coverage determinations. Cigna HealthCare’s formal appeals process meets regulatory requirements, including the National Committee for Quality Assurance (“NCQA”), Employee Retirement Income Security Act of 1974 (“ERISA”), and Utilization Review Accreditation Commission (“URAC”).

CIGNA CORPORATION – 2011 Form 10-K – 11

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Quality Medical Care

Cigna HealthCare’s commitment to promoting quality medical care to its customers is reflected in a variety of activities including: credentialing medical health care professionals and facilities that participate in Cigna HealthCare’s managed care and PPO networks as well as developing the Cigna Care Network ^SM specialist physician designation described below.

Participating Provider Network

Cigna HealthCare has an extensive national network of participating health care professionals that consisted of approximately 5,600 hospitals and approximately 667,400 health care professionals as of December 31, 2011 as well as other facilities, pharmacies and vendors of health care services and supplies.

In most instances, Cigna HealthCare contracts directly with the participating hospital, health care professional or other facility to provide covered services to customers at agreed-upon rates of reimbursement. In some instances, however, Cigna HealthCare companies contract with third parties for access to their provider networks and care management services. In addition, Cigna HealthCare has entered into strategic alliances with several regional managed care organizations (Tufts Health Plan, HealthPartners, Inc., Health Alliance Plan, and MVP Health Plan) to gain access to their provider networks and discounts.

Cigna Medical Group

Cigna Medical Group (CMG) is the multi-specialty medical group practice division of Cigna HealthCare of Arizona, Inc. which delivers primary care and certain specialty care services through 25 medical facilities and approximately 194 employed clinicians in the Phoenix, Arizona metropolitan area. Eighteen of these multi-specialty health care centers and their affiliated primary care physicians have received the top level (level 3) of accreditation from NCQA (Patient Centered Medical Homes). CMG currently holds the highest level of this accreditation for the greatest number of practices and physicians in the state of Arizona.

Cigna Care Network ^SM

Cigna Care Network is a benefit design option available for Cigna HealthCare administered plans in 68 service areas across the country. Cigna Care Network’s designated physicians are a subset of participating physicians in certain specialties who are so designated based on specific clinical quality and cost-efficiency selection criteria. Customers pay reduced co-payments or co-insurance when they receive care from a specialist designated as a Cigna Care Network provider. Participating specialists are evaluated regularly for the Cigna Care Network designation.

Provider Credentialing

Cigna HealthCare credentials physicians, hospitals and other health care professionals in its participating provider networks using quality criteria which meet or exceed the standards of external accreditation or state regulatory agencies, or both. Typically, most health care professionals are re-credentialed every three years.

External Validation

Cigna continues to demonstrate its commitment to quality and has expanded its scope of external validation of its quality programs through nationally recognized accreditation organizations. Each of Cigna’s 36 PPO/OAP markets and 22 of the HMO and POS plans that have undergone an accreditation review have earned Excellent or Commendable status from the NCQA, a private, nonprofit organization dedicated to improving health care quality. In addition, Cigna’s provider transparency, wellness, utilization management, case management and demand management programs have been awarded the highest outcomes possible. From NCQA, Cigna earned Physician & Hospital Quality Certification and Wellness and Health Promotion Accreditation. From URAC, an independent, nonprofit health care accrediting organization dedicated to promoting health care quality through accreditation, certification and commendation, Cigna has full accreditation for Health Utilization Management.

HEDIS® Measures

In addition, Cigna HealthCare participates in NCQA’s Health Plan Employer Data and Information Set (“HEDIS®”) Quality Compass Report, whose Effectiveness of Care measures are a standard set of metrics to evaluate the effectiveness of managed care clinical programs. Cigna HealthCare’s national results compare favorably to industry averages.

Accountable Care Organizations

Cigna has collaborated with 18 accountable care organizations, and expects to continue to expand these arrangements. The overall objective of these organizations is to improve the quality of care and service experience for customers while lowering their costs and improving overall value. The goal in collaborating with an accountable care organization is to identify health care delivery organizations (medical groups and hospital organizations) that can coordinate end-to-end care for a defined population of patients.

CIGNA CORPORATION – 2011 Form 10-K – 12

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Markets and Distribution

Cigna HealthCare offers products in the following markets:

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National segment - these employers have 5,000 or more U.S.-based, full-time employees living in two or more states.

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Middle Market segment – comprised of employers with 250 to 4,999 U.S.-based, full-time employees located in one or more states with a majority of their full-time employees living and working in the same state. This segment also includes single site employers with more than 250 employees, Taft-Hartley plans and other third party payers.

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Select segment - focuses on employers with 51-249 eligible employees and provides ASO and guaranteed cost funding solutions. Select also provides ASO funding to employers with a minimum of 25 employees.

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Individual - Cigna HealthCare actively markets health and dental insurance to individuals in ten states as of December 31, 2011, including Arizona, California, Colorado, Connecticut, Florida, Georgia, North Carolina, South Carolina, Tennessee and Texas.

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Seniors (Medicare) - focuses on the health care needs of individuals who are pre- or post-65 retirees and employers who offer coverage to their pre- and post-65 retirees.

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Small business - Cigna has withdrawn its insured medical product offering from the Small Group market (defined as employers with two to 50 employees) in the following states: California, Connecticut, Florida, Georgia, Hawaii, Illinois, Kansas, Missouri, New Hampshire, New York, North Carolina, Ohio, Pennsylvania, South Carolina and Virginia, as well as the District of Columbia. The insured medical withdrawal in Texas will be completed in 2012. Cigna will continue to offer insured small group medical policies in Arizona, New Jersey, New Mexico, Tennessee, Vermont and the U.S. Virgin Islands.

Cigna HealthCare employs sales representatives to distribute its products and services through insurance brokers and insurance consultants or directly to employers, unions and other groups. Cigna HealthCare also employs representatives to sell utilization review services, managed behavioral health care and employee assistance services directly to insurance companies, HMOs, third party administrators and employer groups. As of December 31, 2011, the field sales force for the products and services of this segment consisted of approximately 830 sales representatives in approximately 90 field locations. With respect to the acquired HealthSpring business, Medicare Advantage enrollment is generally a decision made individually by the customer, and accordingly, sales agents and representatives focus their efforts on in-person contacts with potential enrollees as well as telephonic and group selling venues.

Competition

Cigna HealthCare’s business is subject to intense competition, and industry consolidation has created an even more competitive business environment. In certain geographic locations, some health care companies may have significant market share positions, but no one competitor dominates the health care market nationally. Cigna HealthCare expects a continuing trend of consolidation in the industry given the current economic and political environment. Cigna HealthCare also expects continued vertical integration, with the line blurring between clinicians and hospitals, and traditional insurers.

Competition in the health care market exists both for employers and other groups sponsoring plans and for the employees in those instances where the employer offers its employees a choice of products from more than one health care company. Most group policies are subject to annual review by the policyholder, who may seek competitive quotations prior to renewal. As Health Care Reform is implemented, Cigna expects competition for individuals in the market to purchase insurance for themselves or their families to increase.

CIGNA CORPORATION – 2011 Form 10-K – 13

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The primary competitive factors are quality and cost-effectiveness of service and provider networks; effectiveness of medical care management; products that meet the needs of clients and their employees; price; total cost management; technology; and effectiveness of marketing and sales. Financial strength of the insurer, as indicated by ratings issued by nationally recognized rating agencies, is also a competitive factor. Cigna HealthCare believes that its health advocacy capabilities, holistic approach to consumer engagement, breadth of product offerings, clinical care and medical management capabilities and funding options are competitive advantages. These advantages allow Cigna HealthCare to respond to the diverse needs of its customer base. Cigna HealthCare also believes that its focus on helping to improve the health, well-being and sense of security of its customers will allow it to differentiate itself from its competitors.

Cigna HealthCare’s principal competitors are:

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other large insurance companies that provide group health and life insurance products;

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Blue Cross and Blue Shield organizations;

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stand-alone HMOs and PPOs;

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HMOs affiliated with major insurance companies and hospitals; and

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national managed pharmacy, behavioral health and utilization review services companies.

Competition also arises from smaller regional or specialty companies with strength in a particular geographic area or product line, administrative service firms and, indirectly, self-insurers. In addition to these traditional competitors, a new group of competitors is emerging. These new competitors are focused on delivering employee benefits and services through Internet-enabled technology that allows consumers to take a more active role in the management of their health. This is accomplished primarily through financial incentives, access to enhanced medical quality data and other information sharing. The effective use of the Company’s health advocacy capabilities, decision support tools (some of which are web-based) and enabling technology are critical to success in the health care industry, and Cigna HealthCare believes its capabilities in these areas will be competitive differentiators.

Industry Developments

In the first quarter 2010, Health Care Reform was signed into law. Certain provisions became effective during 2010 and 2011 and others will take effect from 2012 to 2018. Under Health Care Reform, many of the details of these laws were to be set forth through regulations. While federal agencies have published interim final regulations with respect to certain requirements, many aspects of implementing this legislation remain uncertain. For more information concerning Health Care Reform, see the Introduction section of the MD&A beginning on page 48 and the Regulation section beginning on page 26 of this Form 10-K.

CIGNA CORPORATION – 2011 Form 10-K – 14

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E.   Disability and Life

Cigna’s Disability and Life segment (“Cigna Disability and Life”) provides the following insurance products and their related services: group long-term and short-term disability insurance, group life insurance and accident and specialty insurance. These products and services are provided by subsidiaries of Cigna Corporation. Cigna Disability and Life markets products in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands and Canada.

Principal Products and Services

Disability

Long-term and short-term disability insurance products and services generally provide a fixed level of income to replace a portion of wages lost because of disability. Cigna Disability and Life also provides assistance to employees in returning to work and assistance to their employers in managing the cost of employee disability. Group disability coverage is typically employer-paid or a combination of employer and employee-paid, but may also include coverage paid for entirely by employees.

Cigna Disability and Life is an industry leader in returning employees to work quickly, resulting in higher productivity and lower cost for employers and a better quality of life for their employees. Cigna Disability and Life’s disability insurance products may be integrated with other disability benefit programs, behavioral programs, medical programs, social security advocacy, and leave of absence administration. Cigna believes this integration provides customers with increased efficiency and effectiveness in disability claims management, enhances productivity and reduces overall costs to employers. Coordinating the administration of Cigna Disability and Life’s disability and Cigna HealthCare’s medical programs provides enhanced opportunities to influence outcomes, reduce the cost of both medical and disability events and improve the return to work rate. Examples of the benefits of this integrated approach (for which Cigna may receive fees) include:

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the use of information from the Cigna HealthCare and Cigna Disability and Life databases to help identify, treat and manage disabilities before they become chronic, longer in duration and more costly; and

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proactive outreach from Cigna Behavioral Health to assist employees suffering from a mental health condition, either as a primary condition or as a result of another condition.

As measured by 2011 premiums and fees, disability constituted approximately 46% of Cigna Disability and Life’s business. Approximately 9,730 insured disability policies covering approximately 5.8 million lives were outstanding as of December 31, 2011.

Life Insurance

Life insurance products offered by Cigna Disability and Life include group term life and group universal life. Group term life insurance may be employer-paid basic life insurance, employee-paid supplemental life insurance or a combination thereof.

Group universal life insurance is a voluntary life insurance product in which the owner may accumulate cash value. The cash value earns interest at rates declared from time to time, subject to a minimum guaranteed contracted rate, and may be borrowed, withdrawn, or, within certain limits, used to fund future life insurance coverage.

As measured by 2011 premiums and fees, group life insurance constituted approximately 45% of Cigna Disability and Life’s business. Approximately 5,500 group life insurance policies covering approximately 5.2 million lives were outstanding as of December 31, 2011.

Other Products and Services

Cigna Disability and Life offers personal accident insurance coverage, which consists primarily of accidental death and dismemberment and travel accident insurance to employers. Group accident insurance may be employer-paid or employee-paid.

Cigna Disability and Life also offers specialty insurance services that consist primarily of disability and life, accident, and hospital indemnity products to professional or trade associations and financial institutions.

CIGNA CORPORATION – 2011 Form 10-K – 15

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Voluntary benefits are those paid by the employee and are offered at the employer’s worksite. Cigna Disability and Life plans provide employers, among other services, flexible enrollment options, list billing, medical underwriting, and individual record keeping. Cigna Disability and Life designed its voluntary offerings to offer employers a complete and simple way to manage their benefits, including personalized enrollment communication and administration of the benefits program.

In 2010, Cigna sold the workers’ compensation and case management services previously provided through its Intracorp® subsidiary. For more information on this sale, see “Acquisitions and Dispositions” in the Introduction section of the MD&A beginning on page 48.

Financial information, including premiums and fees, is presented in the Disability and Life section of the MD&A beginning on page 67 and in Note 22 to Cigna’s Consolidated Financial Statements beginning on page 156 of this Form 10-K.

Pricing, Reserves and Reinsurance

Cigna Disability and Life’s products and services are offered on a fully insured, experience-rated and ASO basis. Under fully insured arrangements, policyholders pay a fixed premium and Cigna Disability and Life bears the risk for claims and costs. Under experience-rated funding arrangements, a premium that typically includes a margin to partially protect against adverse claim fluctuations is determined at the beginning of the policy period. Cigna Disability and Life generally bears the risk if claims and expenses exceed this premium. If premiums exceed claims and expenses, any surplus amount is generally first used to offset prior deficits and is otherwise generally returned to the policyholder if surplus exceeds minimum contractual levels. With experience-rated insurance products, Cigna Disability and Life may recover deficits from margins in future years if the policy is renewed. Under ASO arrangements, Cigna Disability and Life contracts with groups sponsoring self-insured plans to administer claims and perform other plan related services in return for service fees. The self-insured plan sponsor is responsible for self funding all claims. The majority of Cigna Disability and Life’s products and services are fully insured.

Premiums and fees charged for disability and life insurance products are generally established in advance of the policy period and are generally guaranteed for one to three years and selectively guaranteed for up to five years, but policies are generally subject to early termination by the policyholder or by the insurance company. Premium rates reflect assumptions about future claims, expenses, credit risk, investment returns and profit margins. Assumptions may be based in whole or in part on prior experience of the account or on a pool of accounts, depending on the group size and the statistical credibility of the experience, which varies by product.

Premiums for group universal life insurance products consist of mortality, administrative and surrender charges assessed against the policyholder’s fund balance. Interest credited and mortality charges for group universal life, and mortality charges on group variable universal life, may be adjusted prospectively to reflect expected interest and mortality experience. Mortality charges are subject to guaranteed maximum rates stated in the policy.

In addition to paying current benefits and expenses, Cigna Disability and Life establishes reserves in amounts estimated to be sufficient to pay reported claims not yet paid, as well as claims incurred but not yet reported. For liabilities with longer-term pay-out periods such as long-term disability, reserves represent the present value of future expected payments. Cigna Disability and Life discounts these expected payments using assumptions for interest rates and the length of time over which claims are expected to be paid. The annual effective interest rate assumptions used in determining reserves for most of the long-term disability insurance business is 4.50% for claims that were incurred in 2011 and 5.30% for claims that were incurred in 2010 and prior. For group universal life insurance, Cigna Disability and Life establishes reserves for deposits received and interest credited to the policyholder, less mortality and administrative charges assessed against the policyholder’s fund balance.

The profitability of this segment’s products depends on the adequacy of premiums charged and investment returns relative to claims and expenses. The effectiveness of return to work programs and mortality levels also impact the profitability of disability insurance products. Cigna Disability and Life’s previous claim experience and industry data indicate a correlation between disability claim incidence levels and economic conditions, with submitted claims rising under adverse economic conditions, although the impact of the current adverse economic conditions is not clear. For life insurance products, the degree to which future experience deviates from mortality, morbidity and expense assumptions also affects profitability.

In order to reduce its exposure to large individual and catastrophic losses under group life, disability and accidental death policies, Cigna Disability and Life purchases reinsurance from unaffiliated reinsurers.

CIGNA CORPORATION – 2011 Form 10-K – 16

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Markets and Distribution

Cigna Disability and Life markets the group insurance products and services described above to employers, employees, professional and other associations and groups in the following customer segments:

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National segment - these are multi-site employers generally with more than 5,000 employees;

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Middle Market segment – generally defined as multi-site employers with more than 250 but fewer than 5,000 employees, and single-site employers with more than 250 employees; and

•

Select segment - generally includes employers with more than 50 but fewer than 250 employees.

In marketing these products, Cigna Disability and Life primarily sells through insurance brokers and consultants and employs a direct sales force. As of December 31, 2011, the field sales force for the products and services of this segment consisted of approximately 200 sales professionals in 27 office locations.

Competition

The principal competitive factors that affect the Cigna Disability and Life segment are underwriting and pricing, the quality and effectiveness of claims management, relative operating efficiency, investment and risk management, distribution methodologies and producer relations, the breadth and variety of products and services offered, and the quality of customer service. For certain products with longer-term liabilities, such as group long-term disability insurance, the financial strength of the insurer, as indicated by ratings issued by nationally recognized rating agencies, is also a competitive factor.

The principal competitors of Cigna’s group disability, life and accident businesses are other large and regional insurance companies that market and distribute these or similar types of products. As of December 31, 2011, Cigna is one of the top five providers of group disability, life and accident insurance in the United States, based on premiums.

Industry Developments and Strategic Initiatives

The group insurance market remains highly competitive as the rising cost of providing medical coverage to employees has forced companies to re-evaluate their overall employee benefit spending. Demographic shifts have further driven demand for products and services that are sufficiently flexible to meet the evolving needs of employers and employees who want innovative, cost-effective solutions to their insurance needs. Employers continue to shift towards greater employee participatory coverage and voluntary purchases.

Employers are also expressing a growing interest in employee wellness, absence management and productivity and recognizing a strong link between health, productivity and their profitability. As this interest grows, Cigna believes it is well positioned to deliver integrated solutions that address these broad employer and employee needs through its programs that promote a healthy lifestyle, offer assistance in returning to work and integrate health care and disability programs. Cigna also believes that its strong disability management portfolio and fully integrated programs provide employers and employees tools to improve health status. This focus on managing the employee’s total absence enables Cigna to increase the number and likelihood of interventions and minimize disabling events.

CIGNA CORPORATION – 2011 Form 10-K – 17

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F.   International

Cigna’s International segment (“Cigna International”) offers supplemental health, life and accident insurance products as well as international health care products and services. These products and services are provided by subsidiaries of Cigna Corporation, including foreign operating entities.

Cigna International provides employers, affinity groups and individuals with quality local and global health care and related financial protection programs. With local licenses and partnerships in 30 countries and jurisdictions, Cigna International offers products and services to both local citizens and globally mobile individuals. Cigna International services its globally mobile customers virtually everywhere in the world.

Principal Products and Services

Supplemental Health, Life and Accident Insurance

As measured by 2011 premiums and fees, supplemental health, life and accident insurance constituted approximately 51% of Cigna International’s business. These insurance products generally provide simple, affordable coverage of risks for the health and financial security of individuals. Supplemental health products provide specified payments for a variety of health risks and include personal accident, accidental death, critical illness, hospitalization, travel (through the 2011 acquisition of FirstAssist), dental, cancer and other dread disease coverages. Term life as well as variable universal life insurance and other savings products are also included in the product portfolio. Cigna International’s supplemental health, life and accident insurance products are offered in South Korea, Taiwan, Indonesia, Hong Kong, the European Union, China, New Zealand, Thailand and Turkey. In China, Cigna International owns a 50% interest in a joint venture through which its products and services are offered.

International Health Care

As measured by 2011 premiums and fees, International Health Care constituted approximately 49% of Cigna International’s business. Cigna International’s health care businesses primarily consist of products and services to meet the needs of local and multinational companies and organizations and their local and globally mobile employees and dependents. These products and services include insurance and administrative services for medical, dental, vision, life, accidental death and dismemberment, and disability risks. These global health benefits products and services are offered through guaranteed cost, experience-rated, administrative services only, and minimum premium funding arrangements. For definitions of funding arrangements, see “Funding Arrangements” in Section D (Health Care) beginning on page 4 of this Form 10-K. The customers of Cigna International’s global health benefits business are multinational companies and intergovernmental and non-governmental organizations, headquartered in the United States, Canada, Europe, the Middle East, Hong Kong, China and other international locations. The acquisition of Vanbreda International, in 2010, further strengthened Cigna International’s position in this market.

In addition, Cigna International’s health care businesses include products and services which are primarily provided through group benefits programs to employees of businesses and other organizations in the United Kingdom and Spain. These products and services include medical indemnity insurance coverage, with some offerings having managed care or administrative service aspects. These products and services generally provide an alternative or supplement to government provided national health care programs.

Cigna International offers individual private medical insurance to local citizens in Spain as well as to individual globally mobile high net worth individuals. Cigna International has expanded its individual offerings into China and Hong Kong. Local, regional or global coverage is available to these groups, adapted to local market conditions.

Financial information, including premiums and fees, is presented in the International section of the MD&A beginning on page 69 and in Note 22 to Cigna’s Consolidated Financial Statements beginning on page 156 of this Form 10-K.

Customer Service

With over 8.5 million customer relationships across the globe, Cigna International continues to be a leader in providing quality customer service. Its globally mobile customers have access to medical professionals, case management experts and claims specialists 24 hours a day, 365 days a year, through service centers dedicated to their unique needs. Cigna International uses a wide range of measurement tools to gain better understanding of customers’ needs – ranging from quick 5-minute surveys of a customer’s call-center experience to more elaborate tracking of loyalty as measured by customers’ likelihood to refer Cigna to a friend.

CIGNA CORPORATION – 2011 Form 10-K – 18

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Cigna International has recently improved customer service representative training and hiring practices, enhanced customer communication methods based on customers’ preferences and expanded its basic telephone offering to also include a choice of email or text messaging channels. Additionally, Cigna International began offering opt-in choices for customers who choose to go paperless for their statements and explanations of benefits, and has improved the online claims process by simplifying the interface and providing worldwide access.

Pricing, Reserves and Reinsurance

Premium rates for Cigna International’s supplemental health, life and accident insurance products are based on assumptions about mortality, morbidity, customer acquisition and retention, expenses and target profit margins, as well as interest rates. The profitability of these products is primarily driven by the adequacy of mortality and morbidity assumptions used, and customer retention.

Fees for variable universal life insurance products consist of mortality, administrative, asset management and surrender charges assessed against the contractholder’s fund balance. Mortality charges on variable universal life may be adjusted prospectively to reflect expected mortality experience.

Premium rates and fees for Cigna International’s health care products reflect assumptions about future claims, expenses, customer demographics, investment returns, and profit margins. For products using networks of contracted health care professionals and facilities, premiums reflect assumptions about the impact of these contracts and utilization management on future claims. Most of the premium volume for the medical indemnity business is on a guaranteed cost basis. Other premiums are established on an experience-rated basis. Most contracts permit rate changes at least annually.

The profitability of health care products is dependent upon the accuracy of projections for health care inflation (unit cost, location of delivery of care, currency of incurral and utilization), customer demographics, the adequacy of fees charged for administration and effective medical cost management.

In addition to paying current benefits and expenses, Cigna International establishes reserves of amounts estimated to be sufficient to settle reported claims not yet paid, claims incurred but not yet reported as well as future amounts payable on experience-rated arrangements. Additionally, for some individual life insurance, savings, and supplemental health insurance products, Cigna International establishes policy reserves which reflect the present value of expected future obligations less the present value of expected future premiums attributable to policyholder obligations. Cigna International defers acquisition costs such as commissions, and certain internal selling, underwriting and policy fulfillment costs incurred in the sales of multi-year supplemental health, life, and accident products. For most products, these costs are amortized in proportion to premium revenue recognized, which is impacted by customer retention. For variable universal life products, acquisition costs are amortized in proportion to expected gross profits. In 2012, the Company will implement new accounting requirements for policy acquisition costs. See Note 2 to the Consolidated Financial Statements beginning on page 100 of the Form 10-K for additional information.

Cigna International’s operations are diversified by line of business and geographic spread of risk. South Korea, however, represents the single largest geographic market for Cigna International. In 2011, South Korea generated 31% of Cigna International’s revenues and 51% of its segment earnings. For information on the concentration of risk with respect to Cigna International’s business in South Korea, see “Other Items Affecting International Results” in the International section of the MD&A beginning on page 69 of this Form 10-K.

A global approach to underwriting risk management allows for each local business to underwrite and accept risk within specified limits. Retentions are centrally managed through cost effective use of external reinsurance to limit segment liability on a per life, per risk, and per event (catastrophe) basis.

Markets and Distribution

Cigna International’s supplemental health, life and accident insurance products are generally marketed through distribution partners with whom the individual insured has an affinity relationship. These products are sold primarily through direct marketing channels, such as outbound telemarketing and in-branch bancassurance (where Cigna partners with a bank and uses the bank’s sales channels to sell its insurance products). Marketing campaigns are conducted through these channels under a variety of arrangements with affinity partners. These affinity partners primarily include banks, credit card companies and other financial and non-financial institutions. Cigna International also markets directly to consumers via direct response television and the Internet.

Cigna International’s health care products are distributed through independent brokers and consultants, select partners, Cigna International’s own sales personnel, telemarketing and the Internet.

CIGNA CORPORATION – 2011 Form 10-K – 19

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For Cigna International’s supplemental health, life and accident insurance products, a significant portion of premiums are billed and collected through credit cards. A substantial contraction in consumer credit could impact Cigna International’s ability to retain existing policies and sell new policies. A decline in customer retention would result in both a reduction of revenue and an acceleration of the amortization of acquisition related costs. Changes in regulation around permitted distribution channels may also impact Cigna International’s business or results. See the Regulation section beginning on page 26 and the Risk Factors section beginning on page 33 of this Form 10-K.

Competition

Competitive factors in Cigna International’s supplemental health, life and accident and health care businesses include product and distribution innovation and differentiation, efficient management of marketing processes and costs, commission levels paid to distribution partners, and quality of claims and customer services.

The principal competitive factors that affect Cigna International’s health care businesses are underwriting and pricing, relative operating efficiency, relative effectiveness in network development and medical cost management, product innovation and differentiation, broker relations, and the quality of claims and customer service. In most overseas markets, perception of financial strength is also an important competitive factor.

For the supplemental health, life and accident insurance line of business, competitors are primarily locally based insurance companies, including insurance subsidiaries of banks primarily in Asia and Europe. Insurance company competitors in this segment primarily focus on traditional product distribution through captive agents, with direct marketing being secondary channels. Cigna International estimates that it has less than 2% market share of the total life insurance premiums in any given market in which it operates.

The primary competitors of the global health benefits business include U.S.-based and European health insurance companies with global health benefits operations. For the health care operations in the United Kingdom and Spain, the primary competitors are regional and local insurers, with Cigna’s market share at less than 5% of the premiums of the total local health care market.

Cigna International expects that the competitive environment will intensify as U.S. and Europe-based insurance and financial services providers pursue global expansion opportunities.

Industry Developments

Pressure on social health care systems and increased wealth and education in emerging markets are leading to higher demand for products providing health insurance and financial security. In the supplemental health, life and accident business, direct marketing channels are growing and attracting new competitors while industry consolidation among financial institutions and other affinity partners continues. Increased regulations requiring foreign workers to show proof of health insurance are creating opportunities for Cigna International’s health care businesses. See “Risk Factors” beginning on page 33 of this Form 10-K for a discussion of risks related to Cigna International.

Cigna’s global health benefits business is subject to the minimum medical loss ratio (“MLR”) requirements of Health Care Reform. During 2011, the Department of Health and Human Services provided a special methodology for calculating the MLR for global health benefits plans. This special methodology, that resulted in no premium rebates being due in 2011 for the global health benefits business, has been extended indefinitely. For additional information related to the effects of Health Care Reform on the global health benefits business, see the Regulation section of this Form 10-K beginning on page 26.

CIGNA CORPORATION – 2011 Form 10-K – 20

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G.   Run-off Reinsurance

Principal Products and Services

Until 2000, Cigna offered reinsurance coverage for part or all of the risks written by other insurance companies (or “ceding companies”) under life and annuity policies (both group and individual) and accident policies (workers’ compensation, personal accident, and catastrophe coverages). The products and services related to these operations were offered by subsidiaries of Cigna Corporation.

In 2000, Cigna sold its U.S. individual life, group life and accidental death reinsurance businesses. Cigna placed its remaining reinsurance businesses (including its accident, international life, and annuity reinsurance businesses) into run-off as of June 1, 2000, and stopped underwriting new reinsurance business.

In 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. See Note 3 to the Consolidated Financial Statements beginning on page 109 for more information.

Cigna’s remaining exposures stem primarily from its annuity reinsurance business, including its reinsurance of guaranteed minimum death benefits (“GMDB”) and guaranteed minimum income benefits (“GMIB”) contracts.

Life and Annuity Policies

Guaranteed Minimum Death Benefit Contracts

Cigna’s reinsurance segment reinsured 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. Cigna has equity and other market exposures as a result of this product. The Company purchased retrocessional protection that covers approximately 5% of the assumed risks. The Company also maintains a dynamic hedge program (“GMDB equity hedge program”) to substantially reduce the equity market exposures relating to GMDB contracts by entering into exchange-traded futures contracts. In February 2011, the Company implemented a new dynamic interest rate hedge program (“GMDB growth interest rate hedge program”) that reduces a portion of the short-term interest rate exposures related to GMDB.

For additional information about GMDB contracts, see “Guaranteed Minimum Death Benefits” under Run-off Reinsurance section of the MD&A beginning on page 72 and Note 6 to Cigna’s Consolidated Financial Statements beginning on page 114 of this Form 10-K.

Guaranteed Minimum Income Benefit Contracts

In certain circumstances where Cigna’s reinsurance operations reinsured the GMDB, Cigna also reinsured GMIB under certain variable annuities issued by other insurance companies. These variable annuities are essentially investments in mutual funds combined with minimum income and death benefits. All reinsured GMIB policies also have a GMDB benefit reinsured by the Company. When annuitants elect to receive these minimum income benefits, Cigna may be required to make payments which will vary based on changes in underlying mutual fund values and interest rates. Cigna has retrocessional coverage for 55% of the exposures on these contracts, provided by two external reinsurers. In February 2011, the Company implemented a dynamic hedge program (“GMIB equity hedge program”) to reduce a portion of the equity market exposures related to GMIB contracts by entering into exchange-traded futures contracts, as well as a partial interest rate dynamic hedge program (“GMIB growth interest rate hedge program”) designed to reduce the short-term interest rate exposures related to GMIB.

For additional information about GMIB contracts, see “Guaranteed Minimum Income Benefits” under Run-off Reinsurance section of the MD&A beginning on page 72 and Note 10 to Cigna’s Consolidated Financial Statements beginning on page 125 of this Form 10-K.

CIGNA CORPORATION – 2011 Form 10-K – 21

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Markets and Distribution

These products under Cigna’s Run-off Reinsurance segment were sold principally in North America and Europe through a small sales force and through intermediaries.

Cigna also purchased reinsurance to reduce the risk of losses on contracts that it had written. Cigna determines its net exposure for run-off reinsurance contracts by estimating the portion of its policy and claim reserves that it expects will be recovered from its reinsurers (or “retrocessionaires”) and reflecting these in its financial statements as Reinsurance recoverables, or, with respect to GMIB contracts discussed above, as Other assets including other intangibles.

Other Risks

For more information on policy and claim reserves see the Run-off Reinsurance section of the MD&A beginning on page 72, and Notes 7 and 10 to Cigna’s Consolidated Financial Statements beginning on pages 117 and 125 respectively of this Form 10-K. For more information on the risk associated with Run-off Reinsurance, see the Risk Factors beginning on page 33 of this Form 10-K, and the Critical Accounting Estimates section of the MD&A beginning on page 58 of this Form 10-K.

CIGNA CORPORATION – 2011 Form 10-K – 22

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H.   Other Operations

Cigna’s Other Operations segment includes the following businesses:

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corporate owned life insurance;

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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

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run-off settlement annuity business.

The products and services related to these operations are offered by subsidiaries of Cigna Corporation.

Corporate-owned Life Insurance (“COLI”)

Principal Products and Services

The principal products of the COLI business are permanent insurance contracts sold to corporations to provide coverage on the lives of certain employees for the purpose of funding employer-paid future benefit obligations. Permanent life insurance provides coverage that, when adequately funded, does not expire after a term of years. The contracts are primarily non-participating universal life policies.

Universal life policies typically provide flexible coverage and flexible premium payments. Policy cash values fluctuate with the amount of the premiums paid, mortality and expense charges assessed, and interest credited to the policy. Variable universal life policies are universal life contracts in which the cash values vary directly with the performance of a specific pool of investments underlying the policy.

The principal services provided by the COLI business are issuance and administration of the insurance policies (e.g., maintenance of records regarding cash values and death benefits, claims processing, etc.) as well as oversight of the investment management for separate account assets that support the variable universal life product.

Product Features

COLI policies provide a death benefit for which Cigna collects fees to cover mortality risk. Mortality risk is retained according to guidelines established by Cigna. To the extent a given policy carries mortality risk that exceeds these guidelines, reinsurance is purchased from third parties for the balance. COLI policies also allow policy owners to borrow against a portion of their cash surrender value.

Cash values on universal life policies are credited interest at a declared interest rate that reflects the anticipated investment results of the assets backing these policies and may vary with the characteristics of each product. Universal life policies generally have a minimum guaranteed declared interest rate which may be cumulative from the issuance date of the policy. The declared interest rate may be changed monthly, but is generally changed less frequently.

Cash values on variable universal life policies vary directly with the performance of a specific pool of investments underlying the policy. A limited number of variable universal life policies guarantee that the realized investment performance for a quarter, excluding the impact of unrealized gains/losses and the impact of credit-related events, will not be negative.

Pricing, Reserves, and Reinsurance

Fees for universal life insurance products consist of mortality, administrative and surrender charges assessed against the policyholder’s fund balance. Interest credited and mortality charges for universal life and mortality charges on variable universal life may be adjusted prospectively to reflect expected interest and mortality experience. For universal life insurance, Cigna establishes reserves for deposits received and interest credited to the policyholder, less mortality and administrative charges assessed against the policyholder’s fund balance. In order to reduce its exposure to large individual and catastrophe losses, Cigna purchases reinsurance from unaffiliated reinsurers.

CIGNA CORPORATION – 2011 Form 10-K – 23

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Markets and Distribution

The Company continues to develop and enhance its product portfolio to pursue new business. The principal markets for COLI products are regional to national account-sized corporations, including banks. Cigna’s COLI products are offered through a select group of independent brokers with particular expertise in the bank market and in the use of COLI for the financing of benefit plan liabilities.

Competition

The principal competitive factors that affect Cigna’s COLI business are pricing, service, product innovation and access to third-party distribution. For Cigna’s COLI business, competitors are primarily major life insurance companies. Cigna expects that the competitive environment will intensify as the economy recovers and competitors develop new investment strategies and product designs, and aggressively price their offerings to build distribution capacity and gain market share.

Industry Developments and Strategic Initiatives

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, liquidity or financial condition.

Individual Life Insurance & Annuity and Retirement Benefits Businesses

Cigna sold its individual life insurance and annuity business in 1998 and its retirement benefits business in 2004. Portions of the gains from these sales were deferred because the principal agreements to sell these businesses were structured as reinsurance arrangements. The remaining deferred gain balance is being recognized at the rate that earnings from the sold businesses would have been expected to emerge.

For more information regarding the sale of these businesses and the arrangements which secure Cigna’s reinsurance recoverables, see Note 7 of the Consolidated Financial Statements beginning on page 117 of this Form 10-K.

Settlement Annuity Business

Cigna’s settlement annuity business is a closed run-off block of single premium annuity contracts. These contracts are primarily liability settlements with approximately 31% of the liabilities associated with payments that are guaranteed and not contingent on survivorship. In the case of the contracts that involve non-guaranteed payments, such payments are contingent on the survival of one or more parties involved in the settlement.

The settlement annuities business is premium deficient, meaning initial premiums were not sufficient to cover all claims and profit. Liabilities are estimates of the present value of benefits to be paid less the present value of investment income generated by the assets supporting the product including realized and unrealized capital gains. The Company estimates these liabilities based on assumptions for investment yields, mortality, and administrative expenses. Refer to Note 2 to Cigna’s Consolidated Financial Statements beginning on page 100 of this Form 10-K for additional information regarding reserves for this business.

CIGNA CORPORATION – 2011 Form 10-K – 24

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I.   Investments and Investment Income

General Accounts

Cigna’s investment operations provide investment management and related services for Cigna’s corporate invested assets and the insurance-related invested assets in its General Account (“General Account Invested Assets”). Cigna acquires or originates, directly or through intermediaries, a broad range of investments including private placements and public securities, commercial mortgage loans, real estate, mezzanine, private equity partnerships and short-term investments. Invested assets also include policy loans, which are fully collateralized by insurance policy cash values. Invested Assets are managed primarily by Cigna subsidiaries and, to a lesser extent, external managers with whom Cigna’s subsidiaries contract. Net investment income and realized investment gains (losses) are included as a component of earnings for each of Cigna’s operating segments (Health Care, Disability and Life, Run-off Reinsurance, Other Operations and International) and Corporate. For additional information about invested assets, see the “Investment Assets” section of the MD&A beginning on page 85 and Notes 10, 11, 12, 13 and 14 to Cigna’s Consolidated Financial Statements beginning on pages 125, 134, 140, 143 and 144 of this Form 10-K.

Cigna’s investment strategy is to maximize risk-adjusted yields for the portfolios. Cigna manages the investment portfolios to reflect the underlying characteristics of related insurance and contractholder liabilities and capital requirements, as well as regulatory and tax considerations pertaining to those liabilities and state investment laws. Insurance and contractholder liabilities range from short duration health care products to longer term obligations associated with disability and life products, and the run-off settlement annuity business. Assets supporting these liabilities are managed in segregated investment portfolios to facilitate matching of asset durations and cash flows to those of corresponding liabilities. Investment strategy and results are affected by the amount and timing of cash available for investment, competition for investments, economic conditions, interest rates and asset allocation decisions. Cigna routinely monitors and evaluates the status of its investments, obtaining and analyzing relevant investment-specific information as well as assessing current economic conditions, trends in capital markets and other factors. Such factors include industry sector considerations for fixed maturity investments and mezzanine and private equity partnership investments, and geographic and property-type considerations for commercial mortgage loan and real estate investments.

Separate Accounts

Cigna subsidiaries or external managers manage Separate Account assets on behalf of contractholders. These assets are legally segregated from the Company’s other businesses and are not included in the General Account Invested Assets. Income, gains and losses generally accrue directly to the contractholders.

As of December 31, 2011, Cigna’s Separate Account assets consisted of:

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$1.3 billion in separate account assets that are managed by the buyer of the retirement benefits business pursuant to reinsurance arrangements described in the Sales of Individual Life Insurance & Annuity and Retirement Benefits Businesses sections in Note 7 to the Consolidated Financial Statements beginning on page 117 of this Form 10-K;

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$3.0 billion in separate account assets, that constitute a portion of the assets of the Cigna Pension Plan; and

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$3.8 billion in separate account assets, that primarily support certain corporate-owned life insurance, health care and disability and life products.

CIGNA CORPORATION – 2011 Form 10-K – 25

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J.   Regulation

Cigna and its subsidiaries are subject to comprehensive federal, state and international regulations. The laws and regulations governing Cigna’s business continue to increase each year and are subject to frequent change. Cigna has established policies and procedures to comply with applicable requirements.

Cigna’s insurance and HMO subsidiaries must be licensed by the jurisdictions in which they conduct business. These subsidiaries are subject to numerous state and federal regulations related to their business operations, including, but not limited to:

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the form and content of customer contracts including benefit mandates (including special requirements for small groups, generally under 50 employees);

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premium rates;

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the content of agreements with participating providers of covered services;

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producer appointment and compensation;

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claims processing and appeals;

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underwriting practices;

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reinsurance arrangements;

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unfair trade and claim practices;

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protecting the privacy and confidentiality of the information received from members;

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risk sharing arrangements with providers;

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medical loss ratios;

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advertising; and

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the operation of consumer-directed plans (including health savings accounts, health reimbursement accounts, flexible spending accounts and debit cards).

Cigna and its international subsidiaries comply with regulations in international jurisdictions where foreign insurers may be faced with more onerous regulations than their domestic competitors. The broader regulatory environment may include anti-corruption laws, economic sanctions laws, various privacy, insurance, tax, tariff and trade laws and regulations, corporate governance, employment, intellectual property and investment laws and regulation, discriminatory licensing procedures, compulsory cessions of reinsurance, required localization of records and funds, higher premium and income taxes, and requirements for local participation in an insurer’s ownership. In addition, the expansion of Cigna’s operations into foreign countries increases the Company’s exposure to certain U.S. laws, such as the Foreign Corrupt Practices Act of 1977 (FCPA). See page 29 for further discussion of international regulations.

The business of administering and insuring employee benefit programs, particularly health care programs, is heavily regulated by state and federal laws and administrative agencies, such as state departments of insurance and the federal departments of Labor, Health and Human Services, Treasury and Justice, the Internal Revenue Service as well as the courts. Health savings accounts, health reimbursement accounts and flexible spending accounts are also regulated by the U.S. Department of the Treasury and the Internal Revenue Service.

Cigna’s operations, accounts and other books and records are subject to examination at regular intervals by regulatory agencies, including state insurance and health and welfare departments, state boards of pharmacy and the Center for Medicare & Medicaid Services to assess compliance with applicable laws and regulations. In addition, Cigna’s current and past business practices are subject to review by, and from time to time the Company receives subpoenas and other requests of information from, various state insurance and health care regulatory authorities, attorneys general, the Office of Inspector General, and other state and federal authorities, including inquiries by, and testimony before committees and subcommittees of the U.S. Congress regarding certain of its business practices. These examinations, reviews, subpoenas and requests may result in changes to or clarifications of Cigna’s business practices, as well as fines, penalties or other sanctions.

CIGNA CORPORATION – 2011 Form 10-K – 26

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Regulatory and Legislative Developments

The federal and state governments in the U.S. as well as governments in other countries where Cigna does business continue to enact and seriously consider many broad-based legislative and regulatory proposals that could materially impact various aspects of Cigna’s business.

Health Care Reform

In the first quarter of 2010, Health Care Reform was signed into law. Health Care Reform mandates broad changes in the delivery of health care benefits that may impact the Company’s current business model, including its relationship with current and future customers, producers and health care providers, products, services, processes and technology. Health Care Reform includes, among other requirements, provisions for guaranteed coverage and renewal requirements, prohibitions on some annual and all lifetime limits on the dollar amount of benefits for essential health services, increased restrictions on rescinding coverage, minimum medical loss ratio and customer rebate requirements, a requirement to cover preventive services on a first dollar basis, and greater controls on premium rate increases for individual and small employer health insurance. It also provides for state insurance exchanges through which qualified insurers and HMOs will be able to offer insured plans to individuals and small employers. Certain of the law’s provisions became effective during 2010 and 2011 and others will take effect from 2012 to 2018. Health Care Reform left many of the details of the new law to be established through regulations. While federal agencies have published interim final regulations with respect to certain requirements, many issues remain uncertain.

The provisions of the new law that became effective during 2010 and 2011 included those requiring coverage of preventive services with no enrollee cost-sharing, banning the use of lifetime and certain limits on the dollar amount of benefits for essential health services, increasing restrictions on rescinding coverage and extending coverage of dependents to the age of 26. Minimum medical loss ratio requirements became effective in January 2011, requiring payment of premium rebates beginning in 2012 to employers and customers covered under the Company’s comprehensive medical insurance if certain annual minimum medical loss ratios (“MLR”) are not met. During 2011, the Department of Health and Human Services (“HHS”) released interim final regulations that provided a special methodology for calculating the MLR for 2011 for global health benefits business and limited benefit plans while also stating that the agency intended to study the data in determining whether special accommodations would be made for these plans in 2012 and future years. On December 2, 2011, HHS issued revised regulations on the MLR provisions of Health Care Reform. The special methodology for calculating the MLR for limited benefit plans has been extended through 2014. The special methodology for calculating the MLR for global health benefit plans has been extended indefinitely.

Certain other provisions of Health Care Reform will not become effective until 2013 or beyond, including: (1) the annual health insurer fee on health services companies such as Cigna and others in the health care industry to help fund the additional insurance benefits and coverages provided by this legislation; (2) the guaranteed issue and renewal requirements and the requirement that individuals maintain coverage, and (3) the excise tax on high-cost employer-sponsored coverage. These fees and excise taxes will generally not be tax deductible. Health Care Reform also changed certain tax laws that will effectively limit the amount of compensation for employees of health insurers that is tax deductible. The Department of Health and Human Services has not yet defined “essential health benefits” that must be offered by all plans through state exchanges beginning in 2014.

Health Care Reform also impacts Cigna’s Medicare Advantage and Medicare Part D prescription drug plan businesses acquired with HealthSpring in a variety of additional ways, including reduced Medicare premium rates (which began with the 2011 contract year), transition of Medicare Advantage “benchmark” rates to Medicare fee-for-service parity, reduced enrollment periods and limitations on disenrollment, and providing “quality bonuses” for Medicare Advantage plans with a rating for four or five stars from CMS. Through Health Care Reform and other federal legislation, funding for Medicare Advantage plans has been and may continue to be altered.

In addition to acting to comply with applicable requirements of the legislation, Cigna is closely monitoring regulatory developments and keeping its clients apprised of changes that may affect them.

CIGNA CORPORATION – 2011 Form 10-K – 27

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Dodd-Frank Act

In 2010, Congress enacted the Dodd-Frank Wall-Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) which provides for a number of reforms and regulations in the corporate governance, financial reporting and disclosure, investments, tax and enforcement areas that affect Cigna. The SEC and other regulatory authorities engaged in rulemaking efforts under the Dodd-Frank Act throughout 2011, and additional rulemaking still continues, including the establishment of a Federal Insurance Office that will develop and coordinate federal policy on insurance matters. Cigna is closely monitoring how these regulations impact the Company, however the full impact of the legislation may not be known for several years until regulations become fully effective.

Regulation of Insurance Companies

Financial Reporting

Regulators closely monitor the financial condition of licensed insurance companies and HMOs. States regulate the form and content of statutory financial statements, the type and concentration of permitted investments, and corporate governance over financial reporting. Cigna’s insurance and HMO subsidiaries are required to file periodic financial reports and schedules with regulators in most of the jurisdictions in which they do business as well as annual financial statements audited by independent certified public accountants. Certain insurance and HMO subsidiaries are required to file an annual report of internal control over financial reporting with most jurisdictions in which they do business. Insurance and HMO subsidiaries’ operations and accounts are subject to examination by such agencies.

Guaranty Associations, Indemnity Funds, Risk Pools and Administrative Funds

Most states and certain non-U.S. jurisdictions require insurance companies to support guaranty associations or indemnity funds, which are established to pay claims on behalf of insolvent insurance companies. In the United States, these associations levy assessments on member insurers licensed in a particular state to pay such claims.

Several states also require HMOs to participate in guaranty funds, special risk pools and administrative funds. For additional information about guaranty fund and other assessments, see Note 23 to Cigna’s Consolidated Financial Statements beginning on page 159 of this Form 10-K.

Some states also require health insurers and HMOs to participate in assigned risk plans, joint underwriting authorities, pools or other residual market mechanisms to cover risks not acceptable under normal underwriting standards.

Solvency and Capital Requirements

Many states have adopted some form of the National Association of Insurance Commissioners (“NAIC”) model solvency-related laws and risk-based capital rules (“RBC rules”) for life and health insurance companies. The RBC rules recommend a minimum level of capital depending on the types and quality of investments held, the types of business written and the types of liabilities incurred. If the ratio of the insurer’s adjusted surplus to its risk-based capital falls below statutory required minimums, the insurer could be subject to regulatory actions ranging from increased scrutiny to conservatorship.

In addition, various non-U.S. jurisdictions prescribe minimum surplus requirements that are based upon solvency, liquidity and reserve coverage measures. During 2011, Cigna’s HMOs and life and health insurance subsidiaries, as well as non-U.S. insurance subsidiaries, were compliant with applicable RBC and non-U.S. surplus rules.

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.

Holding Company Laws

Cigna’s domestic insurance companies and certain of its HMOs are subject to state laws regulating subsidiaries of insurance holding companies. Under such laws, certain dividends, distributions and other transactions between an insurance or HMO subsidiary and its affiliates may require notification to, or approval by, one or more state insurance commissioners.

CIGNA CORPORATION – 2011 Form 10-K – 28

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In December 2010, the NAIC adopted revisions to the Model Insurance Holding Company System Regulatory Act and Regulation. The revisions were designed to allow a better understanding of the risks and activities of non-insurance entities within a holding company system. The main focus of the revisions has been to incorporate the concept of “enterprise risk” and to enact provisions designed to provide regulators with additional information and authority to manage this new concept. To date, a few states have taken action to adopt the amended Model Act and Regulation. Cigna continues to follow the states’ activity in this area and will amend its processes as necessary to comply with revised state laws.

Marketing, Advertising and Products

In most states, Cigna’s insurance companies and HMO subsidiaries are required to certify compliance with applicable advertising regulations on an annual basis. Cigna’s insurance companies and HMO subsidiaries are also required in most states to file and secure regulatory approval of products prior to the marketing, advertising, and sale of such products. State and/or federal regulatory scrutiny of life and health insurance company and HMO marketing and advertising practices, including the adequacy of disclosure regarding products and their administration, may result in increased regulation. Products offering limited coverage, such as those Cigna issues through the Star HRG business, continue to attract increased regulatory scrutiny.

Licensing Requirements

Pharmacy Licensure Laws

Certain Cigna subsidiaries are pharmacies, which dispense prescription drugs to participants of benefit plans administered or insured by Cigna subsidiary HMOs and insurance companies. These pharmacy-subsidiaries are subject to state licensing requirements and regulation.

International Licensure Laws

Cigna International subsidiaries are often required to be licensed when entering new markets or starting new operations in certain jurisdictions. The licensure requirements for these Cigna subsidiaries vary by country and are subject to change.

Claim Administration, Utilization Review and Related Services

Certain Cigna subsidiaries contract for the provision of claim administration, utilization management and other related services with respect to the administration of self-insured benefit plans. These Cigna subsidiaries may be subject to state third-party administration and other licensing requirements and regulation.

International Regulations

An increasing portion of Cigna’s revenue is derived from operations outside the United States, which exposes the Company to laws of multiple jurisdictions and the rules and regulations of various governing bodies and regulators, including those related to financial and other disclosures, corporate governance, privacy, data protection, data mining, data transfer, labor and employment, consumer protection and anti-corruption. The operations in countries outside the United States:

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are subject to local regulations in the place in which Cigna subsidiaries conduct business,

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in some cases, are subject to regulations in the places in which customers are located, and

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in all cases are subject to FCPA.

CIGNA CORPORATION – 2011 Form 10-K – 29

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FCPA prohibits offering, promising, providing or authorizing others to give anything of value to a foreign government official to obtain or retain business or otherwise secure a business advantage. Cigna is also subject to applicable anti-corruption laws in the jurisdictions in which it operates. Additionally, in many countries outside of the U.S., health care professionals are employed by the government. Therefore, Cigna’s dealings with them are subject to regulation under the FCPA. Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil sanctions as well as other penalties and the SEC and Department of Justice have increased their enforcement activities with respect to FCPA. The UK Bribery Act of 2010 went into effect in 2011. The Bribery Act is an anti-corruption law that applies to all companies with a nexus to the United Kingdom and whose scope is even broader than the FCPA. It is yet to be seen how the UK Bribery Act will be enforced, but any voluntary disclosures of FCPA violations may be shared with the UK authorities, thus potentially exposing companies to liability and potential penalties in multiple jurisdictions. Cigna has internal control policies and procedures and has implemented training and compliance programs for its employees to deter prohibited practices. However, if Cigna’s employees or agents fail to comply with applicable laws governing its international operations, the Company may face investigations, prosecutions and other legal proceedings and actions which could result in civil penalties, administrative remedies and criminal sanctions. See the Risk Factors section beginning on page 33 for a discussion of the risks related to operating globally.

Federal Regulations

Employee Retirement Income Security Act

Cigna subsidiaries sell most of their products and services to sponsors of employee benefit plans that are governed by ERISA. As a result of Health Care Reform, Cigna subsidiaries are subject to requirements imposed by ERISA affecting claim and appeals procedures for individual insurance and insured and self-insured group health plans and are expected to comply with these requirements on behalf of the dental, disability, life and accident plans they administer.

Medicare Regulations

Several Cigna subsidiaries, including those acquired in the HealthSpring transaction, engage in businesses that are subject to federal Medicare regulations such as:

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those offering individual and group Medicare Advantage (HMO) coverage;

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contractual arrangements with the federal government for the processing of certain Medicare claims and other administrative services; and

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those offering Medicare Pharmacy (Part D) products that are subject to federal Medicare regulations.

In Cigna’s Medicare Advantage business, the Company contracts with the Center for Medicare and Medicaid Services (“CMS”) to provide services to Medicare beneficiaries pursuant to the Medicare program. As a result, the Company’s right to obtain payment from CMS is subject to compliance with numerous and complex regulations and requirements that are frequently modified and subject to administrative discretion. The marketing and sales activities (including those of third-party brokers and agents) are also heavily regulated by CMS and other governmental agencies.

Several Cigna subsidiaries are also subject to reporting requirements pursuant to Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007.

Federal Audits of Government Sponsored Health Care Programs

Participation in government sponsored health care programs subjects Cigna to a variety of federal laws and regulations and risks associated with audits conducted under these programs. These audits may occur in years subsequent to Cigna providing the relevant services under audit. These risks may include reimbursement claims as well as potential fines and penalties. For example, the federal government requires Medicare and Medicaid providers to file detailed cost reports for health care services provided. These reports may be audited in subsequent years. See “Health Care” in Section D beginning on page 4 of this Form 10-K for additional information about Cigna’s participation in government health-related programs.

CIGNA CORPORATION – 2011 Form 10-K – 30

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The Federal government has made investigating and prosecuting health care fraud and abuse a priority. Fraud and abuse prohibitions encompass a wide range of activities, including kickbacks for referral of members, billing for unnecessary medical services, improper marketing, and violation of patient privacy rights. The regulations and contractual requirements in this area are complex and subject to change and compliance will continue to require significant resources.

Health Insurance Portability and Accountability Act Regulations

The federal Health Insurance Portability and Accountability Act of 1996 and its implementing regulations (“HIPAA”) impose requirements on health insurers, HMOs, health plans, health care providers and clearinghouses. Health insurers and HMOs are further subject to regulations related to guaranteed issuance (for groups with 50 or fewer lives), guaranteed renewal, and portability of health insurance.

HIPAA also imposes minimum standards for the privacy and security of protected health information (“PHI”). HIPAA’s privacy and security requirements were expanded by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) which enhanced penalties for HIPAA violations and requires regulated entities to provide notification to various parties in the event of a breach of unsecured PHI. Regulations pursuant to HITECH continue to be promulgated and are monitored and implemented as they are finalized.

HIPAA also established rules that standardize the format and content of certain electronic transactions, including, but not limited to, eligibility and claims. Federal regulations were issued requiring entities subject to HIPAA to update their transaction formats for electronic data interchange from HIPAA 4010 to version 5010 standards and convert from the ICD-9 diagnosis and procedure codes to the ICD-10 diagnosis and procedure codes. The IDC-10 conversion is required by October 1, 2013.

Other Confidentiality Requirements

The federal Gramm-Leach-Bliley Act generally places restrictions on the disclosure of non-public information to non-affiliated third parties, and requires financial institutions, including insurers, to provide customers with notice regarding how their non-public personal information is used, including an opportunity to “opt out” of certain disclosures. State departments of insurance and certain federal agencies adopted implementing regulations as required by federal law. A number of states have also adopted data security laws and/or regulations, regulating data security and/or requiring security breach notification, which may apply to Cigna in certain circumstances.

Antitrust Regulations

Cigna subsidiaries are also engaged in activities that may be scrutinized under federal and state antitrust laws and regulations. These activities include the administration of strategic alliances with competitors, information sharing with competitors and provider contracting.

Anti-Money Laundering Regulations

Certain Cigna products (“Covered Products” as defined in the Bank Secrecy Act) are subject to U.S. Department of the Treasury anti-money laundering regulations. Cigna has implemented anti-money laundering policies designed to ensure that its Covered Products are underwritten and sold in compliance with these regulations. Cigna may also be subject to anti-money laundering laws in non-U.S. jurisdictions where it operates.

Office of Foreign Assets Control

The Company is also subject to regulation put forth by the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury which administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States. In addition, Cigna may be subject to similar regulations in non-U.S. jurisdictions in which it operates.

CIGNA CORPORATION – 2011 Form 10-K – 31

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Investment-Related Regulations

Depending upon their nature, Cigna’s investment management activities are subject to U.S. federal securities laws, ERISA, and other federal and state laws governing investment related activities. In many cases, the investment management activities and investments of individual insurance companies are subject to regulation by multiple jurisdictions.

K.   Miscellaneous

Cigna and its principal subsidiaries are not dependent on business from one or a few customers. No one customer accounted for 10% or more of Cigna’s consolidated revenues in 2011. Cigna and its principal subsidiaries are not dependent on business from one or a few brokers or agents. In addition, Cigna’s insurance businesses are generally not committed to accept a fixed portion of the business submitted by independent brokers and agents, and generally all such business is subject to its approval and acceptance.

Cigna had approximately 31,400 employees as of December 31, 2011; 30,600 employees as of December 31, 2010; and 29,300 employees as of December 31, 2009.

CIGNA CORPORATION – 2011 Form 10-K – 32

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