10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

________________

(Mark One)

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
OR
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission file number 1-8323

CIGNA Corporation

(Exact name of registrant as specified in its charter)

________________

Delaware	06-1059331
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
Two Liberty Place, Philadelphia, Pennsylvania	19192
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (215) 761-1000

________________

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

	Name of each exchange on
Title of each class	which registered
Common Stock, Par Value $0.25;	New York Stock Exchange, Inc.
Preferred Stock	Pacific Exchange, Inc.
Purchase Rights	Philadelphia Stock Exchange, Inc.

Securities registered pursuant to section 12(g) of the Act:

None

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X   No __.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [X]     Accelerated filer [ ]     Non-accelerated filer [ ]

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

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2005, was approximately $13.4 billion.

As of January 31, 2006, 121,068,516 shares of the registrant’s Common Stock were outstanding.

Parts I and II of this Form 10-K incorporate by reference information from the registrant’s annual report to shareholders for the year ended December 31, 2005. Part III of this Form 10-K incorporates by reference information from the registrant’s proxy statement to be dated on or about March 24, 2006.

TABLE OF CONTENTS

Page

PART I

Item 1.	Business
	A.	Description of Business	1
	B.	Financial Information about Industry Segments	2
	C.	Health Care	3
	D.	Disability & Life	11
	E.	International	13
	F.	Other Operations	16
	G.	Investments and Investment Income	17
	H.	Run-off Retirement	19
	I.	Run-off Reinsurance	20
	J.	Regulation	22
	K.	Ratings	25
	L.	Miscellaneous	27
Item 1A.	Risk Factors		28
Item 1B.	Unresolved Staff Comments		33
Item 2.	Properties		33
Item 3.	Legal Proceedings		33
Item 4.	Submission of Matters to a Vote of Security Holders		35
Executive Officers of the Registrant			35
PARTII
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities		36
Item 6.	Selected Financial Data		37
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of
	Operations		37
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		37
Item 8.	Financial Statements and Supplementary Data		37
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial
	Disclosure		37
Item 9A.	Controls and     Controls and Procedures		37
Item 9B.	Controls and     Other Information		37
	It
PART III
Item 10.	Directors and Executive Officers of the Registrant		38
	A. Directors of the Registrant		38
	B. Executive Officers of the Registrant		38
	C. Code of Ethics and Other Corporate Governance Disclosures		38
Item 11.	Executive Compensation		38
Item 12.	Security Ownership of Certain Beneficial Owners and Management and
	Related Stockholder Matters		39
Item 13.	Certain Relationships and Related Transactions		39
Item 14.	Principal Accounting Fees and Services		39
PART IV
Item 15.	Exhibits and Financial Statement Schedules		40
Signatures			41
Index to Financial Statement Schedules			FS-1
Index to Exhibits			E-1

PART I

Item 1. BUSINESS

A.Description of Business

CIGNA Corporation had consolidated shareholders’ equity of $5.4 billion and assets of $44.9 billion as of December 31, 2005, and revenues of $16.7 billion for the year then ended. CIGNA Corporation and its subsidiaries constitute one of the largest investor-owned health care and related benefits organizations in the United States. Its subsidiaries are major providers of health care and related benefits offered through the workplace, including health care products and services, and group disability, life and accident insurance, and disability and workers’ compensation case management and related services. CIGNA’s major insurance subsidiary, Connecticut General Life Insurance Company (“CG Life”), traces its origins to 1865. CIGNA Corporation was incorporated in the State of Delaware in 1981.

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 Corporation is a holding company and is not an insurance company. Its subsidiaries conduct various businesses, which are described in this document.

CIGNA’s revenues are derived principally from premiums, fees, other revenues and investment income. The financial results of CIGNA’s businesses are reported in the following segments, as shown:

·   Health Care Segment

·   Disability and Life Segment

·   International Segment

·   Run-off Reinsurance Segment

·   Run-off Retirement consists of:

·   gain recognition from the 2004 sale of the retirement benefits business;

·   net results of modified coinsurance arrangements;

·   expenses associated with the run-off of the business; and

·   results of the retirement benefits business prior to the sale of the business on April 1, 2004.

·   Other Operations consists of:

·   deferred gains recognized from the 1998 sale of the individual life insurance and annuity business;

·   corporate life insurance (including policies on which loans are outstanding);

·   settlement annuity business; and

·   certain investment management services (a significant portion of which were sold in 2004).

Investment results produced by CIGNA Investments on behalf of CIGNA’s insurance operations are reported in each segment.

Available Information

CIGNA’s Internet address is http://www.cigna.com. CIGNA’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports are available through CIGNA’s website as soon as reasonably practicable after the filing or furnishing of such material with the Securities and Exchange Commission. See “Code of Ethics and Other Corporate Governance Disclosures” in Part III, Item 10 of this Form 10-K regarding additional available information.

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B.    Financial Information about Industry Segments

Financial information in the tables that follow is presented 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 2005 presentation. Industry rankings and percentages set forth below are for the year ended December 31, 2004, 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 19 to the Financial Statements included in CIGNA’s 2005 Annual Report.

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C.    Health Care

CIGNA’s Health Care operations offer insured and self-funded medical, dental, behavioral health, prescription drug and other products and services that integrate to support the delivery of consumerism and health advocacy solutions. These operations also provide disability and life insurance products which were historically sold in connection with certain experience-rated medical products and continue to be managed by CIGNA’s health care business. These products and services are provided by subsidiaries of CIGNA Corporation.

Industry and Strategic Overview

CIGNA believes that the health care business model is evolving to one that focuses more directly on the health care consumer. Consumerism is designed to help individuals be better consumers of health care by providing them the information, support tools, health advocacy and incentives to make more efficient and better informed health care decisions. CIGNA believes that engaging consumers more closely in health care decisions can result in improved health care outcomes and take unnecessary costs out of the system.

Consumerism represents a transition from a cost-based business model to a value-based model, under which CIGNA seeks to provide transparency about provider quality and cost, customer support tools and services, and health advocacy support, to assist consumers in making decisions regarding their health care.

CIGNA has developed products, educational resources and customer support tools for consumers and initial capabilities to improve the quality and transparency of information to employers about the health needs of their plan participants, intended ultimately, to assist consumers in making more informed choices regarding their health care and achieve better health outcomes. The shift in the business model toward consumerism is in the early stages, and CIGNA believes that its capabilities in consumerism, health advocacy and the ability to provide useful information to consumers and employers position CIGNA to meet the emerging trend.

CIGNA continually evaluates acquisitions and other transactions that present opportunities to enhance its product capabilities and provide a basis for lower medical costs. As part of that strategy, in 2005 CIGNA:

·   acquired Choicelinx®, a consumer focused benefits and services company to further strengthen its capabilities in consumerism and health advocacy;

  · acquired Managed Care Consultants to strengthen its provider network in Nevada;

·   formed marketing affiliations with Health Alliance Plan in Michigan and Tufts Health Plan in Massachusetts and Rhode Island, designed to offer national products in these and other states; and 

·   formed a strategic alliance with NationsHealth, Inc. to actively market CIGNATURE Rx^SM, its Medicare Part D program.

Principal Products

The customers of CIGNA’s Health Care operations range in size from some of the largest United States corporations to small enterprises, and include employers, multiple employer groups, unions, governmental entities and other groups. Products are marketed in all 50 states, the District of Columbia and Puerto Rico.

Products and Services

Medical

CIGNA provides a wide array of products and services to meet the needs of employers and other groups sponsoring health benefit plans and the employees and dependents participating in these plans, including consumer directed health plans, health maintenance organizations (“HMOs”), network only (“Network”) and point-of-service (“POS”) medical plans, preferred provider plans (“PPOs”), and traditional medical indemnity coverage. CIGNA offers a modular product portfolio, including CIGNATURE^® CareAllies^SM and CIGNA Choice Fund^SM Solutions that offers a choice of benefits network and various funding, medical management, consumerism and health advocacy options for employers and consumers. CareAllies provides medical management, disease management, and health advocacy services to large, complex plan sponsors that allow their employees to choose from among multiple health care vendors. CareAllies offers a consistent set of services to address the clinical and administrative inconsistencies that are inherent in the multi-vendor approach.

As a means to improve health outcomes and take unnecessary costs out of the system, it is CIGNA's

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goal to provide customers that purchase more than one product, which might include any combination of medical, dental, behavioral health, pharmacy and medical care management, with: (1) a holistic and integrated approach towards members' health that promotes consistent case management; and (2) the integration of health care information through predictive modeling and other tools, to provide targeted outreach and health advocacy by CIGNA's clinical professionals to members.

CIGNA also is developing tools to assist employers in choosing product designs to achieve better health outcomes for their plan participants. For example, CIGNA’s Hi Score^® tool aggregates employee plan participant data (not identifiable by individual) in four categories: frequency and type of health care services provided; level of employee engagement in their health care decisions; effectiveness of existing incentives in meeting employee population objectives; and opportunities for outreach to employees. Hi Score ranks the employer in each of these categories to show the employer’s current performance compared to the original baseline and the employer’s industry peer group with the goal of enabling employers to modify actions to potentially improve employee health outcomes and, consequently, cost trends.

Consumer Directed Health Plans. CIGNA offers customers the CIGNA Choice Fund suite of consumer directed health plan products. The CIGNA Choice Fund includes health reimbursement account (“HRA”) and health savings account (“HSA”) options, both enabled by federal law. The HRA combines flexible benefit plan designs and the ability of employers to allow roll over reimbursement accounts from year to year with enhanced decision support tools and consumer incentive programs. The HSA combines a high deductible payment feature for the health plan with a tax-preferred account offering mutual fund or other savings investment options. Funds in the HSA can be used to pay the deductible and for other eligible tax-deductible medical expenses.

HMOs. HMOs are required by law to provide coverage for all basic health services. They use various tools to facilitate the appropriate utilization of health care services by members and providers and control unit costs through provider contracts. Members typically choose a primary care physician from CIGNA’s provider network. Primary care physicians are responsible for the member’s primary medical and preventive care. Members may be required to obtain referrals from their primary care physicians to receive covered non-emergency services from participating specialists or facilities. CIGNA also offers an open access HMO product that allows members to obtain covered services from non-participating providers and without the requirement of a referral from the primary care physician.

Other than CIGNA HealthCare of Arizona, Inc., a staff model HMO which employs some physicians and other providers, all CIGNA HMOs are individual practice association models utilizing networks of independent physicians, hospitals and other health care providers that have directly or indirectly contracted with the HMO.

As of December 31, 2005, CIGNA’s HMO networks included approximately 258,000 physicians and 2,000 hospitals.

Currently, many contracted providers are compensated by CIGNA on a discounted fee-for-service or other service-specific basis (such as hospital per diems or case rates) for covered health care services provided to the members. Certain participating providers agree to provide covered services in consideration for receiving a monthly predetermined fee (capitation) from CIGNA. Capitation arrangements shift some of the financial risk from CIGNA to the providers.

In some cases, capitated providers subcontract with other providers for certain health care services. In the event that the capitated provider is paid but fails to pay its subcontracted providers, the subcontracted providers or regulators may look to CIGNA for payment. CIGNA may, in some cases, voluntarily make additional payments directly to the subcontracted providers to ensure continuity of care to its members through the provider network. A few states have adopted laws or regulations requiring payment to subcontracted providers in this situation. CIGNA typically requires a satisfactory letter of credit or other financial guarantee from the capitated provider entity to protect CIGNA from this possible exposure, although not all capitated arrangements have this protection.

CIGNA contracts with the federal Centers for Medicare and Medicaid Services (“CMS”) to provide Medicare HMO coverage for eligible individuals in Arizona. The contract provides for a fixed per member per month premium from CMS, based upon a formula that calculates the projected cost of providing services for each Medicare member. Premium amounts are updated annually. Members generally receive enhanced benefits over standard Medicare fee-for-service coverage, including prescription drug and vision coverage, and pay lower, fixed co-payments for services used. Depending on

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the plan benefits selected, members may be required to pay an additional premium to CIGNA for their HMO coverage.

Network, POS and PPO Medical Products. CIGNA offers Network products that cover non-emergency services provided only by CIGNA participating providers and emergency services provided by participating and non-participating providers. CIGNA also offers POS medical plans that cover health care services provided by participating and non-participating health care providers. This allows participants to determine at the “point of service” whether to obtain covered services from a CIGNA participating provider (“In-Network” services) or from a non-participating provider (“Out-of-Network” services). Participants in POS plans generally pay a fixed co-payment or co-insurance amount for In-Network covered services. Reimbursement for Out-of-Network covered services is subject to deductibles and coinsurance, which result in a higher cost to participants than In-Network services. CIGNA offers POS products that allow access to In-Network specialty care without the requirement of a referral from the primary care physician.

CIGNA also offers PPO plans. PPO plans are similar to POS plans except that participants are required to pay coinsurance (a percentage of the charge) for both In-Network and Out-of-Network covered services. The participant’s coinsurance obligation is greater for Out-of-Network services.

Some of CIGNA’s POS products require that the participant receive a referral from a primary care physician participating in the CIGNA provider network for coverage of non-emergency specialty care services. Under this product, the participant selects a primary care physician and the higher In-Network reimbursement for specialty care services is available only if the participant has a referral from his or her primary care physician to a specialty care provider in the CIGNA network.

As of December 31, 2005, CIGNA's Network, POS and PPO networks included approximately 843,000 physicians and 7,900 hospitals.

Traditional Medical Indemnity Products. Traditional medical indemnity products provide reimbursement for covered services without regard to whether the provider of the covered service participates in the CIGNA provider network. Participants are responsible for sharing in the cost of their care by paying deductibles and coinsurance, subject to annual out-of-pocket maximums. Some traditional indemnity products utilize CIGNA's network of participating providers. Patients covered under these plans have an economic incentive to use the CIGNA participating providers because their coinsurance is based upon the providers’ discounted charge.

CIGNA HealthCare of Arizona, Inc. is also a participating provider in the fee-for-service Medicare program, furnishing outpatient care to Medicare beneficiaries. Reimbursement for inpatient and outpatient services is made by CMS pursuant to laws and regulations governing the Medicare program. Currently, CMS reimburses outpatient services in accordance with payment classification groups based on historical cost information filed by CIGNA HealthCare of Arizona, Inc.

Dental

CIGNA offers a variety of dental care products including managed care, PPO and traditional indemnity products. Customers can purchase CIGNA dental products as stand alone products or integrated with CIGNA medical products. Customers have access to live service representatives and 24 hour on-line assistance through CIGNA's secure member website, myCIGNA.com.

Managed dental care products are offered in 36 states and the District of Columbia through a network of independent providers that have contracted with CIGNA to provide dental services to members. Most dentists in the CIGNA network receive a monthly predetermined fee (capitation) for each covered member in their patient panel. Network dentists may also receive additional fees for certain services. Generally, members are responsible for a fixed co-payment for certain covered services provided by a network dentist.

CIGNA also offers dental PPO products similar to the medical PPO products described above. As of December 31, 2005, CIGNA’s national dental PPO network had approximately 70,200 participating dentists.

Traditional dental indemnity products also operate in a manner consistent with that described with respect to medical indemnity products, above.

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Behavioral Health

CIGNA provides behavioral health care benefit products, behavioral health care management, employee assistance programs, and work/life programs to employer sponsored benefit plans, HMOs, governmental entities and disability insurers. CIGNA focuses on integrating its programs and services to provide the consumer with customized, holistic care through such products as:

·   Custom Network Solutions, introduced on January 1, 2006, that give employers the ability to select four different provider network options to meet the specific needs of their plan participants; and

·   customized on-line self-assessment and help tools for a variety of concerns, including stress, grief, relationship issues and depression that connect consumers to a telephonic or face-to-face counselor as appropriate.

As of December 31, 2005, CIGNA's behavioral care national network had approximately 40,000 independent psychiatrists, psychologists and clinical social workers and approximately 5,000 facilities and clinics that are paid on a contracted fee-for-service basis.

Pharmacy

CIGNA offers prescription drug coverage plans both on a stand alone basis as well as in conjunction with its medical products described above. CIGNA has a nationwide network of contracted pharmacies that it utilizes in connection with its HMO, Network, POS and PPO products. In addition, CIGNA provides managed pharmacy benefit programs in connection with its HMO and POS products.

CIGNA also offers mail order, telephone and on-line pharmaceutical fulfillment services through its CIGNA Tel-Drug^® operation. In addition, CIGNA has developed on-line decision support tools to provide consumers with information to make their pharmacy-related decisions. The tools include:

·   a prescription drug price comparison tool that gives members price comparisons on branded and generic drugs from pharmacy retailers and mail order, showing out-of-pocket as well as the total anticipated costs, of the prescription;

·   DrugCompare and Medication Library where members can obtain detailed information and comparisons of medications; and

·   Prescription Claim History Tool, which enables consumers to see their combined retail and home delivery prescription history to help plan for potential out-of-pocket costs.

CIGNATURE Rx. In 2005, CIGNA introduced CIGNATURE Rx, its Medicare Part D prescription drug program, which provides a number of plan options as well as service and information support. CIGNATURE Rx is provided in alliance with NationsHealth, Inc. and combines CIGNA's pharmacy product capabilities with NationsHealth’s service and distribution capabilities. CIGNATURE Rx is available in all 50 states and the District of Columbia.

Care Management

CIGNA strives to help consumers make more informed health care decisions by providing a number of care management and health advocacy programs and information support tools that are designed to help improve health and cost outcomes. Some of these include:

·   early intervention by CIGNA's network of over 3,000 clinical professionals;

·   targeted outreach using CIGNA's predictive modeling capabilities through tools such as the CIGNA Health Advisor Portal;

·   the integration of medical and specialty (pharmacy, dental and behavioral) care to help with consistent case management; and

·   disease management programs, including CIGNA Well Aware for Better Health^® focusing on chronic conditions such as asthma, diabetes, heart disease and low back pain as well as programs introduced in 2005 focusing on depression, high risk obesity, weight loss and smoking cessation.

CIGNA has developed a range of consumer decision support tools including:

·   MyCIGNA.com, CIGNA’s consumer Internet portal. The portal is personalized to each member’s CIGNA medical, dental and pharmacy plan information; and

·   a number of interactive online cost and quality information tools that compare hospital quality and efficiency information, prescription drug choices and, beginning in 2006, average price

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range and member-specific estimates for average out-of-pocket costs for certain medical procedures.

Quality Outcomes

CIGNA's commitment to promoting quality care is reflected in a variety of activities, including: the development of the CIGNA Care Network^®, described below; the credentialing of medical providers and facilities that participate in CIGNA's managed care and PPO networks, using quality criteria which meet or exceed external accreditation or state regulatory agency standards, or both; a national externally accredited Quality Program, that includes clinical interventions and quality measurement; and participation in industry initiatives that provide hospital and physician profiling information to members for more educated decision making.

CIGNA Care Network. CIGNA Care Network is a benefit design option available January 1, 2006, for CIGNA plans in 16 service areas across the country. CIGNA Care Network is a subset of participating physicians in certain specialties who are designated as CIGNA Care Network providers based on specific quality and efficiency selection criteria. Consumers pay reduced co-payments for choosing a specialist designated as a CIGNA Care Network provider. This encourages consumers to select a physician identified for participation in the CIGNA Care Network based on quality and efficiency measures. CIGNA participating specialists are evaluated annually for inclusion in the CIGNA Care Network.

Provider Credentialing. CIGNA credentials physicians, hospitals and other health care providers participating in its participating provider networks using quality criteria which meets or exceeds the standards of external accreditation or state regulatory agencies, or both.

CIGNA's practitioner credentialing criteria include verification of a current unrestricted professional license, a valid and unrestricted license to prescribe drugs (as appropriate), board certification or other appropriate training and hospital privileges (as appropriate) at a CIGNA participating facility. In addition, CIGNA queries the National Practitioner Data Bank to obtain information about the practitioner’s malpractice experience and also obtains Medicare sanction activity. CIGNA expects practitioners to demonstrate an acceptable history of malpractice claim experience, adequacy of malpractice insurance coverage and an acceptable work history. Typically, most practitioners are recredentialed every three years.

To be credentialed, CIGNA requires the medical facilities with which it contracts to have an unrestricted state license, no sanctions by the Department of Health and Human Services, accreditation by an approved accrediting organization and adequate malpractice and general liability coverage. Typically, most medical facilities are recredentialed every three years.

NCQA Accreditation. Accreditation by the National Committee for Quality Assurance (“NCQA”) of CIGNA’s medical HMOs validates CIGNA’s quality program. The NCQA is a nationally recognized independent, not-for-profit organization dedicated to assessing, measuring and reporting on the quality of managed care plans.

As of December 31, 2005, 88% of CIGNA’s U.S. plan locations are NCQA accredited and, as of January, 2006, 100% of these accredited plans have received Excellent or Commendable accreditation for HMO and POS products.

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

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Distribution and Markets

CIGNA has organized the sales and distribution of its products in the following segments:

·   national accounts, which are multi-site employers with more than 5,000 employees;

·   middle market, generally defined as multi-site employers with more than 200 but fewer than 5,000 employees;

·   small business, which includes employers with 2 to 200 employees;

·   government, which includes employees in federal, state and local governments, primary and secondary schools, and colleges and universities;

·   Taft-Hartley, which includes members covered by union trust funds; and

·   seniors, which focuses on the health care needs of individuals 55 years and older.

CIGNA employs group sales representatives to distribute the products and services of this segment through insurance brokers, insurance consultants and directly to employers. CIGNA also employs representatives to sell medical cost containment, managed behavioral health care and employee assistance services directly to insurance companies, HMOs, third party administrators and employer groups. As of December 31, 2005, the field sales force for the products and services of this segment consisted of approximately 525 sales representatives in 85 field locations.

CIGNA believes that the health care consumer will play an increasingly important role in the health care product purchasing process and has developed MyCignaPlans.com as a tool to facilitate this change. MyCignaPlans.com allows prospective members to access its website before enrolling to compare plan coverage and pricing options based on a variety of factors. The application gives consumers information on the total health care cost to them and their employer.

Funding Arrangements

The segment’s health care products and services are offered through guaranteed cost, retrospectively experience-rated, administrative services only (“ASO”) and minimum premium funding arrangements.

Under guaranteed cost funding arrangements, CIGNA charges a fixed premium and bears the risk for claims and costs in excess of the premium.

Under retrospectively 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 generally bears the risk for costs incurred in excess of premiums, but has the potential to recover this deficit from future policyholder renewal premiums. For additional discussion, see “Pricing, Reserves and Reinsurance” below.

Under ASO funding arrangements, the employer or other plan sponsor self-funds all of its claims, and they assume the risk for claim costs incurred. CIGNA makes available to ASO plans its participating provider network and typically provides claims processing and other services and programs, including: health quality assurance, utilization management, cost containment, health advocacy, 24-hour help line, case management, disease management, pharmacy benefit management, behavioral health care management services (through its provider networks), or a combination of the above, in exchange for administrative service fees. The employer/plan sponsor is responsible for self-funding all claims, but may purchase stop-loss insurance from CIGNA or other insurers for claims in excess of some predetermined amount in total or for specific types of claims or both.

Minimum premium funding arrangements combine insurance protection with an element of self-funding. The policyholder assumes the risk for, and self-funds, claim costs up to a predetermined aggregate, maximum amount, and CIGNA bears the risk for claim costs incurred in excess of that amount. CIGNA has the potential to recover this deficit balance from future policyholder renewal premiums. Accordingly, minimum premium funding arrangements have a risk profile similar to retrospectively experience-rated funding arrangements.

Pricing, Reserves and Reinsurance

Premiums and fees charged for most insured health care products and for disability and life insurance products are generally set in advance of the policy period and are guaranteed for one year.

Premium rates are established either on a guaranteed cost basis or on a retrospectively experience-rated basis.

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Charges to customers established on a guaranteed cost basis at the beginning of the policy period cannot be adjusted to reflect actual claim experience during the policy period. A guaranteed cost pricing methodology reflects assumptions about future claims, expenses, credit risk, enrollment mix, investment returns, competitive considerations and profit margins. Claim and expense 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. Generally, guaranteed cost groups are smaller and less statistically credible than retrospectively experience-rated groups. In addition, pricing for health care products that use networks of contracted providers also reflects assumptions about the impact of provider contracts on future claims. Premium rates may vary among accounts to reflect the anticipated contract mix, family size, industry, renewal date, and other cost-predictive factors. In some states, premium rates must be approved by the state insurance departments, and state laws may restrict or limit the use of rating methods.

Premiums established for retrospectively experience-rated business may be adjusted for the actual claim and administrative cost experience of the account through an experience settlement process subsequent to the policy period. To the extent that the cost experience is favorable in relation to the prospectively determined premium rates, a portion of the initial premiums may be credited to the policyholder as an experience refund. If claim experience is adverse in relation to the initial premiums, CIGNA may recover the resulting experience deficit, according to contractual provisions, through future premiums and experience settlements, provided the contract remains in force.

CIGNA contracts on an ASO basis with customers who fund their own claims. CIGNA charges these customers administrative fees based on the expected cost of administering their self-funded programs. These fees reflect anticipated or actual experience with respect to claim volumes, expenses, competitive considerations, and profit margins. In some cases, CIGNA provides performance guarantees related to identified performance. If these standards are not met, CIGNA may be financially at risk up to a percentage of the contracted fee or a stated dollar amount.

In addition to paying current benefits and expenses under insurance policies and HMO service agreements, CIGNA establishes reserves in amounts estimated to be sufficient to settle reported claims not yet paid, as well as claims incurred but not yet reported. Also, liabilities are established for estimated experience refunds based on the results of retrospectively experience-rated policies and applicable contract terms.

As of December 31, 2005, approximately $1.4 billion, or 62% of the reserves of this segment comprise 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. Of the reserve amount expected to be paid within one year, $320 million relates to amounts recoverable from certain ASO customers and from minimum premium policyholders, and is offset by a receivable. The remaining reserves are primarily short term with a long tail 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.

CIGNA credits interest on fund balances to retrospectively experience-rated policyholders through rates that are set at CIGNA’s discretion taking investment performance and market rates into consideration. Generally, for interest-crediting rates set at CIGNA’s discretion, higher rates are credited to funds with longer terms reflecting the fact that higher yields are generally available on investments with longer maturities. For 2005, the rates of interest credited ranged from 2.75% to 4.32%, with a weighted average rate of 3.30%.

The profitability of CIGNA's fully insured health care products depends on the adequacy of premiums charged relative to claims and expenses. For medical and dental products, profitability reflects the accuracy of cost projections for health care (unit costs and utilization), the adequacy of fees charged for administration and risk assumption and effective medical cost and utilization management.

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

Competition

The health care businesses described in this segment are subject to intense competition. Recent industry consolidation has intensified an already competitive business environment. While no one competitor or small number of competitors dominates the health care market, CIGNA expects a continuing trend of consolidation in the industry with the emergence of consumerism intensifying this development.

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Also, in certain geographic locations some health care companies may have significant market share positions. A large number of health care companies and other entities compete in offering similar products. Competition in the health care market exists both for employer-policyholders and for the employees in those instances where the employer offers its employees the choice of products of more than one health care company. Most group policies are subject to annual review by the policyholder, which may seek competitive quotations prior to renewal.

The principal competitive factors that affect this segment are quality of service; scope, cost-effectiveness and quality of provider networks; effectiveness of medical care management; product responsiveness to the needs of customers and their employees; cost-containment services; technology; price; and effectiveness of marketing and sales. In addition, financial strength of the insurer, as indicated by ratings issued by nationally recognized rating agencies, is also a competitive factor. For more information concerning insurance ratings, see “Ratings” in Section K beginning on page 25.

CIGNA believes that its national scope, integrated approach to consumerism, product breadth, clinical care and medical management capabilities and funding options are strategic competitive advantages. These advantages allow CIGNA to respond to the diverse needs of its customer base in each market in which it operates.

The principal competitors of CIGNA’s managed care and indemnity businesses are:

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

·   Blue Cross and Blue Shield organizations;

·   stand-alone HMOs and PPOs;

·   HMOs affiliated with major insurance companies and hospitals; and

·   national managed pharmacy, behavioral health and cost containment 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 allow consumers to take a more active role in the management of their health. This is accomplished primarily through financial incentives and access to enhanced medical quality data. Management believes that it has the capabilities and appropriate strategy to allow it to compete against both the traditional and new competitors.

The effective use of web-based information tools and technology are critical to success in the health care industry, and CIGNA believes they will be competitive differentiators.

Financial information about the Health Care segment is presented in the MD&A section and Note 19 to CIGNA's 2005 Financial Statements included in its 2005 Annual Report, which are incorporated herein by reference.

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D.Disability and Life

Principal Products and Markets

CIGNA’s Disability and Life operations provide the following insurance products and their related services: long- and short-term disability insurance, disability and workers’ compensation case management, group life insurance, and accident and specialty insurance. These products and services are provided by subsidiaries of CIGNA Corporation. CIGNA markets these group insurance products and services to employers, employees, professional and other associations and other groups.

The following table sets forth the net premiums and fees for this segment by its principal products.

	Year Ended December 31,
	2005		2004		2003
	(In millions)
Disability	$	677	$	617	$	538
Life		1,108		1,041		977
Other		280		265		292
Total Premiums      and Fees	$	2,065	$	1,923	$	1,807

Disability Insurance

CIGNA markets group long-term and short-term disability insurance products in all states and statutorily required disability insurance plans in certain states. These products generally provide a fixed level of income to replace a portion of wages lost because of disability. They also provide assistance to the employee in returning to work and assistance to the employer in managing the cost of employee disability.

CIGNA also provides case management and related services to workers’ compensation insurers and employers who self-fund workers’ compensation and disability benefits.

CIGNA’s disability insurance products may be coordinated with behavioral programs, workers’ compensation, medical programs, social security advocacy, and the Family and Medical Leave Act and leave of absence administration. This integration provides customers with increased efficiency and effectiveness in disability claims management. CIGNA may receive fees for providing integration services to clients.

Life Insurance

Group life insurance products include group term life and group universal life. CIGNA no longer markets variable universal life insurance but continues to administer the products for existing policyholders. Group term life insurance may be employer-paid basic life insurance or employee-paid supplemental life insurance.

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 rate, and may be borrowed, withdrawn, or used to fund future life insurance coverage. With group variable universal life insurance, the cash value varies directly with the performance of the underlying investments and neither the return nor the principal is guaranteed.

Approximately 5,200 group life insurance policies covering approximately 5.8 million lives were outstanding as of December 31, 2005.

Other

CIGNA 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 also offers specialty insurance services that consist primarily of life, accident and disability insurance to professional associations, financial institutions, schools and participant organizations.

Distribution

CIGNA employs group sales representatives to distribute the products and services of this segment through insurance brokers and consultants. As of December 31, 2005, the field sales force for the products and services of this segment consisted of approximately 160 sales representatives in 26 field locations.

Pricing, Reserves and Reinsurance

Premiums and fees charged for disability and life insurance products are generally established in advance of the policy period and are often guaranteed

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for two years to three years, but contracts may be subject to termination.

Premium rates reflect assumptions about future claims, expenses, credit risk, investment returns, competitive considerations and profit margins. Claim and expense 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.

Fees for universal life insurance products consist of mortality, administrative and surrender charges assessed against the contractholder’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.

In addition to paying current benefits and expenses, CIGNA establishes reserves in amounts estimated to be sufficient to settle reported claims not yet paid, as well as claims incurred but not yet reported. For liabilities with longer-term pay-out periods such as long-term disability, reserves represent the present value of future expected payments. CIGNA discounts these reserves based on interest rate assumptions. The annual effective interest rate assumption used in determining reserves for most of the long-term disability insurance business is 4.25% for claims that were incurred in 2005 and 5.10% for claims that were incurred in 2004 and prior years. For universal life insurance, CIGNA establishes reserves for deposits received and interest credited to the contractholder, less mortality and administrative charges assessed against the contractholder’s fund balance.

The profitability of this segment’s products depends on the adequacy of premiums charged relative to claims and expenses. Profitability of disability insurance products is impacted by the effectiveness of return to work programs as well as adequate return on invested assets. For life insurance products, profitability is affected by the degree to which future experience deviates from mortality, morbidity and expense assumptions.

CIGNA reduces its exposure to large individual and catastrophe losses under group life, disability and accidental death contracts by purchasing reinsurance from unaffiliated reinsurers.

Competition

The principal competitive factors that affect the products of the Disability and Life segment are underwriting and pricing, relative operating efficiency, distribution methodologies and producer relations, variety of products and services offered, and the quality of customer service and claims management.

For certain products with longer-term liabilities, such as group long-term disability insurance, financial strength of the insurer, as indicated by ratings issued by nationally recognized rating agencies, is also a competitive factor. For more information concerning insurance ratings, see  “Ratings” in Section K beginning on page 25.

The principal competitors of CIGNA’s group disability, life and accident businesses are other large and regional insurance companies that market and distribute these products.

CIGNA is one of the top five providers of group disability, life and accident insurance, based on premiums.

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E.International

Principal Products and Markets

CIGNA’s international operations (“International”) provide various coverages, products and services in selected markets outside the United States, principally in Asia (mainly South Korea, Hong Kong and Taiwan) and Europe (mainly the United Kingdom and Spain). In addition, CIGNA provides group benefits products in numerous markets for expatriate employees of multinational companies.

The coverages, products and services of this segment, which are provided by subsidiaries of CIGNA Corporation, relate to individual and group life insurance, accident and health insurance and health care products.

The following table sets forth the principal lines of business of this segment and their related net earned premiums and fees:

	Year Ended December 31,
	2005		2004		2003
	(In millions)
Life, Accident and Health	$	677	$	545	$	430
Health Care		566		481		425
Total Premiums and Fees	$	1,243	$	1,026	$	855

____________________________________________

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Life, accident and health products are designed to meet the insurance, savings and investment needs of consumers in selected markets outside of U.S. insurance markets. These products are marketed on both group and individual bases. Life insurance products include term, whole life, endowment and variable universal life. Supplemental products include accidental death, medical, hospitalization, cancer and other dread disease coverages.

The health care products the International segment provides are primarily indemnity insurance coverage, with some products having managed care or administrative service aspects. These products generally provide an alternative or supplement to government programs. Health care includes life and medical insurance products that are provided through group benefits programs as well as medical insurance products that are marketed directly to individuals.

Health care also includes global group benefits products for employees of multinational companies (primarily U.S. and European multinational companies) who work outside of their country of citizenship. This product group includes medical, dental, vision, life, accidental death and dismemberment and disability coverage, as well as primary medical and dental benefits for international travelers.

CIGNA generally conducts its international businesses through foreign operating entities that maintain assets and liabilities in local currencies, which reduces the exposure to economic loss resulting from unfavorable exchange rate movements. For information on the effect of foreign exchange exposure, see “Market Risk” in the MD&A section, and Note 2R to CIGNA’s 2005 Financial Statements included in its 2005 Annual Report.

International’s healthcare and life, accident and health products include coverage for employees and individuals who may be exposed to acts of terrorism, the events of a war zone or natural disasters. These risks could result in a concentration of loss if a single adverse event affected many covered individuals.

South Korea represents the single largest geographic market for CIGNA's international businesses. In 2005, South Korea generated 27% of International’s revenues and 41% of its segment earnings. International’s business in South Korea would be vulnerable to adverse consumer credit conditions in that country. In addition, geopolitical and economic events in South Korea could have a significant impact on the International segment.

Distribution

International distributes its products through a combination of independent brokers and agents, agents of strategic partners, financial institutions and various direct marketing channels. Life, accident and health products are primarily distributed through direct marketing, including telemarketing and direct mail under a variety of sponsored arrangements; the Internet; and financial institutions. Health care products are distributed through independent brokers and agents as well as the company’s own sales personnel.

Pricing, Reserves and Reinsurance

Premiums for life, accident and health insurance products are based on assumptions about mortality, morbidity, persistency, expenses and target profit margins, as well as interest rates and competitive considerations. The profitability of these products is affected by the degree to which future experience deviates from these assumptions.

Fees for variable universal life insurance products consist of mortality, administrative 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.

Premiums and fees for health care products reflect assumptions about future claims, expenses, investment returns, competitive considerations and profit margins. For products using networks of contracted providers, premiums reflect assumptions about the impact of provider 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 and utilization), the adequacy of fees charged for administration and risk assumption and, in the case of managed care products, effective medical cost management.

In addition to paying current benefits and expenses, CIGNA establishes reserves in amounts estimated to be sufficient to settle reported claims not yet paid, as well as claims incurred but not yet reported. Additionally, for some individual life insurance and supplemental health products, CIGNA establishes policy reserves that reflect the present

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value of expected future obligations less the present value of expected future premiums.

CIGNA reduces its exposure to large and/or multiple losses arising out of a single occurrence by purchasing reinsurance from unaffiliated reinsurers.

Competition

The principal competitive factors that affect the International operations are underwriting and pricing, relative operating efficiency, relative effectiveness in medical cost management, quality of provider networks and relationships, product innovation and differentiation, distribution methodologies and producer relations, and the quality of claims and policyholder services. In most overseas markets, perception of financial strength is also an important competitive factor.

International’s primary competitors include U.S.-based companies with global operations, as well as other, non-U.S., global carriers and indigenous companies in regional and local markets. For the life, accident and health lines of business, locally based competitors are primarily indigenous life insurance companies, but also include financial institutions and insurance subsidiaries of banks. CIGNA expects that the competitive environment will intensify as U.S. and Europe-based insurance and financial services providers pursue global expansion opportunities.

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F.Other Operations

Other Operations consists of:

·   deferred gains recognized from the 1998 sale of the individual life insurance and annuity business;

·   corporate life insurance (including policies on which loans are outstanding);

·   settlement annuity business; and

·   certain investment management services (a significant portion of which were sold in 2004).

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

CIGNA sold its individual life insurance and annuity business in 1998. A portion of the gain was deferred because the principal agreement to sell this business was an indemnity reinsurance arrangement. The deferred portion is being recognized at the rate that earnings from the sold business would have been expected to emerge, primarily over 15 years on a declining basis. Because it was an indemnity reinsurance transaction, CIGNA is not relieved of primary liability for the reinsured business.

CIGNA sold its retirement business in 2004 but retained the corporate life insurance business previously reported in that segment. Corporate life insurance products are permanent life insurance contracts sold to corporations to provide coverage on the lives of certain of their employees. Permanent life insurance, which is non-participating, provides coverage that when adequately funded does not expire after a term of years and builds a cash value that may equal the full policy amount if the insured is alive on the policy maturity date. Non-participating insurance does not pay dividends, but deviations from assumed experience may be reflected in future policy values.

Corporate life insurance products include universal life and variable universal life.

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

Interest is credited on most nonvariable universal life products at a declared rate equal to or above a minimum guaranteed rate. Credited interest rates vary with the characteristics of each product and the anticipated investment results of the assets backing these products. Where the credited interest rate exceeds the guaranteed rate, the excess is used to purchase additional insurance or increase cash values. Credited interest rates on these products for 2005 ranged from 2.33% to 5.44%, with a weighted average rate of 4.61%, compared with a range from 2.23% to 6.06% and a weighted average of 4.58% for 2004.

In lieu of credited interest rates, holders of certain nonvariable universal life contracts may select the option of receiving credited income based on changes in an equity index, such as the S&P 500^®. No such elections were made in 2004 or 2005. If such an equity index is used, CIGNA may purchase derivative options to minimize the effect of the income credited for such contracts.

Federal legislation enacted in 1996 eliminated the tax deduction for policy loan interest for most leveraged corporate life insurance products. There have been no sales of this product since 1997. As a result of an Internal Revenue Service initiative to settle tax disputes regarding these products, some customers have surrendered their policies and management expects earnings associated with these products to continue to decline.

CIGNA’s settlement annuity business is a run-off block of contracts. These contracts are primarily liability settlements with approximately half of the payments guaranteed and not contingent on survivorship.

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G.Investments and Investment Income

CIGNA’s investment operations provide investment management and related services in the United States primarily for CIGNA’s corporate invested assets and the insurance-related invested assets in its General Account ("Invested Assets"). CIGNA acquires or originates, directly or through intermediaries, various investments including private placements, public securities, mortgage loans, real estate and short-term investments. CIGNA’s Invested Assets are managed primarily by CIGNA subsidiaries and external managers with whom CIGNA's subsidiaries contract.

CIGNA’s Invested Assets under management at December 31, 2005 totaled $21.4 billion.

As of December 31, 2005, CIGNA's Separate Account funds consisted of:

·   $4.8 billion in separate account assets that are managed by the buyer of the retirement benefits business pursuant to modified coinsurance arrangements; and

·   $3.8 billion in funds directly managed by CIGNA which support certain health care and disability and life products.

CIGNA also managed, as of December 31, 2005, $73 million in customer assets for which the customer retains title. These customer assets together with the Separate Account assets managed directly by CIGNA are referred to as “Advisory Portfolio Assets.” The income, gains and losses for Advisory Portfolio Assets generally accrue to contractholders and are not included in CIGNA's revenues and expenses, although the assets in Separate Accounts and related liabilities are separately presented on CIGNA's balance sheet.

Types of Investments

CIGNA invests in a broad range of asset classes, including domestic and international fixed maturities and common stocks, mortgage loans, real estate and short-term investments. Fixed maturity investments include publicly traded and private placement corporate bonds, government bonds, publicly traded and private placement asset-backed securities, and redeemable preferred stocks.

Domestic Employee Benefits Investments

The major portfolios under management in CIGNA’s General Account consist of the combined assets of the Health Care, Disability and Life, Other Operations, Run-off Retirement and Run-off Reinsurance segments (collectively, “Domestic Employee Benefits portfolios”). As of December 31, 2005 the Domestic Employee Benefits portfolios had $19.6 billion in Invested Assets.

CIGNA generally manages the characteristics of these assets to reflect the underlying characteristics of related insurance and contractholder liabilities, as well as regulatory and tax considerations pertaining to those liabilities. CIGNA’s domestic insurance and contractholder liabilities as of December 31, 2005, excluding liabilities of businesses sold through use of reinsurance, were associated with the following products: fully guaranteed annuity, 27%; interest-sensitive life insurance, 27%; and other life and health, 46%. These products, and the investment assets supporting them, are described below.

Fully guaranteed products primarily include single premium annuity products and settlement annuities. Because these products generally do not permit withdrawal by policyholders prior to maturity, the amount and timing of future benefit cash flows can be reasonably estimated. Funds supporting these products are invested in fixed income investments that generally match the aggregate duration of the investment portfolio with that of the related benefit cash flows. As of December 31, 2005, the duration of assets that supported these liabilities was approximately 13.6 years for settlement annuities and 7.2 years for single premium annuities.

Interest-sensitive products primarily consist of corporate life insurance products. Invested assets supporting these products are primarily fixed income investments and policy loans. Fixed income investments emphasize investment yield while meeting the liquidity requirements of the related liabilities.

Other life and health insurance products consist of various group and individual life, health and disability insurance products and guaranteed minimum death benefits. The supporting invested assets are structured to emphasize investment income, and the necessary liquidity is provided through cash flow, short-term and fixed maturity investments. Assets supporting longer-term group disability insurance benefits and group life waiver of premium benefits are generally managed to an aggregate duration similar to that of the related benefit cash flows.

Investment Strategy

Investment strategy and results are affected by the amount and timing of cash available for investment, competition for investments (especially in private asset classes), economic conditions, interest rates and asset allocation decisions.

CIGNA routinely monitors and evaluates the status of its investments in light of current economic

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conditions, trends in capital markets and other factors. Such factors include industry sector considerations for fixed maturity investments, and geographic and property-type considerations for mortgage loan and real estate investments.

Fixed Maturities

As of December 31, 2005, fixed maturity investments constituted 70% of the Domestic Employee Benefits portfolios.

CIGNA invests primarily in investment grade fixed maturities rated by rating agencies (for public investments) and by CIGNA (for private investments). For information about below investment grade holdings, see “Investment Assets” in the MD&A section of CIGNA’s 2005 Annual Report.

Mortgages and Real Estate

Mortgage loan investments constituted 20% of the Domestic Employee Benefits portfolios as of December 31, 2005. Mortgage loan investments are subject to underwriting criteria addressing loan-to-value ratio, debt service coverage, cash flow, tenant quality, leasing, market, location and borrower’s financial strength. Such investments consist primarily of first mortgage loans on commercial properties and are diversified by property type, location and borrower. CIGNA invests in mortgages on fully completed and substantially leased commercial properties. Virtually all of CIGNA’s mortgage loans are balloon payment loans, under which all or a substantial portion of the loan principal is due at the end of the loan term.

CIGNA enters into joint ventures with local partners to develop, lease and manage commercial real estate to maximize investment returns. CIGNA's portfolio of real estate investments consist of properties under development and stabilized properties, and are diversified relative to property type and location. CIGNA also acquires real estate through foreclosure of mortgage loans. CIGNA rehabilitates, re-leases and sells foreclosed properties, a process that usually takes from two to four years unless management considers a near-term sale preferable. Additionally, CIGNA invests in third party sponsored real estate equity funds to maximize investment returns and to maintain diversity with respect to its real estate related exposure. CIGNA sold $11 million of foreclosed properties in 2005. Real estate investments were not a significant portion of CIGNA’s Domestic Employee Benefits portfolios as of December 31, 2005.

Derivative Instruments

CIGNA generally uses derivative financial instruments to minimize its exposure to certain market risks. CIGNA has also written derivative instruments to minimize insurance customers’ market risks. In addition, to enhance investment returns, CIGNA invests in indexed credit default swaps. For information about CIGNA’s use of derivative financial instruments, see Notes 2(B) and 10G to CIGNA’s 2005 Financial Statements included in its 2005 Annual Report.

See “Investment Assets” in the MD&A section of, and Notes 2, 10, 11 and 14 to the Financial Statements included in CIGNA’s 2005 Annual Report for additional information about CIGNA’s investments.

Other Investments

In addition to the Domestic Employee Benefits portfolios, CIGNA has a portfolio which includes the investments of the International segment and unallocated corporate investments. Invested assets for International and unallocated corporate investments totaled $1.7 billion as of December 31, 2005. Investments include U.S. and international fixed maturities, policy loans, mortgage loans and short-term investments.

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H.Run-off Retirement

On April 1, 2004, CIGNA sold its retirement benefits businesses. CIGNA no longer sells the products related to the sold businesses. For additional information about the sale transaction, see “Sale of Retirement Benefits Business” in the MD&A section, and Note 3 to CIGNA’s 2005 Financial Statements included in its 2005 Annual Report.

The sale of CIGNA's retirement benefits business was primarily in the form of a reinsurance arrangement. Upon the sale, CIGNA reinsured with the buyer of the retirement business $16.0 billion of general account contractholder liabilities under an indemnity reinsurance arrangement and $35.3 billion of insurance, contractholder and separate account liabilities under modified coinsurance arrangements, including $32.0 billion in separate account liabilities, and $2.0 billion related to the single premium annuity business described below.

The General and Separate Accounts

Since the sale in 2004, the buyer of the retirement business has entered into agreements with many of the insured party contractholders relieving CIGNA of any remaining contractual obligations to those parties (“novation agreements”). As a result, CIGNA reduced reinsurance recoverables, contractholder deposit funds and separate account balances for these obligations.

The buyer deposited assets associated with the reinsurance of general account contracts other than the single premium annuity business into a trust (the "Ceded Business Trust"), which provides security to CIGNA for the related reinsurance recoverables. The buyer is permitted to withdraw assets from the Ceded Business Trust equal to the reduction in CIGNA's reserves whenever such a reduction occurs. For example, such reductions will occur when the buyer enters into additional novation agreements and assumes the direct liability to the insured party. As of December 31, 2005, assets totaling $1.7 billion remained in the Ceded Business Trust.

Single Premium Annuity Business

The single premium annuity business consists primarily of single premium annuities that are supported by CIGNA's general account. This business is reinsured on a modified coinsurance basis for the first two years following the sale. Assets associated with this business are held in a trust of which the buyer is the beneficiary (the "Trust").

The buyer has given notice that it intends to terminate its reinsurance of the single premium annuity business effective April 1, 2006. Discussions between the two parties continue. If the buyer terminates its reinsurance, CIGNA would retain the single premium annuity business, including the trust assets and the insurance liabilities. CIGNA does not expect the ultimate outcome of these discussions to have a material adverse effect on its consolidated results of operation, liquidity or financial condition.

As of December 31, 2005, CIGNA had approximately $1.9 billion in assets in the trust for the single premium annuity business, consisting primarily of fixed maturities and mortgage loans.

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I.Run-off Reinsurance

Principal Products and Markets

Until June of 2000, CIGNA offered reinsurance coverage for part or all of the risks written by other insurance companies under life and annuity policies (both group and individual); accident policies (personal accident, catastrophe and workers’ compensation coverages); and health policies. These products were sold principally in North America and Europe through a small sales force and through intermediaries.

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

For the run-off reinsurance business, CIGNA has established policy reserves that reflect the present value of expected future obligations less the present value of expected premiums. In addition, CIGNA establishes loss reserves for claims received but not yet paid, based on the amount of the claim received, and for losses incurred but not reported, based on prior claim experience.

Guaranteed Minimum Death Benefit Contracts. CIGNA’s reinsurance operations reinsured a guaranteed minimum death benefit 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 market risks as a result of this product.

For additional information about guaranteed minimum death benefit contracts, see “Other Matters” under “Run-off Reinsurance” in the MD&A section of, and Note 6 to CIGNA's 2005 Financial Statements included in its 2005 Annual Report.

Guaranteed Minimum Income Benefit Contracts. CIGNA’s reinsurance business also wrote reinsurance contracts with issuers of variable annuity contracts that provide annuitants with certain guarantees related to minimum income benefits. When annuitants elect to receive these minimum income benefits, CIGNA may be required to make payments based on changes in underlying mutual fund values and interest rates.

For additional information about guaranteed minimum income benefit contracts, see “Other Matters” under “Run-off Reinsurance” and “Guaranteed minimum income benefit contracts” under “Guarantees and Contractual Obligations” in the MD&A section of, and Note 20C to CIGNA's 2005 Financial Statements included in its 2005 Annual Report.

Unicover and Other Run-off Reinsurance

The Run-off Reinsurance operations participate in a workers’ compensation reinsurance pool, which ceased accepting new risks in early 1999. This pool was formerly managed by Unicover Managers, Inc. The pool purchased significant reinsurance (retrocessional) protection for its assumed risks. Disputes concerning these retrocessional contracts have resulted in a number of arbitrations, most of which have been resolved or settled. The remaining disputes are expected to be resolved in 2006.

Run-off Reinsurance also includes other (non-Unicover) workers’ compensation reinsurance contracts, as well as personal accident reinsurance contracts, including contracts assumed in the London market. CIGNA is in dispute and arbitration with some ceding companies over the amount of liabilities assumed under their contracts, and expects that these disputes and arbitrations will be substantially resolved by the end of 2007. 

In addition, CIGNA obtained retrocessional reinsurance coverage for a significant portion of its liabilities under these contracts and some of these retrocessionaires have disputed the validity of their contracts with CIGNA.  Many of these disputes with retrocessionaires have been resolved or settled.  Most of the remaining significant disputes relating to the retrocessional reinsurance coverage are expected to be resolved in 2006.  CIGNA bears the risk of loss if the retrocessionaires are unable to meet their reinsurance obligations to CIGNA. 

Unfavorable claims experience related to workers’ compensation and personal accident exposures is possible and could result in future losses, including losses attributable to the inability to recover amounts from retrocessionaires (either due to disputes with the retrocessionaires or their financial condition).

CIGNA’s reserves for amounts recoverable from retrocessionaires, as well as for reserves associated with underlying reinsurance exposures assumed by CIGNA, are considered appropriate as of December 31, 2005, based on current information. However, it is possible that future developments could have a material adverse effect on CIGNA’s consolidated results of operations, and, in certain

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situations, could have a material adverse effect on CIGNA’s financial condition.

For more information see “Run-off Reinsurance” in the MD&A section of, and Note 7 to CIGNA's 2005 Financial Statements included in its 2005 Annual Report.

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J.Regulation

CIGNA’s subsidiaries, depending on the type and location of their business activities, may be subject to regulation by federal, state and non-U.S. jurisdictions. CIGNA’s insurance subsidiaries and HMOs are licensed to do business in, and are subject to regulation and supervision by, state regulatory authorities as well as authorities in the District of Columbia, certain U.S. territories and various non-U.S. jurisdictions.

The extent of regulation of insurance subsidiaries and HMOs varies. Licensing of insurers, HMOs and their agents and the approval of coverage and provider contract forms are usually required.

All states in which CIGNA's insurance and HMO subsidiaries do business regulate their activities. State laws and regulations govern numerous aspects of their businesses including policy forms, premium rates, claims and appeal processing, solvency, underwriting practices and standards of care.

CIGNA's focus on consumer directed products is driven, in part, by the availability of enhanced saving incentives under federal and state law and CIGNA's ability to provide high deductible health plans. The Medicare Prescription Drug Improvement and Modernization Act of 2003 offered federal tax incentives for health savings accounts. In 2005, seven states enacted legislation to provide tax incentives for such accounts and seven other states are considering such incentives. While a variety of state statutes currently limit the availability of high deductible health plans, eleven states took legislative action in 2005 to remove such impediments. Legislation is pending in other states to address statutory restrictions on the use of high deductible plans.

The financial condition of licensed insurance companies and HMOs is closely monitored by state regulators. States regulate the form and content of statutory financial statements and the type and concentration of investments. Each insurance and HMO subsidiary is required to file periodic financial reports with regulators in most of the jurisdictions in which it does business, and its operations and accounts are subject to examination by such agencies at regular intervals.

Most states and certain non-U.S. jurisdictions require licensed 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 in a particular state to pay such claims. These assessments are levied in proportion to the member insurers’ relative shares of the lines of business that had been written by the insolvent insurer. The maximum assessment permitted by law in any one year is generally 2% of annual premiums written by each member in a particular state with respect to the categories of business involved and may be offset in some states over a five-year period against premium taxes payable.

In addition, insurance companies are subject to a variety of assessments to fund insurance-related activities such as medical risk pools and operating expenses of state regulatory bodies.

Several states also require HMOs to participate in guaranty funds, special risk pools and administrative funds. CIGNA expects additional states to consider revising their solvency standards and guaranty fund legislation to encompass HMOs. For additional information about guaranty fund and other assessments, see Note 20 to CIGNA’s 2005 Financial Statements included in its 2005 Annual Report.

Some states 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.

The National Association of Insurance Commissioners (“NAIC”) has developed model solvency-related laws that many states have adopted. The NAIC also has developed risk-based capital rules (“RBC rules”) for life and health insurance companies and HMOs that have been adopted by many states.

The NAIC is considering changing statutory reserving rules for variable annuities. Any changes would apply to CIGNA’s specialty life reinsurance contracts.

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 maintained. Depending on the ratio of the insurer’s adjusted surplus to its risk-based capital, the insurer could be subject to various regulatory actions ranging from increased scrutiny to conservatorship.

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In addition, various non-U.S. jurisdictions prescribe minimum surplus requirements that are based upon solvency, liquidity and reserve coverage measures. CIGNA’s life, health and non-U.S. insurance and HMO subsidiaries were adequately capitalized during 2005 under applicable RBC and non-U.S. surplus rules.

Certain CIGNA insurance subsidiaries are subject to state laws regulating insurers that are subsidiaries of insurance holding companies. Under such laws, certain dividends, distributions and other transactions between an insurance subsidiary and the holding company or its other subsidiaries may require notification to, or be subject to the approval of, one or more state insurance commissioners.

State and 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. States have responded to concerns about marketing, advertising and administration of insurance by increasing the number and frequency of market conduct examinations and imposing larger penalties for violations of laws and regulations pertaining to these functions.

Several state regulatory inquiries have been made into broker compensation practices for property and casualty, disability, group insurance and health care products. The California Insurance Commissioner also filed suit against several insurance holding companies, including CIGNA, regarding broker compensation practices. This increased regulatory focus may lead to legislative or regulatory changes that would affect the manner in which CIGNA and its competitors compensate brokers. For more information regarding the state attorney general inquiries, see “Legal Proceedings” in Item 3 on pages 33 and 34.

CIGNA sells many of its products and services to sponsors of employee health care benefit plans that are typically governed by the Employment Retirement Income Security Act (“ERISA”) and, therefore, may be subject to requirements imposed by ERISA on plan fiduciaries and parties in interest, including regulations affecting claims and appeals procedures for disability, life and accident and health care claims.

CIGNA also offers a variety of products and services subject to federal Medicare regulations. Subsidiaries offer individual and group Medicare Advantage (HMO) coverage in Arizona. In addition, CIGNA has contractual arrangements with the federal government by which CIGNA provides claims processing and other administrative services to the government with respect to certain Medicare claims. Beginning in 2006, new Medicare Part D products also increase CIGNA’s exposure to federal Medicare regulations.

Participation in government sponsored health care programs subjects CIGNA to a variety of federal laws and regulations and risks associated with audits conducted under the programs (which may occur in years subsequent to when CIGNA provides the applicable services). These risks 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. Also, under Office of Personnel Management rules, CIGNA HMOs that contract to cover federal employees may be required to reimburse the federal government if, following an audit, it is determined that a federal employee group did not receive the benefit of a discount offered by a CIGNA HMO to one of the two groups closest in size to the federal employee group. See “Health Care” in Section C beginning on page 3 for additional information about CIGNA’s participation in government health-related programs.

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and other federal statutes subject health care insurers and HMOs to federal regulation. HIPAA imposes electronic data security standards, guaranteed issuance (for groups with 50 or fewer lives), renewal and portability requirements on health care insurers.

In addition, final regulations pursuant to HIPAA providing standards for the assignment of a unique national identifier for providers must be implemented by May, 2007. CIGNA is implementing the administrative changes, systems enhancements and training necessary to satisfy these requirements.

With respect to privacy, federal and state lawmakers and regulators have imposed privacy standards and an increasing number of non-U.S. jurisdictions are also imposing privacy requirements. These standards affect how identifiable information about individuals may be handled, used and disclosed. State regulators reviewthe privacy law compliance of insurance companies. States are focusing on the importance of maintaining privacy of personal information, with 23 states having enacted privacy incident notification requirements intended to

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combat identity theft, and more are expected to follow.

The business of administering and insuring employee benefit programs, particularly health care programs, is heavily regulated by federal and state laws and administrative agencies, such as state departments of insurance and the federal Departments of Labor and Justice, as well as the courts. See “Regulatory and Industry Developments” in the MD&A section of CIGNA’s 2005 Annual Report for additional information.

The extent of insurance regulation varies significantly among the countries in which CIGNA conducts its international operations. In many countries, non-U.S. insurers are faced with greater restrictions than domestic competitors. These restrictions may include discriminatory licensing procedures, compulsory cessions of reinsurance, required localization of records and funds, higher premium and income taxes, and requirements for local participation in an insurer’s ownership.

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 and products. In many cases, the investment management activities and investments of individual insurance companies are subject to regulation by multiple jurisdictions.

The United States Treasury Department issued regulations in 2005 requiring insurance companies offering specified products to implement appropriate anti-money laundering compliance programs with respect to those products on or before May 2, 2006. CIGNA is completing its risk assessment and is preparing to implement anti-money laundering programs for its affected products to comply with the regulations.

Federal regulation and legislation may affect CIGNA’s operations in a variety of ways. In addition to proposals discussed above related to increased regulation of the health care industry, current and proposed federal measures that may significantly affect CIGNA’s operations include employee benefit regulation and tax.

The economic and competitive effects on CIGNA’s business operations of the legislative and regulatory proposals discussed above will depend upon the final form any such legislation or regulation may take.

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K.Ratings

CIGNA and certain of its insurance subsidiaries are rated by nationally recognized rating agencies. The significance of individual ratings varies from agency to agency. However, companies assigned ratings at the top end of the range have, in the opinion of the rating agency, the strongest capacity for repayment of debt or payment of claims, while companies at the bottom end of the range have the weakest capacity.

Insurance ratings represent the opinions of the rating agencies on the financial strength of a company and its capacity to meet the obligations of insurance policies. The principal agencies that rate CIGNA’s insurance subsidiaries characterize their insurance rating scales as follows:

• A.M. Best Company, Inc. (“A.M. Best”), A++ to S (“Superior” to “Suspended”);

• Moody’s Investors Service (“Moody’s”), Aaa to C (“Exceptional” to “Lowest”);

• Standard & Poor’s Corp. (“S&P”), AAA to R (“Extremely Strong” to “Regulatory Action”); and

• Fitch, Inc. (“Fitch”), AAA to D (“Exceptionally Strong” to “Order of Liquidation”).

As of February 21, 2006, the insurance financial strength ratings for CG Life were as follows:

	CG Life
	Insurance Ratings(1)
A.M. Best	A-
	(“Excellent,”
	4th of 16)
Moody’s	A3
	(“Good,”
	7th of 21)
S&P	A-
	(“Strong,”
	7th of 21)
Fitch	A
	(“Strong,”
	6th of 24)

________________________

(1)Includes the rating assigned, the agency’s characterization of the rating and the position of the rating in the agency’s rating scale (e.g., CG Life’s rating by A.M. Best is the 4^th highest rating awarded in its scale of 16).

As of February 21, 2006, the insurance financial strength rating for Life Insurance Company of North America assigned by A.M. Best was A- (“Excellent,” 4^th of 16), and by Moody’s was A3 (“Good,” 7^th of 21).

Debt ratings are assessments of the likelihood that a company will make timely payments of principal and interest. The principal agencies that rate CIGNA’s senior debt characterize their rating scales as follows:

• Moody’s, Aaa to C (“Exceptional” to “Lowest”);

• S&P, AAA to D (“Extremely Strong” to “Default”); and

• Fitch, AAA to D (“Highest” to “Default”).

The commercial paper rating scales for those agencies are as follows:

• Moody’s, Prime-1 to Not Prime (“Superior” to “Not Prime”);

• S&P, A-1+ to D (“Extremely Strong” to “Default”); and

• Fitch, F-1+ to D (“Very Strong” to “Distressed”).

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As of February 21, 2006, the debt ratings assigned by the following agencies were as follows:

Debt Ratings⁽¹⁾

CIGNA CORPORATION

		Commercial
	Senior Debt	Paper
Moody’s	Baa3	Prime-3
	(“Adequate,”	(“Acceptable,”
	10th of 21)	3rd of 4)
S&P	BBB	A-2
	(“Adequate,”	(“Good,”
	9thof 22)	3rd of 7)
Fitch	BBB	F-2
	(“Good,”	(“Moderately Strong,”
	9th of 24)	3rd of 7)

________________________

(1)Includes the rating assigned, the agency’s characterization of the rating and the position of the rating in the applicable agency’s rating scale.

In December 2005, Moody’s, S&P and A.M. Best affirmed the financial strength, senior debt and commercial paper ratings of CIGNA and certain of its subsidiaries and raised the outlook to positive from stable. CIGNA is committed to maintaining appropriate levels of capital in its subsidiaries to support ratings of CIGNA that meet customers’ expectations, and to improving the earnings of the health care business. Lower ratings at the parent company level increase the cost to borrow funds. Lower ratings of CG Life could adversely affect new sales and retention of current business.

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L. Miscellaneous

Portions of CIGNA’s insurance business are seasonal in nature. Reported claims under group health products are generally higher in the first quarter.

CIGNA and its principal subsidiaries are not dependent on business from one or a few customers. No customer accounted for 10% or more of CIGNA’s consolidated revenues in 2005. 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 28,000, 28,600 and 32,700 employees as of December 31, 2005, 2004 and 2003, respectively.

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Item 1A.  RISK FACTORS

CIGNA’s businesses face risks and uncertainties, including those discussed below and elsewhere in this report. These factors represent risks and uncertainties that could have a material adverse effect on CIGNA’s business, results of operations and financial condition. These risks and uncertainties are not the only ones CIGNA faces. Others that CIGNA does not know about now, or that the Company does not now think are significant, may impair its business or the trading price of its securities. The following are significant risks identified by CIGNA.

If CIGNA does not execute on its strategic initiatives, there could be a material adverse effect on CIGNA’s results of operations and in certain situations, CIGNA's financial condition.

The future performance of CIGNA’s business will depend in large part on CIGNA’s ability to execute effectively and implement its strategic initiatives. These initiatives include: executing CIGNA's consumerism strategy, including designing products to meet emerging market trends and ensuring that an appropriate infrastructure is in place to meet the needs of customers and members; continuing to reduce medical costs; and further improving the efficiency of operations, including lowering operating costs and enabling higher value services.

Successful execution of these initiatives depends on a number of factors including:

·   the ability to gain and retain customers and members by providing appropriate levels of support and service for CIGNA’s products, as well as avoiding service and health advocacy related errors;

·   the ability to attract and retain sufficient numbers of qualified employees;

·   the negotiation of favorable and standardized provider contracts;

·   the identification and introduction of the proper mix or integration of products that will be accepted by the marketplace; and

·   the ability of CIGNA’s products and services to differentiate CIGNA from its competitors and of CIGNA to demonstrate that these products and services (such as disease management and health advocacy programs, provider credentialing and other quality care initiatives) result in improved health outcomes and reduced costs.

Further, CIGNA’s success will depend upon its ability to develop new systems and enhance the performance of its existing procedures and processes to adequately support CIGNA's operations, strategies and business objectives.

If CIGNA fails to properly maintain the integrity of its data or to strategically implement new information systems, there could be a material adverse effect on CIGNA’s business.

CIGNA’s business depends on effective information systems and the integrity and timeliness of the data it uses to run its business. CIGNA’s business strategy requires providing members and providers with internet or e-business related products and information to meet their needs. CIGNA’s ability to adequately price its products and services, establish reserves, provide effective and efficient service to its customers, and to timely and accurately report its financial results also depends significantly on the integrity of the data in its information systems. If the information CIGNA relies upon to run its businesses was found to be inaccurate or unreliable or if CIGNA were to fail to maintain effectively its information systems and data integrity, the Company could have problems with, among other things: operational disruptions;determining medical cost estimates and establishing appropriate pricing; customers, physicians and other health care providers; regulators; increases in operating expenses; and retention and attraction of customers.

CIGNA requires an ongoing commitment of significant resources to maintain, protect and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving industry and regulatory standards, and changing customer preferences. There can be no assurance that CIGNA’s process of improving existing systems, developing new systems to support its operations, integrating new systems and improving service levelswill not be delayed or that additional systems issues will not arise in the future.

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If premiums are insufficient to cover the cost of health care services delivered to members, or if CIGNA’s estimates of medical claim reserves for its guaranteed cost and experience-rated businesses based upon estimates of future medical claims are inadequate, profitability could decline.

CIGNA’s profitability depends, in part, on its ability to accurately predict and control future health care costs through underwriting criteria, provider contracting, utilization management and product design. Premiums in the health benefits business are generally fixed for one-year periods. Accordingly, future cost increases in excess of medical cost projections reflected in pricing cannot generally be recovered in the contract year through higher premiums. Although CIGNA bases the premiums it charges on its estimate of future health care costs over the fixed premium period, actual costs may exceed what was estimated and reflected in premiums. Factors that may cause actual costs to exceed premiums include: medical cost inflation, the introduction of new or costly treatments and technology and membership mix.

CIGNA records medical claims reserves for estimated future payments. The Company continually reviews estimates of future payments relating to medical claims costs for services incurred in the current and prior periods and makes necessary adjustments to its reserves. However, actual health care costs may exceed what was estimated.

Unfavorable claims experience related to workers’ compensation and personal accident insurance exposures in CIGNA’s Run-off Reinsurance business could result in losses.

Unfavorable claims experience related to workers’ compensation and personal accident insurance exposures in CIGNA’s run-off reinsurance business is possible and could result in future losses. Further, CIGNA could have losses attributable to its inability to recover amounts from retrocessionaires or ceding companies either due to disputes with the retrocessionaires or ceding companies or their financial condition. If CIGNA’s reserves for amounts recoverable from retrocessionaires or ceding companies, as well as reserves associated with underlying reinsurance exposures are insufficient, it could result in losses.

If CIGNA fails to manage successfully its outsourcing projects and key vendors, CIGNA’s financial results could be harmed.

CIGNA takes steps to monitor and regulate the performance of independent third parties who provide services or to whom the Company delegates selected functions. These third parties include information technology system providers, independent practice associations and specialty service providers. These arrangements, however, may make CIGNA’s operations vulnerable if those third parties fail to satisfy their obligations to the Company, due to CIGNA’s failure to adequately monitor and regulate their performance, changes in their own operations, financial condition, or other matters outside of CIGNA’s control. Certain legislative authorities have in recent periods discussed or proposed legislation that would restrict outsourcing and, if enacted, could materially increase CIGNA’s costs. In recent years, certain third parties to whom CIGNA delegated selected functions, such as specialty services providers, have experienced legal and other difficulties, which may subject CIGNA to adverse publicity, increased costs, decline in quality of service and potential network disruptions, and in some cases cause the Company to incur increased claims expense. Further, CIGNA may not fully realize on a timely basis the anticipated economic and other benefits of the outsourcing projects or other relationships it enters into with key vendors which could result in substantial costs or other operational or financial problems that could adversely impact the Company’s financial results.

A downgrade in the financial strength ratings of CIGNA’s insurance subsidiaries could adversely affect new sales and retention of current business, and a downgrade in CIGNA's debt ratings would increase the cost of borrowed funds.

Financial strength, claims paying ability and debt ratings by recognized rating organizations are an important factor in establishing the competitive position of insurance companies and health benefits companies. Ratings information by nationally recognized ratings agencies is broadly disseminated and generally used throughout the industry. CIGNA believes the claims paying ability and financial strength ratings of its principal insurance subsidiaries are an important factor in marketing its products to certain of CIGNA’s customers. In addition,

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CIGNA Corporation’s debt ratings impact both the cost and availability of future borrowings, and accordingly, its cost of capital. Each of the rating agencies reviews CIGNA’s ratings periodically and there can be no assurance that current ratings will be maintained in the future. In addition, a downgrade of these ratings could make it more difficult to raise capital and to support business growth at CIGNA’s insurance subsidiaries.

    As of February 21, 2006, the insurance financial strength ratings for CG Life, the Company's principal insurance subsidiary, were as follows:

	CG Life
	Insurance Ratings(1)
A.M. Best	A-
	(“Excellent,”
	4th of 16)
Moody’s	A3
	(“Good,”
	7th of 21)
S&P	A-
	(“Strong,”
	7th of 21)
Fitch	A
	(“Strong,”
	6th of 24)

________________________

(1)Includes the rating assigned, the agency’s characterization of the rating and the position of the rating in the agency’s rating scale (e.g., CG Life’s rating by A.M. Best is the 4^th highest rating awarded in its scale of 16).

A description of CIGNA Corporation ratings, other subsidiary ratings, as well as more information on these ratings, is included in “Ratings” in Section K beginning on page 25.

If CIGNA’s program for its guaranteed minimum death benefits contracts fails to reduce the risk of stock market declines, it could have a material adverse effect on the Company’s financial condition.

As part of its run-off reinsurance business, CIGNA reinsured a guaranteed minimum death benefit under certain variable annuities issued by other insurance companies. CIGNA adopted a program to reduce equity market risks related to these contracts by selling domestic and foreign-denominated exchange-traded futures contracts and foreign currency forward contracts. The purpose of this program is to reduce the adverse effects of potential future domestic and international stock market declines on CIGNA’s liabilities for these contracts. Under the program, increases in liabilities under the annuity contracts from a declining market are offset by gains on the futures contracts. However, if CIGNA were to have difficulty in entering into appropriate futures or forward contracts, or stock market declines expose CIGNA to higher rates of partial surrender (which are not covered by the program), there could be a material adverse effect on the Company’s financial condition. See “Run-off Reinsurance” in Section I on page 20 for more information on the program.

If actual experience differs significantly from CIGNA’s assumptions used in estimating CIGNA’s liabilities for reinsurance contracts that guarantee minimum death benefits or minimum income benefits, it could have a material adverse effect on CIGNA’s consolidated results of operations, and in certain situations, could have a material adverse effect on CIGNA's financial condition.

CIGNA’s management estimates reserves for guaranteed minimum death benefit and minimum income benefit exposures based on assumptions regarding lapse, partial surrender, mortality, interest rates, volatility, reinsurance recoverables and other considerations, and, for minimum income benefit exposures, annuity income election rates. These estimates are based on CIGNA’s experience and future expectations. CIGNA monitors actual experience to update these reserve estimates as necessary. CIGNA regularly evaluates the assumptions used in establishing reserves and changes its estimates if actual experience or other evidence suggests that earlier assumptions should be revised.

Significant stock market declines could result in increased pension plan expenses and the recognition of additional pension obligations.

CIGNA has a pension plan that covers a large number of current employees and retirees. Unfavorable investment performance due to significant stock market declines or changes in estimates of benefit costs, if significant, could adversely affect CIGNA’s results of operations or financial condition by significantly increasing its pension plan expenses and obligations.

Significant changes in market interest rates affect the value of CIGNA's financial instruments that promise a fixed return and, as such, could have an adverse effect on CIGNA's results of operations.

As an insurer, CIGNA has substantial investment assets that support its policy liabilities. Generally low levels of interest rates on investments, such as those experienced in United States financial markets during recent years, have negatively impacted the level of investment income earned by the Company in recent periods, and such lower levels of investment income would continue if these lower interest rates were to continue. Substantially all of the Company’s investment assets are in fixed interest-yielding debt securities of varying maturities, fixed redeemable preferred securities, mortgage loans and real estate. The value of these securities can fluctuate significantly with changes in market conditions.

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CIGNA faces risks related to litigation and regulatory investigations.

CIGNA is routinely involved in numerous claims, lawsuits, regulatory audits, investigations and other legal matters arising in the ordinary course of the business of administering and insuring employee benefit programs, including benefit claims, breach of contract actions, tort claims, and disputes regarding reinsurance arrangements. In addition, CIGNA incurs and likely will continue to incur liability for claims related to its health care business, such as failure to pay for or provide health care, poor outcomes for care delivered or arranged, provider disputes, including disputes over compensation, and claims related to self-funded business. Also, there are currently, and may be in the future, attempts to bring class action lawsuits against the industry. In addition, CIGNA is involved in pending and threatened litigation arising out of its run-off reinsurance and retirement operations.

Court decisions and legislative activity may increase CIGNA’s exposure for any of these types of claims. In some cases, substantial non-economic or punitive damages may be sought. CIGNA currently has insurance coverage for some of these potential liabilities. Other potential liabilities may not be covered by insurance, insurers may dispute coverage or the amount of insurance may not be enough to cover the damages awarded. In addition, certain types of damages, such as punitive damages, may not be covered by insurance, and insurance coverage for all or certain forms of liability may become unavailable or prohibitively expensive in the future.

A description of material legal actions in which CIGNA is currently involved is included under “Legal Proceedings” in Item 3 on pages 33 and 34, and Note 20 to CIGNA’s 2005 Financial Statements included in its 2005 Annual Report. The outcome of litigation and other legal matters is always uncertain, and outcomes that are not justified by the evidence can occur. CIGNA believes that it has valid defenses to the legal matters pending against it and is defending itself vigorously. Nevertheless, it is possible that resolution of one or more legal matters could result in losses material to CIGNA’s consolidated results of operations, liquidity or financial condition.

CIGNA’s business is subject to substantial government regulation, which, along with new regulation, could increase its costs of doing business and could adversely affect its profitability.

CIGNA’s business is regulated at the international, federal, state and local levels. The laws and rules governing CIGNA’s business and interpretations of those laws and rules are subject to frequent change. Broad latitude is given to the agencies administering those regulations. Existing or future laws and rules could force CIGNA to change how it does business, restrict revenue and enrollment growth, increase health care, technology and administrative costs including pension costs and capital requirements, and increase CIGNA’s liability in federal and state courts for coverage determinations, contract interpretation and other actions. CIGNA must obtain and maintain regulatory approvals to market many of its products, to increase prices for certain regulated products and to consummate some of its acquisitions and divestitures. Delays in obtaining or failure to obtain or maintain these approvals could reduce the Company’s revenue or increase its costs.

For further information on regulatory matters relating to CIGNA, see “Regulation” in Section J on page 22, and “Legal Proceedings” in Item 3 on pages 33 and 34, as well as “Regulatory and Industry Developments” in the MD&A section of CIGNA’s 2005 Annual Report.

CIGNA faces competitive pressure, particularly price competition, which could reduce product margins and constrain growth in CIGNA’s health care businesses.

While health plans compete on the basis of many factors, including service quality of clinical resources, claims administration services and medical management programs, and quality and sufficiency of provider networks, CIGNA expects that price will continue to be a significant basis of competition. CIGNA’s customer contracts are subject to negotiation as customers seek to contain their costs, and customers may elect to reduce benefits in order to constrain increases in their benefit costs. Such an election may result in lower premiums for the Company’s products, although it may also reduce CIGNA’s health care costs. Alternatively, the Company’s customers may purchase different types of products from it that are less profitable, or move to a competitor to obtain more favorable premiums.

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In addition, significant merger and acquisition activity has occurred in the health care industry giving rise to speculation and uncertainty regarding the status of companies, which potentially can affect marketing efforts and public perception. Consolidation may make it more difficult for the Company to retain or increase customers, to improve the terms on which CIGNA does business with its suppliers, or to maintain its position or increase profitability. Factors such as business consolidations, strategic alliances, legislative reform and marketing practices create pressure to contain premium price increases, despite increasing medical costs. For example, the Gramm-Leach-Bliley Act gives banks and other financial institutions the ability to affiliate with insurance companies, which may lead to new competitors with significant financial resources in the insurance and health benefits fields. If CIGNA does not compete effectively in its markets, if the Company sets rates too high in highly competitive markets to keep or increase its market share, if membership does not increase as it expects, or if it declines, or if CIGNA loses accounts with favorable medical cost experience while retaining or increasing membership in accounts with unfavorable medical cost experience, CIGNA’s product margins and growth could be adversely affected.

Public perception of CIGNA's products and practices as well as of the health benefits industry, if negative, could reduce enrollment in CIGNA’s health benefits programs.

The health benefits industry is subject to negative publicity, which can arise either from perceptions regarding the industry or CIGNA's business practices or products. This risk may be increased as CIGNA offers new products, such as products with limited benefits or an integrated line of products, targeted at market segments, beyond those in which CIGNA traditionally has operated. Negative publicity may adversely affect the CIGNA brand and its ability to market its products and services, which could reduce the number of enrollees in CIGNA's health benefits programs and adversely affect CIGNA’s profitability.

Large-scale public health epidemics and bio-terrorist activity could cause CIGNA’s covered medical and disability expenses, pharmacy costs and mortality experience to rise significantly, and in severe circumstances, could cause operational disruption.

If widespread public health epidemics such as an influenza pandemic or bio-terrorist or other attack were to occur, CIGNA’s covered medical and disability expenses, pharmacy costs and mortality experience could rise significantly, depending on the government’s actions and the responsiveness of public health agencies and insurers. In addition, depending on the severity of the situation, a widespread outbreak could curtail economic activity in general, and CIGNA's operations in particular, which could result in operational and financial disruption to CIGNA, which among other things may impact the timeliness of claims and revenue.

CIGNA faces a wide range of risks, and its success depends on its ability to identify, prioritize and appropriately manage its enterprise risk exposure.

As a large company operating in a complex industry, CIGNAencounters a variety of risks as identified in this Risk Factor discussion. CIGNAdevotes resources to developing enterprise-wide risk management processes, in addition to the risk management processes within its businesses. Failure to appropriately identify and manage these risks, as well as the failure to identify and take advantage of appropriate opportunities, can materially affect CIGNA’s profitability, its ability to retain or grow business, or, in the event of extreme circumstances, CIGNA’s financial condition.

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Item 1B.  UNRESOLVED STAFF COMMENTS

None.

Item 2.  PROPERTIES

As of March 1, 2006 CIGNA's headquarters will be joining CIGNA Group Insurance, CIGNA International, portions of CIGNA HealthCare and CIGNA's staff support operations in leased premises of approximately 450,000 square feet at Two Liberty Place, Philadelphia. CIGNA HealthCare is the primary occupant of a complex of buildings owned by CIGNA, aggregating approximately 1.5 million square feet of office space, located at 900-950 Cottage Grove Road, Bloomfield, Connecticut. In addition, CIGNA owns or leases office buildings, or parts thereof, throughout the United States and in other countries. CIGNA believes its properties are adequate and suitable for its business as presently conducted. For additional information concerning leases and property, see Notes 2(H) and 18 to CIGNA's 2005 Financial Statements included in its 2005 Annual Report. This paragraph does not include information on investment properties.

Item 3.  LEGAL PROCEEDINGS

Multi-district health care litigation in a Florida federal court against CIGNA and several competitors, included the federal cases Shane v. Humana, Inc., et al. (CIGNA subsidiaries added as defendants in August 2000) and Mangieri v. CIGNA Corporation (filed December 7, 1999 in the United States District Court for the Northern District of Alabama), as well as the Illinois state suit Kaiser and Corrigan v. CIGNA Corporation, et al. (class of health care providers certified on March 29, 2001). CIGNA previously disclosed final, court-approved settlement agreements between CIGNA and both classes of plaintiffs, the physician class and the non-physician health care professional class. A dispute with a representative of certain physicians over administration of their settlement is likely to be resolved in mid 2006.

Beginning in 2004, CIGNA, other insurance companies and certain insurance brokers received subpoenas and inquiries from the New York Attorney General, the Connecticut Attorney General, the Florida Insurance Department and other state regulators relating to their investigations of broker compensation. CIGNA received a subpoena in October 2005 from the U.S. Attorney’s Office for the Southern District of California and is providing information to that Office about broker, Universal Life Resources (ULR). In January 2006, CIGNA received a subpoena from the U.S. Department of Labor and is providing information to that Office about another broker. CIGNA is cooperating with the inquiries and investigations by regulators and the U.S. Attorney’s Office.

A case filed on October 14, 2004, United Policyholders v. Universal Life Resources, Inc., et al., in the Superior Court of the State of California for the County of San Diego was withdrawn on April 26, 2005. This case sought injunctive and monetary relief for alleged fraudulent and deceptive business practices under section 17200 of the California Code in connection with purportedly undisclosed commissions paid by insurers to ULR, and named CIGNA Corporation and Life Insurance Company of North America as defendants. A case filed on October 20, 2004, Ronald Scott Shirley, on behalf of himself and All Others Similarly Situated v. Universal Life Resources, et al., which was subsequently recaptioned Cynthia C. Brandes, On Behalf of Herself and All Others Similarly situated vs. Universal Life Resources, et. al. was dismissed by the plaintiffs on August 29, 2005. This case was a purported class action suit filed in the United States District Court for the Southern District of California under RICO. It alleged that hidden commissions increased the cost of employee benefit plans and sought treble damages and injunctive relief. CIGNA Corporation and its subsidiary, Life Insurance Company of North America, were named among the defendants.

On November 18, 2004, The People of the State of California by and through John Garamendi, Insurance Commissioner of the State of California v. Universal Life Resources, et al. was filed in the Superior Court of the State of California for the County of San Diego alleging that defendants (including CIGNA and several other insurance holding companies) failed to disclose compensation paid to ULR and that, in return for the compensation, ULR steered clients to defendants. The plaintiffs are seeking injunctive relief only.

On August 1, 2005, two CIGNA subsidiaries, Connecticut General Life Insurance Company and Life Insurance Company of North America, were named as defendants in a consolidated amended complaint filed in In re Insurance Brokerage Antitrust Litigation, a

33

multi-district litigation proceeding consolidated in the United States District Court for the District of New Jersey. The complaint alleges that brokers and insurers conspired to hide commissions, increasing the cost of employee benefit plans, and seeks treble damages and injunctive relief. Numerous insurance brokers and other insurance companies are named as defendants.

A shareholder derivative suit, Coustry v. Hanway, et al. nominally on behalf of CIGNA, filed on February 25, 2005 in the United States District Court for the Eastern District of Pennsylvania was voluntarily dismissed by the plaintiff on January 10, 2006.  The complaint alleged breach of fiduciary duty in connection with alleged concealment of the fact that CIGNA paid contingent commissions to brokers, and sought damages and equitable relief.

In late 2002, several purported class action lawsuits were filed against CIGNA and certain of its officers by individuals seeking to represent a class of purchasers of CIGNA securities from May 2, 2001 to October 24, 2002. The complaints allege, among other things, that the defendants violated Section 10(b) of, and Rule 10b-5 under, the Securities Exchange Act of 1934 by misleading CIGNA shareholders with respect to the company’s performance during the class period. Plaintiffs seek compensatory damages and attorneys’ fees. In 2003, these suits were consolidated in the United States District Court for the Eastern District of Pennsylvania as In re CIGNA Corp. Securities Litigation. CIGNA’s motions to dismiss certain claims were granted in 2004 and 2005. In January 2006, the lead plaintiff filed an amended complaint to conform to Court Orders dismissing claims related to certain issues and statements.  

On November 7, 2002, a purported shareholder derivative complaint nominally on behalf of CIGNA was filed in the United States District Court for the Eastern District of Pennsylvania by Evelyn Hobbs. The complaint alleges breaches of fiduciary duty by CIGNA’s directors, including, among other things, their “failure to monitor, investigate and oversee Cigna’s management information system” and seeks compensatory and punitive damages. A similar complaint, filed on November 19, 2002 in the New Castle County (Delaware) Chancery Court by Jack Scott was dismissed by the plaintiff and refiled in the United States District Court for the Eastern District of Pennsylvania. The Hobbs and Scott cases are being coordinated in the United States District Court for the Eastern District of Pennsylvania by the same judge handling the In re CIGNA Corp. Securities Litigation.

On December 18, 2001, Janice Amara filed a purported class action lawsuit in the United States District Court for the District of Connecticut against CIGNA Corporation and the CIGNA Pension Plan on behalf of herself and other similarly situated participants in the CIGNA Pension Plan who earned certain Plan benefits prior to 1998. The plaintiffs allege, among other things, that the Plan violated ERISA by impermissibly conditioning certain post-1997 benefit accruals on the amount of pre-1998 benefit accruals, that these conditions are not adequately disclosed to plan participants, and that the Plan’s cash balance formula discriminates against older employees. The plaintiffs were granted class certification on December 20, 2002, and seek equitable relief.

On August 4, 2004, a complaint captioned New York v. Express Scripts, Inc., ESI Mail Pharmacy Service, Inc., Connecticut General Life Insurance Company and CIGNA Life Insurance Company of New York was filed in the Supreme Court of the State of New York. The complaint alleges certain breaches of contract and violations of civil law in connection with the management of the prescription drug benefit program under New York State’s principal employee health plan, the Empire Plan. CIGNA subsidiaries filed a motion to dismiss all but the breach of contract claims.

See “Unicover and Other Run-off Reinsurance” on page 20 for a description of legal matters arising out of the run-off reinsurance operations.

CIGNA is routinely involved in numerous claims, lawsuits, regulatory audits, investigations and other legal matters arising, for the most part, in the ordinary course of the business of administering and insuring employee benefit programs. An increasing number of claims are being made for substantial non-economic, extra-contractual or punitive damages. The outcome of litigation and other legal matters is always uncertain, and outcomes that are not justified by the evidence can occur. CIGNA believes that it has valid defenses to the legal matters pending against it and is defending itself vigorously. Nevertheless, it is possible that resolution of one or more of the legal matters currently pending or threatened could result in losses material to

34

CIGNA’s consolidated results of operations, liquidity or financial condition.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Executive Officers of the Registrant

All officers are elected to serve for a one-year term or until their successors are elected. Principal occupations and employment during the past five years are listed.

MICHAEL W. BELL, 42, Executive Vice President and Chief Financial Officer of CIGNA beginning December 2002; Chief Financial Officer-elect from October 2002 until December 2002; and President of CIGNA Group Insurance from July 2000 until October 2002.

DAVID M. CORDANI, 40, President, CIGNA HealthCare beginning July 2005; President, Health Segments, CIGNA HealthCare from June 2004 until July 2005; Senior Vice President and Chief Financial Officer, CIGNA HealthCare from October 2002 until June 2004; Senior Vice President, Transformation and Program Management, CIGNA HealthCare from April 2002 until October 2002; and Vice President, Corporate Accounting and Planning, CIGNA Corporation from August 2000 until April 2002.

H. EDWARD HANWAY, 54, Chairman of CIGNA since December 2000; Chief Executive Officer of CIGNA since January 2000; President and a Director of CIGNA since January 1999;  and Chief Operating Officer of CIGNA from January 1999 until January 2000.

PAUL E. HARTLEY, 49, President of CIGNA International beginning June 2005; and President and Chief Executive Officer, CIGNA International, Asia Pacific region from June 1999 to June 2005.

JOHN M. MURABITO, 47, Executive Vice President of CIGNA beginning August 2003, with responsibility for Human Resources and Services; and  Senior Vice President, Human Resources and Corporate Services from March 2000 until August 2003 at Monsanto Company.

KAREN S. ROHAN, 43, President of CIGNA Group Insurance beginning November 2005; President of CIGNA Dental & Vision Care beginning April 2004; President of CIGNA Specialty Companies from November 2004 until November 2005; Chief Underwriting Officer, CIGNA HealthCare from January 2003 until April 2004; and Vice President and Business Financial Officer, CIGNA HealthCare from March 2000 until December 2002.

JUDITH E. SOLTZ, 59, Executive Vice President and General Counsel beginning February 2001; and Senior Vice President and Associate General Counsel from 1998 until February 2001.

SCOTT A. STORRER, 38, Executive Vice President, CIGNA Service Operations and Information Technology beginning June 2005; Interim Head of CIGNA Information Technology from November 2004 until June 2005; Senior Vice President of CIGNA HealthCare Service Operations and CIGNA Information Technology from October 2002 until November 2004; and Senior Vice President of Disability Management Solutions and Customer Service for CIGNA Group Insurance from May 2001 until October 2002.

35

PART II

Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The information under the caption “Quarterly Financial Data--Stock and Dividend Data” and under the caption “Stock Listing” in CIGNA’s 2005 Annual Report is incorporated by reference, as is the information from Note 15 to CIGNA’s 2005 Financial Statements and the number of shareholders of record as of December 31, 2005 under the caption “Highlights” in CIGNA’s 2005 Annual Report. CIGNA’s common stock is listed with, and trades on, the New York Stock Exchange under the symbol “CI.”

Issuer Purchases of Equity Securities

The following table provides information about CIGNA's share repurchase activity for the quarter ended December 31, 2005:

Issuer Purchases of Equity Securities
Period	Total # of Shares purchased(1)	Average price paid per share	Total # of shares purchased as part of publicly announced program (2)	Approximate dollar value of shares that may yet be purchased as part of publicly announced program (3)
October 1-31, 2005	1,123,353	$114.21	1,123,000	$698,126,310
November 1-30, 2005	1,670,752	$112.82	1,638,100	$513,263,468
December 1-31, 2005	2,236,719	$113.13	2,236,100	$260,303,106
Total	5,030,824	$113.27	4,997,200	N/A

__________________

(1)   Includes shares tendered by employees as payment of the exercise price of stock options granted under the Company’s equity compensation plans. Employees tendered 33,624 shares in October, November and December.

(2)   CIGNA has had a repurchase program for many years, and has had varying levels of repurchase authority and activity under this program. The program has no expiration date. CIGNA suspends activity under this program from time to time, generally without public announcement. Remaining authorization under the program was approximately $260 million as of December 31, 2005.

(3)   Approximate dollar value of shares is as of the last date of the applicable month.

36

Item 6.SELECTED FINANCIAL DATA

The five-year financial information under the caption “Highlights” in CIGNA’s 2005 Annual Report is incorporated by reference.

Item 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information contained in the MD&A section of CIGNA’s 2005 Annual Report is incorporated by reference.

Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information under the caption “Market Risk” in the MD&A section of CIGNA’s 2005 Annual Report is incorporated by reference.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CIGNA’s Consolidated Financial Statements and the report of its independent registered public accounting firm in CIGNA’s 2005 Annual Report are incorporated by reference, as is the unaudited information set forth under the caption “Quarterly Financial Data--Consolidated Results.”

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

None.

Item 9A. CONTROLS AND PROCEDURES

A.   Disclosure Controls and Procedures.

Based on an evaluation of the effectiveness of CIGNA’s disclosure controls and procedures, CIGNA’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, CIGNA’s disclosure controls and procedures are effective to ensure that information required to be disclosed by CIGNA in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

   B.   Internal Control Over Financial Reporting.

Management's Report on Internal Control Over Financial Reporting

CIGNA’s management report on internal control over financial reporting under the caption “Management’s Annual Report on Internal Control over Financial Reporting” in CIGNA's 2005 Annual Report is incorporated by reference.

Attestation Report of the Registered Public Accounting Firm

The attestation report of CIGNA’s independent registered public accounting firm, on management's assessment of the effectiveness of CIGNA’s internal control over financial reporting and the effectiveness of CIGNA’s internal control over financial reporting under the caption “Report of Independent Registered Public Accounting Firm” in CIGNA’s 2005 Annual Report is incorporated by reference.

Changes in Internal Control Over Financial Reporting

There have been no changes in CIGNA’s internal control over financial reporting identified in connection with the evaluation described in the above paragraph that have materially affected, or are reasonably likely to materially affect, CIGNA’s internal control over financial reporting.

Item 9B. OTHER INFORMATION

None.

37

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

A.    Directors of the Registrant

The information under the captions “The Board of Directors’ Nominees for Terms to Expire in April 2009,” “Directors Who Will Continue in Office” and “Board of Directors and Committee Meetings, Membership, Attendance and Independence” (as it relates to Audit Committee disclosure) in CIGNA’s proxy statement to be dated on or about March 24, 2006 is incorporated by reference.

B.    Executive Officers of the Registrant

See PART I - “Executive Officers of the Registrant.”

C. Code of Ethics and Other Corporate Governance Disclosures

CIGNA’s Code of Ethics and Compliance is the Company’s code of business conduct and ethics, and applies to CIGNA’s directors, officers (including the chief executive officer, chief financial officer and chief accounting officer) and employees. The Code of Ethics and Compliance policies are posted on the Corporate Governance section of the Company’s website, www.cigna.com. In the event the Company substantively amends its Code of Ethics and Compliance or waives a provision of the Code, CIGNA intends to disclose the amendment or waiver on the Corporate Governance section of the Company’s website as well.

In addition, the Company’s corporate governance guidelines (Board Practices) and the charters of its board committees (audit, corporate governance, executive, finance and people resources) are available on the Corporate Governance section of the Company’s website. These corporate governance documents, as well as the Code of Ethics and Compliance policies, are available in print to any shareholder who requests them.

Item 11.EXECUTIVE COMPENSATION

The information under the captions “Executive Compensation,” “2005 Non-Employee Director Compensation” and “2006 Non-Employee Director Compensation” in CIGNA’s proxy statement to be dated on or about March 24, 2006 is incorporated by reference.

38

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table presents information regarding CIGNA’s equity compensation plans as of December 31, 2005:

	(a)	(b)	(c)
Plan Category	Securities To Be Issued Upon Exercise Of Outstanding Options, Warrants And Rights	Weighted Average Exercise Price Of Outstanding Options, Warrants And Rights	Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected In Column (a))
Equity Compensation Plans Approved By Security Holders	8,653,000	$82.57	11,457,000
Equity Compensation Plans Not Approved By Security Holders(1)	219,000	$79.53	--
Total	8,872,000	$82.49	11,457,000

____________________

(1)Consists of the CIGNA-Healthsource Stock Plan of 1997 discussed below under “Description of the Equity Compensation Plan Not Approved by Security Holders.”

Description of the Equity Compensation Plan Not Approved by Security Holders. The CIGNA-Healthsource Stock Plan of 1997 was adopted by CIGNA’s Board of Directors in 1997 in connection with the acquisition of Healthsource, Inc. The plan provided for CIGNA stock option grants to replace prior Healthsource stock option grants as well as new incentive compensation grants to Healthsource employees after the acquisition. The plan had terms similar to those included in other CIGNA equity compensation plans existing at the time but provided only for the grant of stock options and restricted stock. No grants were made under the plan after 1999.

The information under the caption “Stock Held by Directors, Nominees and Executive Officers” and “Largest Security Holders” in CIGNA's proxy statement to be dated on or about March 24, 2006 is incorporated by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information under the caption “Certain Transactions” in CIGNA’s proxy statement to be dated on or about March 24, 2006 is incorporated by reference.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information under the captions “Policy for the Pre-Approval of Audit and Non-Audit Services” and “Fees Billed by Independent Auditors” in CIGNA’s proxy statement to be dated on or about March 24, 2006 is incorporated by reference.

39

PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

        (a) (1) The following financial statements have been incorporated by reference from CIGNA’s 2005 Annual Report:

Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003.

Consolidated Balance Sheets as of December 31, 2005 and 2004.

Consolidated Statements of Comprehensive Income and Changes in Shareholders’ Equity for the years ended December 31, 2005, 2004 and 2003.

Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003.

Notes to the Financial Statements.

Report of Independent Registered Public Accounting Firm.

         (2) The financial statement schedules are listed in the Index to Financial Statement Schedules on page FS-1.

         (3) The exhibits are listed in the Index to Exhibits beginning on page E-1.

40

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by its undersigned, thereunto duly authorized.

Date: February 23, 2006

CIGNA Corporation

By:/s/ Michael W. Bell

Michael W. Bell

Executive Vice President and

Chief Financial Officer

(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Principal Executive Officer:	Directors:*
H. Edward Hanway*	Robert H. Campbell
Chairman, Chief Executive Officer and a Director	Isiah Harris, Jr. Jane E. Henney, M.D
	Peter N. Larson
	Roman Martinez IV Louis W. Sullivan, M.D.
	Harold A. Wagner
	Carol Cox Wait
	Donna F. Zarcone William D. Zollars

Principal Accounting Officer:
/s/ Annmarie T. Hagan
Annmarie T. Hagan
Vice President and
Chief Accounting Officer
Date: February 23, 2006
	*By: /s/ Carol J. Ward
	Carol J. Ward
	Attorney-in-Fact
	Date: February 23, 2006

41

CIGNA CORPORATION AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENT SCHEDULES

			PAGE
Report of Independent Registered Public Accounting Firm on Financial Statement Schedules			FS-2
Schedules
	I	Summary of Investments--Other Than Investments in Related
		Parties as of December 31, 2005	FS-3
	II	Condensed Financial Information of CIGNA Corporation
		(Registrant)	FS-4
	III	Supplementary Insurance Information	FS-9
	IV	Reinsurance	FS-11
	V	Valuation and Qualifying Accounts and Reserves	FS-12

Schedules other than those listed above are omitted because they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto, which are incorporated by reference from CIGNA's 2005 Annual Report.

FS-1

Report of Independent Registered Public Accounting Firm

On Financial Statement Schedules

To the Board of Directors

of CIGNA Corporation

Our audits of the consolidated financial statements, of management’s assessment of the effectiveness of internal control over financial reporting and of the effectiveness of internal control over financial reporting referred to in our report dated February 22, 2006 appearing in the 2005 Annual Report to Shareholders of CIGNA Corporation (which report, consolidated financial statements and assessment are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedules listed in Item 15(a)(2) of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 22, 2006

FS-2

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE I

SUMMARY OF INVESTMENTS — OTHER THAN INVESTMENTS IN RELATED PARTIES

DECEMBER 31, 2005

(In millions)

Type of Investment	Cost		Fair Value		Amount at which shown in the consolidated balance sheet
Fixed maturities:
Bonds:
United States government and government
agencies and authorities	$	639	$	913	$	913
States, municipalities and political subdivisions		2,387		2,512		2,512
Foreign governments		780		818		818
Public utilities		785		859		859
All other corporate bonds		8,144		8,607		8,607
Asset-backed securities:
United States government agencies,
mortgage-backed		45		44		44
Other mortgage-backed		490		503		503
Other asset-backed		548		635		635
Redeemable preferred stocks		55		56		56
Total fixed maturities		13,873		14,947		14,947
Equity securities:
Common stocks:
Industrial, miscellaneous and all other		2		23		23
Public utilities		1		1		1
Non-redeemable preferred stocks		110		111		111
Total equity securities		113		135		135
Mortgage loans on real estate		3,934				3,934
Policy loans		1,337				1,337
Real estate investments		80				80
Other long-term investments		502				504
Short-term investments		439				439
Total investments	$	20,278			$	21,376

FS-3

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

STATEMENTS OF INCOME

(In millions)

	For the year ended December 31,
	2005			2004			2003
Other revenues	$	7		$	6		$	--
Total revenues		7			6			--
Operating expenses:
Interest		105			107			111
Intercompany interest		162			73			64
Other		71			138			87
Total operating expenses		338			318			262
Loss before income taxes		(331	)		(312	)		(262	)
Income tax benefit		(126	)		(138	)		(71	)
Loss of parent company		(205	)		(174	)		(191	)
Equity in income of subsidiaries from continuing operations		1,481			1,751			775
Income from continuing operations		1,276			1,577			584
Income from discontinued operations, net of taxes		349			--			48
Income before Cumulative Effect of Accounting Change		1,625			1,577			632
Cumulative Effect of Accounting Change, net of taxes		--			(139	)		--
Net income	$	1,625		$	1,438		$	632

See Notes to Condensed Financial Statements on pages FS-7 and FS-8

FS-4

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

BALANCE SHEETS

(In millions)

				As of December 31,
				2005						2004
Assets:
Cash and cash equivalents				$	1					$	3
Investments in subsidiaries					12,204						12,153
Other assets					510						583
Total assets				$	12,715					$	12,739
Liabilities:
Intercompany				$	4,711					$	4,384
Current portion of long-term debt					100						--
Long-term debt					1,324						1,424
Other liabilities					1,220						1,728
Total liabilities					7,355						7,536
Shareholders' Equity:
Common stock (shares issued, 160; 160)					40						40
Additional paid-in capital					2,385						2,360
Net unrealized appreciation — fixed maturities	$	195					$	390
Net unrealized appreciation — equity securities		24						17
Net unrealized depreciation — derivatives		(14	)					(16	)
Net translation of foreign currencies		2						2
Minimum pension liability adjustment		(716	)					(729	)
Accumulated other comprehensive loss					(509	)					(336	)
Retained earnings					5,162						3,679
Less treasury stock, at cost					(1,718	)					(540	)
Total shareholders' equity					5,360						5,203
Total liabilities and shareholders' equity				$	12,715					$	12,739

See Notes to Condensed Financial Statements on pages FS-7 and FS-8.

FS-5

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

STATEMENTS OF CASH FLOWS

(In millions)

	For the year ended December 31,
	2005			2004			2003
Cash Flows from Operating Activities:
Net Income	$	1,625		$	1,438		$	632
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of subsidiaries		(1,481	)		(1,751	)		(775	)
Income from discontinued operations		(349	)		--			(48	)
Cumulative effect of accounting change, net of taxes		--			139			--
Dividends received from subsidiaries		1,306			499			608
Other liabilities		(290	)		106			(155	)
Cash provided by operating activities of discontinued operations		222			--			--
Other, net		(68	)		(10	)		53
Net cash provided by operating activities		965			421			315
Cash Flows from Investing Activities:
Other, net		(9	)		5			10
Net cash provided by (used in) investing activities		(9	)		5			10
Cash Flows from Financing Activities:
Net change in intercompany debt		327			364			(20	)
Repayment of long-term debt		--			(76	)		(126	)
Issuance of common stock		346			64			6
Common dividends paid		(13	)		(100	)		(185	)
Treasury stock repurchases		(1,618	)		(676	)		--
Net cash used in financing activities		(958	)		(424	)		(325	)
Net increase (decrease) in cash and cash equivalents		(2	)		2			--
Cash and cash equivalents, beginning of year		3			1			1
Cash and cash equivalents, end of year	$	1		$	3		$	1

See Notes to Condensed Financial Statements on pages FS-7 and FS-8.

FS-6

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

NOTES TO CONDENSED FINANCIAL STATEMENTS

The accompanying condensed financial statements should be read in conjunction with the Consolidated Financial Statements and the accompanying notes thereto in the Annual Report.

Note 1—For purposes of these condensed financial statements, CIGNA Corporation’s wholly owned subsidiaries are recorded using the equity basis of accounting.

Note 2—Short-term and long-term debt consisted of the following at December 31:

(In millions)	2005		2004
Short-term:
Current maturities of long-term debt	$	100	$	-
Total short-term debt	$	100	$	-
Long-term:
Uncollateralized debt:
6 3/8% Notes due 2006	$	-	$	100
7.4% Notes due 2007		291		291
8 ¼% Notes due 2007		85		85
7% Notes due 2011		222		222
6.375% Notes due 2011		226		226
7.65% Notes due 2023		100		100
8.3% Notes due 2023		17		17
7 7/8% Debentures due 2027		300		300
8.3% Step Down Notes due 2033		83		83
Total long-term debt	$	1,324	$	1,424

In May 2004, CIGNA entered into a three-year syndicated revolving credit and letter of credit agreement for $1.0 billion. Of this amount, up to $600 million may be used to support an internal reinsurance arrangement and the remaining portion will serve as an available line of credit commitment for CIGNA.

As of December 31, 2005 CIGNA Corporation had $500 million remaining under an effective shelf registration statement filed with the Securities and Exchange Commission, which may be issued as debt securities, equity securities or both.

Maturities of long-term debt are as follows (in millions): $100 in 2006, $376 in 2007, none in 2008 and 2009, and the remainder in years after 2010.

Interest paid on short- and long-term debt amounted to $104 million, $109 million and $114 million for 2005, 2004 and 2003, respectively.

FS-7

Note 3—Intercompany liabilities consist primarily of loans payable to CIGNA Holdings, Inc. of $4.8 billion and $4.1 billion as of December 31, 2005 and 2004, respectively. Interest was accrued at an average monthly rate of 3.62% for 2005 and 1.76% for 2004.

Note 4—As of December 31, 2005, CIGNA Corporation had guarantees and similar agreements in place to secure payment obligations or solvency requirements of certain wholly owned subsidiaries as follows:

·   CIGNA Corporation has arranged for bank letters of credit in support of CIGNA Global Reinsurance Company, an indirect wholly owned subsidiary domiciled in Bermuda, in the amount of $116 million. These letters of credit secure the payment of insureds’ claims from run-off reinsurance operations. CIGNA Corporation has agreed to indemnify the banks providing the letters of credit in the event of any draw. As of December 31, 2005 approximately $112 million of the letters of credit are issued.

·   CIGNA Corporation has provided a capital commitment deed in an amount up to $185 million in favor of CIGNA Global Reinsurance Company. This deed is equal to the letters of credit securing the payment of insureds’ claims from run-off reinsurance operations. This deed is required by Bermuda regulators to have these letters of credit for the London run-off reinsurance operations included as admitted assets.

·   Various indirect, wholly owned subsidiaries have obtained surety bonds in the normal course of business. If there is a claim on a surety bond and the subsidiary is unable to pay, CIGNA Corporation guarantees payment to the company issuing the surety bond. The aggregate amount of such surety bonds as of December 31, 2005 was $50 million.

·   CIGNA Corporation is obligated under a $25 million letter of credit required by the insurer of its high-deductible self-insurance programs to indemnify the insurer for claim liabilities that fall within deductible amounts for policy years dating back to 1994.

·   CIGNA Corporation also provides solvency guarantees aggregating $34 million under state and federal regulations in support of its indirect wholly owned medical HMOs in several states.

·   CIGNA Corporation has arranged a $150 million letter of credit in support of CIGNA Europe Insurance Company, an indirect wholly owned subsidiary. CIGNA Corporation has agreed to indemnify the banks providing the letters of credit in the event of any draw. CIGNA Europe Insurance Company is the holder of the letters of credit.

·   In addition, CIGNA Corporation has agreed to indemnify payment of losses included in CIGNA Europe Insurance Company’s reserves on the reinsurance business transferred from ACE. As of December 31, 2005, the reserve was $452 million.

Through December 31, 2005, no payments have been made on these guarantees and none are pending. CIGNA Corporation provided other guarantees to subsidiaries that, in the aggregate, do not represent a material risk to CIGNA Corporation’s results of operations, liquidity or financial condition.

FS-8

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE III

SUPPLEMENTARY INSURANCE INFORMATION

(In millions)

Segment	Deferred policy acquisition costs		Future policy benefits and contractholder deposit funds		Medical claims payable and unpaid claims
Year Ended December 31, 2005:
Health Care	$	27	$	794	$	1,478
Disability and Life		12		973		2,835
International		491		870		171
Run-off Retirement		--		2,808		1
Run-off Reinsurance		--		980		826
Other Operations		88		11,877		135
Corporate		--		--		--
Total	$	618	$	18,302	$	5,446
Year Ended December 31, 2004:
Health Care	$	26	$	857	$	1,941
Disability and Life		12		1,022		2,796
International		420		746		146
Run-off Retirement		--		10,203		--
Run-off Reinsurance		--		1,016		894
Other Operations		86		12,228		144
Corporate		--		--		--
Total	$	544	$	26,072	$	5,921
Year Ended December 31, 2003:
Health Care	$	25	$	915	$	2,563
Disability and Life		15		1,012		2,833
International		311		610		136
Run-off Retirement		146		19,173		--
Run-off Reinsurance		--		1,210		894
Other Operations		83		12,409		188
Corporate		--		--		--
Total	$	580	$	35,329	$	6,614

FS-9

Unearned premiums and fees		Premiums and fees (1)		Net investment income (2)		Benefit expenses (1)(3)		Amortization of deferred policy acquisition expenses		Other operating expenses
$	97	$	10,177	$	275	$	6,652	$	56	$	3,786
	43		2,065		264		1,587		4		617
	331		1,243		71		690		84		381
	--		2		144		119		--		61
	1		92		99		150		--		69
	43		116		465		448		5		59
	--		--		41		--		--		123
$	515	$	13,695	$	1,359	$	9,646	$	149	$	5,096
$	111	$	10,868	$	283	$	7,100	$	55	$	3,835
	39		1,923		253		1,529		6		590
	325		1,026		58		575		82		314
	--		215		467		565		6		257
	1		80		92		82		--		36
	46		124		475		413		5		141
	--		--		15		--		--		210
$	522	$	14,236	$	1,643	$	10,264	$	154	$	5,383
$	119	$	12,284	$	283	$	8,684	$	62	$	4,099
	39		1,807		250		1,458		6		579
	244		855		49		482		59		289
	2		271		1,413		919		24		295
	2		84		82		116		--		39
	43		159		517		561		5		154
	--		--		--		--		--		129
$	449	$	15,460	$	2,594	$	12,220	$	156	$	5,584

________________________

(1) Amounts presented are shown net of the effects of reinsurance. See Note 7 to the Financial Statements included in CIGNA’s 2005 Annual Report.

(2) The allocation of net investment income is based upon the investment year method, the identification of certain portfolios with specific segments, or a combination of both.

(3) Benefit expenses include Health Care medical claims expense and other benefit expenses.

FS-10

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE IV

REINSURANCE

(In millions)

	Gross amount		Ceded to other companies		Assumed from other companies		Net amount		Percentage of amount assumed to net
Year Ended December 31, 2005:
Life insurance in force	$	336,705	$	43,062	$	134,989	$	428,632		31.5	%
Premiums and fees:
Life insurance and annuities	$	1,728	$	330	$	417	$	1,815		23.0	%
Accident and health insurance		11,966		155		69		11,880		.6	%
Total	$	13,694	$	485	$	486	$	13,695		3.5	%
Year Ended December 31, 2004:
Life insurance in force	$	337,654	$	46,530	$	112,070	$	403,194		27.8	%
Premiums and fees:
Life insurance and annuities	$	1,969	$	363	$	423	$	2,029		20.8	%
Accident and health insurance		12,285		116		38		12,207		.3	%
Total	$	14,254	$	479	$	461	$	14,236		3.2	%
Year Ended December 31, 2003:
Life insurance in force	$	323,241	$	52,511	$	136,754	$	407,484		33.6	%
Premiums and fees:
Life insurance and annuities	$	2,115	$	397	$	495	$	2,213		22.4	%
Accident and health insurance		13,328		122		41		13,247		.3
Total	$	15,443	$	519	$	536	$	15,460		3.5	%

FS-11

CIGNA CORPORATION

SCHEDULE V

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

(In millions)

Description	Balance at beginning of period		Charged (Credited) to costs and expenses			Charged (Credited) to other accounts -describe(1)			Other deductions -describe(2)			Balance at end of period
2005:
Investment asset valuation reserves:
Mortgage loans	$	2	$	2		$	-		$	(2	)	$	2
Allowance for doubtful accounts:
Premiums, accounts and notes
receivable		78		8			-			(24	)		62
Deferred tax asset valuation
allowance		262		(33	)		-			(84	)		145
Reinsurance recoverables		193		(9	)		-			(26	)		158
2004:
Investment asset valuation reserves:
Mortgage loans	$	19	$	1		$	-		$	(18	)	$	2
Allowance for doubtful accounts:
Premiums, accounts and notes
receivable		81		20			-			(23	)		78
Deferred tax asset valuation
allowance		223		51			-			(12	)		262
Reinsurance recoverables		176		48			-			(31	)		193
2003:
Investment asset valuation reserves:
Mortgage loans	$	11	$	3		$	5		$	-		$	19
Real estate		21		1			1			(23	)		-
Allowance for doubtful accounts:
Premiums, accounts and notes
receivable		55		42			(2	)		(14	)		81
Deferred tax asset valuation
allowance		204		28			-			(9	)		223
Reinsurance recoverables		149		19			-			8			176

________________________

(1) Change in valuation reserves attributable to policyholder contracts.

(2) Reflects transfer of reserves to other investment asset categories as well as charge-offs upon sales, repayments and other. The change in the deferred tax asset valuation allowance primarily reflects activity in discontinued operations. The change in reinsurance recoverable reflects a reclassification of the gross reinsurance recoverable, with no effect on the net reinsurance recoverable

FS-12

INDEX TO EXHIBITS

Number		Description	Method of Filing
3.1		Restated Certificate of Incorporation of the registrant as last amended July 22, 1998	Filed as Exhibit 3.1 to the registrant's Form 10-K for the year ended December 31, 2003 and incorporated herein by reference.
3.2		By-Laws of the registrant as last amended and restated December 11, 2000	Filed herewith.
4	(a)	Amended and Restated Shareholder Rights Agreement dated as of July 22, 1998 between CIGNA Corporation and First Chicago Trust Company of New York	Filed as Exhibit 4(a) to the registrant's Form 10-K for the year ended December 31, 2003 and incorporated herein by reference.
	(b)	Amendment No. 1 dated as of December 14, 1998 to the Amended and Restated Shareholder Rights Agreement	Filed as Exhibit 4(b) to the registrant's Form 10-K for the year ended December 31, 2003 and incorporated herein by reference.
	(c)	Amendment No. 2 dated as of December 31, 2001 to the Amended and Restated Shareholder Rights Agreement	Filed as Exhibit 10.1 to the registrant's Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.

Exhibits 10.1 through 10.17 are identified as management contracts or compensatory plans or arrangements pursuant to Item 15 of Form 10-K.

10.1		Deferred Compensation Plan for Directors of CIGNA Corporation, as amended and restated January 1, 1997	Filed as Exhibit 10.1 to the registrant's Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.
10.2		Restricted Stock/Stock Equivalent Plan for Non-Employee Directors of CIGNA Corporation amended and restated effective January 17, 2006	Filed as Exhibit 10.2 to the registrant’s Form 8-K filed on December 13, 2005 and incorporated herein by reference.
10.3		Description of Compensation Plan for Non-Employee Directors of CIGNA Corporation, as amended and restated effective January 1, 2006.	Filed as Exhibit 10.1 to the registrant’s Form 8-K filed on December 13, 2005 and incorporated herein by reference.
10.4		CIGNA Corporation Stock Plan, as amended and restated through July 2000	Filed as Exhibit 10.4 to the registrant’s Form 10-K for the year ended December 31, 2003 and incorporated herein by reference.
10.5	(a)	CIGNA Executive Severance Benefits Plan effective as of January 1, 1997	Filed as Exhibit 10.7(a) to the registrant’s Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.
	(b)	Amendment No. 1 effective February 23, 2000 to the CIGNA Executive Severance Benefits Plan	Filed as Exhibit 10.5(b) to the registrant’s Form 10-K for the year ended December 31, 2004 and incorporated herein by reference.
10.6		Description of Severance Benefits for Executives in Non-Change of Control Circumstances	Filed as Exhibit 10.6 to the registrant’s Form 10-K for the year ended December 31, 2004 and incorporated herein by reference.

E-1

 

10.7		CIGNA Executive Incentive Plan, as amended and restated January 1, 2002	Filed as Exhibit 10 to the registrant's Form 10-Q for the quarter ended March 31, 2002 and incorporated herein by reference.
10.8		CIGNA Long-Term Incentive Plan, as amended and restated effective as of January 1, 2005	Filed as Appendix B to the registrant’s definitive proxy statement filed March 21, 2005 and incorporated herein by reference.
10.9		Description of Arrangement regarding Unit-based Long-Term Incentive Compensation	Filed as Exhibit 10.5 to the registrant’s Form 10-Q for the year ended September 30, 2003 and incorporated herein by reference.
10.10		CIGNA Deferred Compensation Plan, as amended and restated October 24, 2001	Filed as Exhibit 10 to the registrant’s Form 10-Q for the quarter ended September 30, 2001 and incorporated herein by reference.
10.11		Description of Amendments to Executive Management Compensation Arrangements	Filed as Exhibit 10.1 to the registrant’s Form 10-Q for the quarter ended March 31, 2005 and incorporated herein by reference.
10.12	(a)	CIGNA Supplemental Pension Plan, as amended and restated August 1, 1998	Filed as Exhibit 10.9(a) to the registrant's Form 10-K for the year ended December 31, 2003 and incorporated herein by reference.

(b)	Amendment No. 1 to the CIGNA Supplemental Pension Plan, effective as of September 1, 1999	Filed as Exhibit 10.10(b) to the registrant’s Form 10-K for the year ended December 31, 2004 and incorporated herein by reference.
(c)	Amendment No. 2 dated December 6, 2000 to the CIGNA Supplemental Pension	Filed as Exhibit 10.11(c) to the registrant's Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.

10.13	Description of CIGNA Corporation Financial Services Program	Filed as Exhibit 10.10 to the registrant's Form 10-K for the year ended December 31, 2003 and incorporated herein by reference.
10.14	Description of Mandatory Deferral of Non-Deductible Executive Compensation Arrangement	Filed as Exhibit 10.17 to the registrant's Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.
10.15	Form of Non-Compete Agreement dated December 8, 1997 with Mr. Hanway	Filed as Exhibit 10.15 to the registrant's Form 10-K for the year ended December 31, 2002 and incorporated herein by reference.

10.16 Special Incentive Agreement with Mr. Hanway dated March 17, 1998 Filed as Exhibit 10.19 to the registrant's Form 10-K for the period ended December 31, 2002 and incorporated herein by reference.

E-2

 

10.17	Schedule regarding Deferred Stock Unit Agreements dated August 6, 2003 with Messrs. Hanway, Bell and Ms. Soltz and Form of Deferred Stock Unit Agreement	Filed as Exhibit 10.22 to the registrant's Form 10-K for the year ended December 31, 2003 and incorporated herein by reference.
12	Computation of Ratios of Earnings to Fixed Charges	Filed herewith.

13	Portions of registrant's 2005 Annual Report to Shareholders (Entire Annual Report bound in printed versions of Form 10-K)	Filed herewith.
21	Subsidiaries of the Registrant	Filed herewith.
23	Consent of Independent Registered Public Accounting Firm	Filed herewith.
24.1	Powers of Attorney	Filed herewith.
24.2	Certified Resolutions	Filed herewith.
31.1	Certification of Chief Executive Officer of CIGNA Corporation pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934	Filed herewith.
31.2	Certification of Chief Financial Officer of CIGNA Corporation pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934	Filed herewith.
32.1	Certification of Chief Executive Officer of CIGNA Corporation pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350	Furnished herewith.

32.2 Certification of Chief Financial Officer of CIGNA Corporation pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350 Furnished herewith.

The registrant will furnish to the Commission upon request a copy of any of the registrant's agreements with respect to its long-term debt.

Shareholders may obtain copies of exhibits by writing to CIGNA Corporation, Shareholder Services Department, 1601Chestnut Street, TL17A, Philadelphia, PA 19192.

 E-3

EX-3.2

Exhibit 3.2

BY-LAWS

CIGNA

CORPORATION

A Delaware Corporation

Incorporated November 3, 1981

As Amended and Restated

December 11, 2000

INDEX TO BY-LAWS
ARTICLE I	OFFICES		Page
	Section 1.	Registered Office	1
	Section 2.	Other Offices	1
ARTICLE II	MEETINGS OF SHAREHOLDERS
	Section 1.	Place of Meetings	1
	Section 2.	Annual Meeting	2
	Section 3.	Special Meetings	2
	Section 4.	Notice of Meetings	2
	Section 5.	List of Shareholders	3
	Section 6.	Quorum, Adjournments	4
	Section 7.	Organization	4
	Section 8.	Order of and Rules for
		Conducting Business	4
	Section 9.	Voting	4
	Section 10.	Inspectors of Election	6
	Section 11.	Nomination of Directors	7
	Section 12.	Notice of Shareholder
		Business	8
ARTICLE III	BOARD OF DIRECTORS
	Section 1.	General Powers	10
	Section 2.	Number, Qualifications,
		Election and Term of Office	10
	Section 3.	Place of Meetings	11
	Section 4.	Annual Organization	11
	Section 5.	Regular Meetings	11
	Section 6.	Special Meetings	11
	Section 7.	Notice of Meetings	11
	Section 8.	Quorum and Manner of Acting	12
	Section 9.	Organization	12
	Section 10.	Resignations	13
	Section 11.	Vacancies	13
	Section 12.	Removal of Directors	13
	Section 13.	Compensation	13
	Section 14.	Committees	13
	Section 15.	Action by Consent	15
	Section 16.	Telephonic Meeting	15

ARTICLE IV	OFFICERS		Page
	Section 1.	Selection and Qualifications	15
	Section 2.	Resignations	16
	Section 3.	Removal	16
	Section 4.	Chairman of the Board	16
	Section 5.	President	17
	Section 6	Chief Executive Officer	17
	Section 7.	Vice Presidents	17
	Section 8.	Treasurer	17
	Section 9.	Corporate Secretary	18
	Section 10.	Assistant Treasurer	18
	Section 11.	Assistant Corporate Secretary	19
	Section 12.	Designation	19
	Section 13.	Agents and Employees	19
	Section 14.	Officers' Bonds or Other
		Security	19
	Section 15.	Compensation	19
	Section 16.	Terms	20
ARTICLE V	STOCK CERTIFICATES AND THEIR TRANSFER
	Section 1.	Stock Certificates;
		Uncertificated Shares	20
	Section 2.	Facsimile Signatures	21
	Section 3.	Lost Certificates	21
	Section 4.	Transfers of Stock	22
	Section 5.	Transfer Agents and
		Registrars	22
	Section 6.	Regulations	22
	Section 7.	Fixing the Record Date	22
	Section 8.	Registered Shareholders	23
ARTICLE VI	INDEMNIFICATION
	Section 1.	General	23
	Section 2.	Derivative Actions	24
	Section 3.	Indemnification in Certain
		Cases	25
	Section 4.	Procedure	25
	Section 5.	Advances for Expenses	25
	Section 6.	Exclusion of Mandatory
		Indemnification and Advances
		in Certain Cases	25
	Section 7.	Rights Not Exclusive	26
	Section 8.	Insurance	26
	Section 9.	Definition of Corporation	26
	Section 10.	Definition of Other Terms	27

			Page
	Section 11.	Right of Indemnitee to
		Bring Suit in Certain
		Circumstances	27
ARTICLE VII	GENERAL PROVISIONS
	Section 1.	Dividends	28
	Section 2.	Reserves	28
	Section 3.	Seal	28
	Section 4.	Fiscal Year	28
	Section 5.	Contributions	28
	Section 6.	Borrowing, etc.	28
	Section 7.	Deposits	29
	Section 8.	Execution of Contracts,
		Deeds, etc.	29
	Section 9.	Voting of Stock in Other
		Corporations	29
	Section 10.	Form of Records	29
	Section 11.	Repurchase of Stock	30
ARTICLE VIII	AMENDMENTS		30
ARTICLE IX	DEFINITIONS		31

BY-LAWS OF

CIGNA CORPORATION

(A Delaware Corporation)

ARTICLE I

Offices

SECTION 1. Registered Office. The registered office of the Corporation within the State of Delaware shall be in the City of Wilmington, County of New Castle.

SECTION 2. Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors shall from time to time determine or the business of the Corporation may require.

ARTICLE II

Meetings of Shareholders

SECTION 1. Place of Meetings. All meetings of the shareholders for the election of directors or for any other purpose shall be held at any such place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting.

1

SECTION 2. Annual Meeting. The annual meeting of shareholders shall be held on the fourth Wednesday in April of each year, if not a legal holiday, and if a legal holiday, then on the next succeeding day not a legal holiday, at 3:30 P.M., or at such other time or on such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. At such annual meeting, the shareholders shall elect, by a plurality vote, directors to the Board of Directors and transact such other business as may properly be brought before the meeting.

SECTION 3. Special Meetings. Special meetings of shareholders, unless otherwise prescribed by statute, may be called at any time by the Board of Directors or the Chief Executive Officer.

SECTION 4. Notice of Meetings. Except as otherwise expressly required by statute, written notice, or notice in the form of electronic transmission to shareholders who have consented to receive notice in such form, of each annual and special meeting of shareholders stating the place, date and time of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each shareholder of record entitled to vote thereat not less than ten nor more than sixty days before the date of the meeting. Business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice. If mailed, such notice shall be sent in a postage prepaid envelope, addressed to the shareholder at his address as it appears on the records of the Corporation. Such notice shall be deemed given (i) if by mail, at the time when the same shall be deposited in the United States mail, postage prepaid; (ii) if by facsimile telecommunication, when directed to a number at which the shareholder has consented to receive notice; (iii) if by electronic mail, when directed to an electronic mail address at which the shareholder has consented to receive such notice; (iv) if by a posting on an electronic network together with a separate notice to the shareholder of such specific posting, upon the later to occur of (a) such posting, or (b) the giving of the separate notice of such posting; or (v) if by any other form of electronic communication, when directed to the shareholder in the manner consented to by the shareholder. Any such consent shall be revocable by the shareholder by written notice to the Corporation. Any such consent shall be deemed revoked if (1) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (2) such inability becomes known to the Corporate Secretary or Assistant Corporate Secretary of the Corporation or to the transfer agent or other person responsible for giving notice; provided however, that inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice of any meeting shall not be required to be given to any person who attends such meeting, except when such person attends the meeting in person or by proxy for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, or who, either before or after the meeting, shall submit a signed written waiver of notice, or a waiver by electronic transmission, in person or by proxy. Neither the business to be transacted at, nor the purpose of, an annual or special meeting of shareholders need be specified in any written waiver of notice.

2

SECTION 5. List of Shareholders. The Corporate Secretary of the Corporation, or such other person who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before each meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, in the manner provided by law. The list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present.

3

SECTION 6. Quorum, Adjournments. The holders of at least two-fifths of the issued and outstanding stock of the Corporation entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of shareholders, except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented by proxy at any meeting of shareholders, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented by proxy. At such adjourned meeting at which a quorum shall be present or represented by proxy, any business may be transacted which might have been transacted at the meeting as originally called. If the adjournment is for more than thirty days, or, if after adjournment a new record date is set, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting.

SECTION 7. Organization. At each meeting of shareholders, the Chief Executive Officer, or, in his absence, a chairman designated by the Board of Directors, or in the absence of such designation a chairman chosen at the meeting, shall act as chairman of the meeting. The Corporate Secretary or, in her absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting shall act as secretary of the meeting and keep the minutes thereof.

SECTION 8. Order of and Rules for Conducting Business. The order of and the rules for conducting business at all meetings of the shareholders shall be as determined by the chairman of the meeting.

SECTION 9. Voting. Except as otherwise provided by statute, the Certificate of Incorporation, or any resolution or resolutions adopted by the Board of Directors pursuant to the authority vested in it by the Certificate of Incorporation, each shareholder of the Corporation shall be entitled at each meeting of shareholders to one vote for each share of capital stock of the Corporation standing in his name on the record of shareholders of the Corporation:

(a)on the date fixed pursuant to the provisions of Section 7 of Article V of these By-Laws as the record date for the determination of the shareholders who shall be entitled to notice of and to vote at such meeting; or

(b)if no such record date shall have been fixed, then at the close of business on the day next preceding the day on which notice thereof shall be given, or, if notice is waived by all shareholders, at the close of business on the day next preceding the day on which the meeting is held.

4

Each shareholder entitled to vote at any meeting of shareholders may vote in person or may authorize another person or persons to act for him by a proxy authorized by an instrument in writing or by a transmission permitted by law delivered to the Inspectors of Election, but no such proxy shall be voted after three years from its date, unless the proxy provides for a longer period. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this paragraph may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A shareholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering an instrument in writing or a transmission permitted by law revoking the proxy or constituting another valid proxy bearing a later date to the Inspectors. Any such proxy shall be delivered to the Inspectors, or such other person so designated to receive proxies, at or prior to the time designated in the order of business for so delivering such proxies. When a quorum is present at any meeting, the vote of the shareholders who are present in person or represented by proxy and who hold a majority of the voting power of the issued and outstanding stock of the Corporation represented at such meeting and entitled to vote thereon, shall decide any question brought before such meeting, unless the question is one upon which by express provision of statute or of the Certificate of Incorporation or of these By-Laws, a different vote is required, in which case such express provision shall govern and control the decision of such question. Unless required by statute, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the shareholder voting, or by his proxy, if there be such proxy, and shall state the number of shares voted.

5

SECTION 10. Inspectors of Election. The Board of Directors or the Chief Executive Officershall, in advance of any meeting of shareholders, appoint one or more Inspectors of Election to act at the meeting or at any adjournment and make a written report thereof, and may designate one or more persons as alternate Inspectors to replace any Inspectors who fail to act. If no Inspector or alternate is able to act at a meeting of shareholders, the chairman of the meeting shall appoint one or more Inspectors to act at the meeting. Each Inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of Inspector at such meeting with strict impartiality and according to his best ability. The Inspectors shall determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting and the validity of proxies and ballots, receive and count all votes and ballots, determine all challenges and questions arising in connection with the right to vote, retain for a reasonable period a record of the disposition of any challenges made to any determination by the Inspectors, and certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots and report the same to the chairman of the meeting, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. The Inspectors may appoint or retain other persons or entities to assist the Inspectors in the performance of the duties of the Inspectors. The date and time of the opening and the closing of the polls for each matter upon which the shareholders will vote at a meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the Inspectors after the closing of the polls unless the Court of Chancery upon application by a shareholder shall determine otherwise. On request of the chairman of the meeting, the Inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an Inspector of an election of directors. Inspectors need not be shareholders.

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Section 11. Nomination of Directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of shareholders (a) by or at the direction of the Board of Directors or (b) by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this Section, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Corporate Secretary of the Corporation. To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days prior to the meeting; provided, however, that in the event that less than 90 days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was first given or such public disclosure was first made. Such shareholder's notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the shareholder giving notice (i) the name and address, as they appear on the Corporation's stock ledger, of such shareholder, (ii) the class and number of shares of the Corporation which are beneficially owned by such shareholder and (iii) if the shareholder intends to solicit proxies in support of such shareholder's nominees, a representation to that effect. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Corporate Secretary of the Corporation that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee. No person shall be eligible for election at any meeting of shareholders as a director of the Corporation unless nominated in compliance with the procedures set forth in this Section. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in compliance with the procedures prescribed by the By-Laws, and if he should so determine, he shall so declare to the meeting and the defective nominations shall be disregarded. Notwithstanding the foregoing provisions of this Section, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 11.

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SECTION 12. Notice of Shareholder Business. At the annual meeting of shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting business must be a proper subject for shareholder action under the Delaware General Corporation Law and must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this Section and who shall be entitled to vote at the meeting. For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Corporate Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 90 days prior to the meeting; provided, however, that in the event that less than 90 days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder, to be timely, must be so received not later than the close of business on the 10th day following the date on which such notice of the date of the annual meeting was first mailed or such public disclosure was first made.

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A shareholder's notice to the Corporate Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting, (b) as to the shareholder giving such notice (i) the name and address, as they appear on the Corporation's stock ledger, of such shareholder, (ii) the class and number of shares of the Corporation which are beneficially owned by such shareholder, and (iii) if the shareholder intends to solicit proxies in support of such shareholder's proposal, a representation to that effect; and (c) any material interest of the shareholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at an annual meeting except in compliance with the procedures set forth in this Section 12. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in compliance with the provisions of this Section 12, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. At any special meeting of shareholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Board of Directors.

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ARTICLE III

Board of Directors

SECTION 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by statute or the Certificate of Incorporation directed or required to be exercised or done by the shareholders.

SECTION 2. Number, Qualifications, Election and Term of Office. The Board of Directors shall consist of not less than 8 nor more than 16 directors. The number of directors may be fixed, from time to time, by the affirmative vote of a majority of the entire Board of Directors. Any decrease in the number of directors shall be effective at the time of the next succeeding annual meeting of shareholders unless there shall be vacancies in the Board of Directors, in which case such decrease may become effective at any time prior to the next succeeding annual meeting to the extent of the number of such vacancies. Directors need not be shareholders. The directors (other than members of the initial Board of Directors) shall be divided into three classes which shall be divided as evenly as practicable with respect to the number of members of each class; the term of office of those of the first class to expire at the annual meeting commencing in April, 1983; of the second class one year thereafter; of the third class two years thereafter; and at each annual election held after such classification and election, directors shall be chosen by class for a term of three years, or for such shorter term as the shareholders may specify to complete the unexpired term of a predecessor, or to preserve the division of the directors into classes as provided herein. Each director shall hold office until his successor shall have been elected and qualified, or until his death, or until he shall have resigned, or have been removed, as hereinafter provided in these By-Laws.

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SECTION 3. Place of Meetings. Meetings of the Board of Directors shall be held at such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine or as shall be specified in the notice of any such meeting.

SECTION 4. Annual Organization. Following the Annual Meeting of Shareholders, the Board of Directors shall elect officers and take such other actions as may be necessary or appropriate for the purpose of organization of the Corporation.

SECTION 5. Regular Meetings. Regular meetings of the Board of Directors shall be held at such time and place as the Board of Directors may fix. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day. Notice of regular meetings of the Board of Directors need not be given except as otherwise required by statute or these By-Laws.

SECTION 6. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Boardor by one-third of the members of the Board of Directors of the Corporation.

SECTION 7. Notice of Meetings. Notice of each special meeting of the Board of Directors (and of each regular meeting for which notice shall be required) shall be given by the Corporate Secretary as hereinafter provided in this Section 7. Any such notice shall state the place, date and time of the meeting. Except as otherwise required by these By-Laws, such notice need not state the purposes of such meeting. Notice of each such meeting shall be mailed, postage prepaid, to each director, addressed to him at his residence or usual place of business, by first-class mail, at least two days before the day on which such meeting is to be held, or shall be sent addressed to him at such place by telegraph, cable, telex, telecopier, electronic transmission or other similar means, or be delivered to him personally or be given to him by telephone or other similar means, at least twelve hours before the time at which such meeting is to be held. Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice, or waiver by electronic transmission or who shall attend such meeting, except when he shall attend for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

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SECTION 8. Quorum and Manner of Acting. A majority of the entire Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, and, except as otherwise expressly required by statute or the Certificate of Incorporation or these By-Laws, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum at any meeting of the Board of Directors, a majority of the directors present thereat may adjourn such meeting to another time and place. Notice of the time and place of any such adjourned meeting shall be given to all of the directors unless such time and place were announced at the meeting at which the adjournment was taken, in which case such notice shall only be given to the directors who were not present thereat. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. The directors shall act only as a Board and the individual directors shall have no power as such.

SECTION 9. Organization. At each meeting of the Board of Directors, the Chairman of the Board, or, in the absence of the Chairman of the Board, the Chief Executive Officer, or, in his absence, another director chosen by a majority of the directors present shall act as chairman of the meeting and preside thereat. The Corporate Secretary or, in her absence, any person appointed by the chairman of the meeting shall act as secretary of the meeting and keep the minutes thereof.

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SECTION 10. Resignations. Any director of the Corporation may resign at any time by giving notice in writing or by electronic transmission of his resignation to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 11. Vacancies. Any vacancy in the Board of Directors, whether arising from death, disqualification, resignation, removal for cause, an increase in the number of directors or any other cause, may be filled by the vote of a majority of the directors then in office, though less than a quorum, or by the sole remaining director. Each director so elected shall hold office until his successor shall have been elected and qualified.

SECTION 12. Removal of Directors. Any director may be removed, only for cause, at any time, by the holders of a majority of the voting power of the issued and outstanding capital stock of the Corporation entitled to vote at an election of directors.

SECTION 13. Compensation. The Board of Directors shall have authority to fix the compensation, including fees and reimbursement of expenses, of directors, including the Chairman of the Board, for services to the Corporation in any capacity.

SECTION 14. Committees.

(a) The Board shall create an Executive Committee, which shall consist of no less than two nor more than seven members of the Board and shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it, except the Executive Committee shall not have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the shareholders, any action or matter expressly required by the General Corporation Law of the State of Delaware to be submitted to shareholders for approval or (ii) adopting, amending or repealing any By-Law of the Corporation.

(b)The Board shall create an Audit Committee and a People Resources Committee, each of which shall consist of three (3) or more members of the Board of Directors of the Corporation, none of whom shall be employees of the Corporation or its subsidiaries.

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(c)The Board may also create such other committees, with such authority and duties, as the Board may from time to time deem advisable, and may authorize any of such committees to appoint one or more subcommittees. Each such committee or subcommittee, to the extent provided in the resolution creating it, shall have and may exercise all the powers and authority of the Board of Directors and may authorize the seal of the Corporation to be affixed to all papers which require it but shall have no greater powers than those given the Executive Committee by these By-Laws and as restricted by statute or the Certificate of Incorporation. Each such committee or subcommittee shall serve at the pleasure of the Board of Directors or of the committee creating it as the case may be, and have such name as may be determined from time to time by resolution adopted by the Board of Directors or by the committee creating it. Each committee shall keep regular minutes of its meeting and report the same to the Board of Directors or the committee creating it.

(d)The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In addition, in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not the member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

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SECTION 15. Action by Consent. Unless restricted by the Certificate of Incorporation, any action required or permitted to be taken by the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of the Board of Directors or such committee, as the case may be. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

SECTION 16. Telephonic Meeting. Unless restricted by the Certificate of Incorporation, any one or more members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Participation by such means shall constitute presence in person at a meeting.

ARTICLE IV

Officers

SECTION 1. Selection and Qualifications. The officers of the Corporation shall be elected by the Board of Directors except as otherwise provided herein or in a resolution adopted by the Board of Directors and shall include the Chairman of the Board, the President,the Chief Executive Officer, one or more Vice Presidents, and such other officers as it may choose. The Board of Directors shall designate the Chairman of the Board or the President as the Chief Executive Officer of the Corporation unless each of such offices is held by the same person, in which case such person shall be the Chief Executive Officer of the Corporation. The Board may authorize the Chief Executive Officerto appoint one or more classes of officers with such titles (including the titles of Vice President, Corporate Secretary and Treasurer), powers, duties and compensation as he may approve. Any two or more offices may be held by the same person, and no officer except the Chairman of the Boardneed be a director. Each officer shall hold office until his successor shall have been duly elected or appointed and shall have qualified, or until his death, or until he shall have resigned or have been removed, as hereinafter provided in these By-Laws.

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SECTION 2. Resignations. Any officer of the Corporation may resign at any time by giving written notice of such resignation to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon receipt. Unless otherwise specified therein, the acceptance of any such resignation shall not be necessary to make it effective.

SECTION 3. Removal. Any officer of the Corporation may be removed, either with or without cause, at any time, by the Board of Directors at any meeting thereof. Any appointed officer of the Corporation may also be removed, either with or without cause, at any time, by the Chief Executive Officer.

SECTION 4. Chairman of the Board. The Chairman of the Board shall be a member of the Board of Directors, and shall preside at all meetings of the Board of Directors, and of the Executive Committee at which he shall be present. He may serve as a member of any committee of the Board except as may otherwise be determined by the Board or provided in these By-Laws, provided, however, that in his capacity as Chairman of the Board he shall have the right to attend all meetings of any committee and to participate in its discussions. He shall perform all duties incident to the Office of Chairman of the Board and such other duties as may from time to time be assigned to him by the Board of Directors.

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SECTION 5. President. The President shall perform all duties incident to the Office of President and such other duties as may from time to time be assigned to him by the Chief Executive Officer or Board of Directors.

SECTION 6. Chief Executive Officer. The Chief Executive Officer shall have responsibility for the general and active management of the business, property and affairs of the Corporation, subject, to the control of the Board of Directors. He shall preside at all meetings of the shareholders and perform such other duties as may be specified in the By-Laws or assigned by the Board of Directors.

SECTION 7. Vice Presidents. Each Vice President shall perform such duties as from time to time may be assigned to him by the Board of Directors, the Chief Executive Officer, or such other officer as may be designated by one of the foregoing.

SECTION 8. Treasurer. The Treasurer shall:

(a) have charge and custody of, and be responsible for, all the funds and securities of the Corporation;

(b) keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation;

(c) deposit all moneys and other valuables to the credit of the Corporation in such depositories as may be designated by the Board of Directors or pursuant to its direction;

(d) receive, and give receipts for, moneys due and payable to the Corporation from any source whatsoever;

(e) disburse the funds of the Corporation and supervise the investments of its funds, taking proper vouchers therefor;

(f) render to the Board of Directors, whenever the Board of Directors may require, an account of the financial condition of the Corporation; and

(g) in general, perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors, or the Chief Executive Officer, or such other officer as may be designated by one of the foregoing.

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SECTION 9. Corporate Secretary. The Corporate Secretary shall:

(a) keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of the Board of Directors, the committees of the Board of Directors and the shareholders;

(b) see that all notices are duly given in accordance with the provisions of these By-Laws and as required by law;

(c) be custodian of the records and the seal of the Corporation and affix and attest the seal to all certificates for shares of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal;

(d) see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and

(e) in general, perform all duties incident to the office of Corporate Secretary and such other duties as from time to time may be assigned to her by the Board of Directors, the Chief Executive Officer, or such other officer as may be designated by one of the foregoing.

SECTION 10. The Assistant Treasurer. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their seniority), shall, in the absence of the Treasurer or in the event of the inability or refusal of the Treasurer to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as from time to time may be assigned by the Board of Directors, the Chief Executive Officer, the Treasurer, or such other officer as may be designated by one of the foregoing.

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SECTION 11. The Assistant Corporate Secretary. The Assistant Corporate Secretary, or if there be more than one, the Assistant Corporate Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their seniority), shall, in the absence of the Corporate Secretary or in the event of the inability or refusal of the Corporate Secretary to act, perform the duties and exercise the powers of the Corporate Secretary and shall perform such other duties as from time to time may be assigned by the Board of Directors, the Chairman of the Board, the President and Chief Executive Officer, the Corporate Secretary, or such other officer as may be designated by one of the foregoing.

SECTION 12. Designation. The Board of Directors may, by resolution, designate one or more officers to be any of the following: Chief Operating Officer, Chief Financial Officer, General Counsel, or Chief Accounting Officer.

SECTION 13. Agents and Employees. If authorized by the Board of Directors, the Chief Executive Officer, or any officer or employee of the Corporation designated by the Board or the Chief Executive Officer may appoint or employ such agents and employees as shall be requisite for the proper conduct of the business of the Corporation, and may fix their compensation and the conditions of their employment, subject to removal by the appointing or employing person.

SECTION 14. Officers' Bonds or Other Security. If required by the Board of Directors, any officer of the Corporation shall give a bond or other security for the faithful performance of his duties, in such amount and with such surety as the Board of Directors may require.

SECTION 15. Compensation. The compensation of all officers of the Corporation for their services as such officers shall be fixed from time to time by the Board of Directors unless by resolution of the Board that authority is delegated to a committee of the Board, the Chief Executive Officer, or any other officer of the Corporation. An officer of the Corporation shall not be prevented from receiving compensation by reason of the fact that he is also a director of the Corporation.

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SECTION 16. Terms. Unless otherwise specified by the Board of Directors in any particular election or appointment, each officer shall hold office, and be removable, at the pleasure of the Board.

ARTICLE V

Stock Certificates and Their Transfer

SECTION 1. Stock Certificates; Uncertificated Shares. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such resolution by the Board of Directors, every holder of stock represented by certificates, and upon request every holder of uncertificated shares, shall be entitled to have a certificate signed by, or in the name of the Corporation by the Chairman of the Board, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Corporate Secretary or an Assistant Corporate Secretary, representing the number of shares registered in certificate form. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restriction of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of the State of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each shareholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required or permitted to be set forth or stated on certificates pursuant to this section or otherwise pursuant to the Delaware General Corporation Law. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

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SECTION 2. Facsimile Signatures. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person was such officer, transfer agent or registrar at the date of issue.

SECTION 3. Lost Certificates. The Corporation may issue a new certificate or certificates, or uncertificated shares, in the place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed. The Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his legal representative, to give the Corporation a bond in such sum as it may direct sufficient to indemnify it against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

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SECTION 4. Transfers of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority or transfer, or upon receipt by the transfer agent of a proper instruction from the registered holder of uncertificated shares, it shall be the duty of the Corporation to transfer such shares upon its records and, in connection with the transfer of a share that will be certificated, to issue a new certificate to the person entitled thereto and to cancel the old certificate provided, however, that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer. Whenever any transfer of stock shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of transfer if, when the certificates are presented to the Corporation for transfer, or when proper instructions with respect to the transfer of uncertificated shares are received, both the transferor and the transferee request the Corporation to do so.

SECTION 5. Transfer Agents and Registrars. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars.

SECTION 6. Regulations. The Board of Directors may make such additional rules and regulations, not inconsistent with these By-Laws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation.

SECTION 7. Fixing the Record Date. In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

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SECTION 8. Registered Shareholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments a person registered on its records as the owner of shares of stock, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VI

Indemnification

SECTION 1. General. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person (i) is or was a director, officer, or employee of the Corporation, (ii) or is or was a director, officer or employee of the Corporation or any of its subsidiaries serving at the request of the Corporation as a director, officer, employee, agent, trustee or partner of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolocontendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the conduct was unlawful.

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SECTION 2. Derivative Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, or employee of the Corporation, or is or was a director, officer or employee of the Corporation or any of its subsidiaries serving at the request of the Corporation as a director, officer, employee, agent, trustee or partner of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

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SECTION 3. Indemnification in Certain Cases. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article VI, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith.

SECTION 4. Procedure. Any indemnification under Sections 1 and 2 of this Article VI (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer or employee is proper in the circumstances because such person has met the applicable standard of conduct set forth in such Sections 1 and 2. Such determination shall be made (a) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (b) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (c) by the shareholders.

SECTION 5. Advances for Expenses. Expenses (including attorneys' fees) incurred in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer or employee to repay such amount if it shall be ultimately determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article VI.

SECTION 6. Exclusion of Mandatory Indemnification and Advances in Certain Cases. Notwithstanding any other provision of this Article VI, the Corporation shall not be obligated to indemnify any person under Sections 1, 2 or 3 of Article VI or to advance expenses under Section 5 thereof to any person who has initiated any proceeding or part thereof, unless the initiation of such proceeding or part thereof was authorized or ratified by the Board of Directors.

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SECTION 7. Rights Not Exclusive. The indemnification and advancement of expenses provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, by-law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in the official capacity of such person and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee and shall inure to the benefit of the heirs, executors and administrators of such a person. Any repeal, modification or amendment of this Article VI shall not adversely affect any rights or obligations then existing between the Corporation and any then incumbent or former director, officer, or employee with respect to any facts then or theretofore existing or any action, suit, or proceeding theretofore or thereafter brought based in whole or in part upon such facts.

SECTION 8. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, agent, trustee or partner of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of the status of such person as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article VI.

SECTION 9. Definition of Corporation. For the purposes of this Article VI, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees and agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VI with respect to the resulting or surviving corporation as such person would if such person had served with respect to such constituent corporation if its separate existence had continued. "The Corporation" shall also include Connecticut General Corporation and INA Corporation for the period ending at the time that such corporations became subsidiaries of CIGNA Corporation.

26

SECTION 10. Definition of Other Terms. For purposes of this Article VI, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes or penalties assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VI.

SECTION 11. Right of Indemnitee to Bring Suit in Certain Circumstances. Any person entitled to indemnification under this Article VI is referred to in this section as an "indemnitee." If after the occurrence of a Change of Control (as defined in this section) a claim under Sections 1, 2, 3 or 5 of this Article VI is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its board of directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Section or otherwise shall be on the Corporation.

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"Change of Control" shall mean that:

(a)A corporation, person or group acting in concert as described in Section 14(d)(2) of the Securities Exchange Act of 1934 as amended (the "Exchange Act"), holds or acquires beneficial ownership, within the meaning of Rule 13d-3 promulgated under the Exchange Act, of a number of preferred or common shares of the Corporation having voting power which is either: (1) more than 50 percent of the voting power of the shares which voted in the election of directors of the Corporation at the shareholders' meeting immediately preceding such determination; or, (2) more than 25 percent of the voting power of common shares outstanding of the Corporation; or,

(b)As a result of a merger or consolidation to which the Corporation is a party, either: (1) the Corporation is not the surviving corporation; or, (2) Directors of the Corporation immediately prior to the merger or consolidation constitute less than a majority of the board of directors of the surviving corporation; or,

(c)A change occurs in the composition of the Board at any time during any consecutive 24-month period such that the "Continuity Directors" cease for any reason to constitute a majority of the Board. For purposes of the preceding sentence, "Continuity Directors" shall mean those members of the Board who either: (1) were directors at the beginning of such consecutive 24-month period, or, (2) were elected by, or upon nomination or recommendation of, at least a majority (consisting of at least nine directors) of the Board.

ARTICLE VII

General Provisions

SECTION 1. Dividends. Subject to the provisions of statute and the Certificate of Incorporation, dividends upon the shares of capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting. Dividends may be paid in cash, in property or in shares of stock of the Corporation, unless otherwise provided by statute or the Certificate of Incorporation.

SECTION 2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors may, from time to time, in its absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors may think conducive to the interests of the Corporation. The Board of Directors may modify or abolish any such reserves in the manner in which it was created.

SECTION 3. Seal. The seal of the Corporation shall be in such form as shall be approved by the Board of Directors.

SECTION 4. Fiscal Year. The fiscal year of the Corporation shall be fixed, and once fixed, may thereafter be changed, by resolution of the Board of Directors.

SECTION 5. Contributions. The Board of Directors shall have the authority from time to time to make such contributions as the Board in its discretion shall determine, for public and charitable purposes.

SECTION 6. Borrowing, etc. No officer, agent or employee of the Corporation shall have any power or authority to borrow money on its behalf, to pledge its credit, or to mortgage or pledge its real or personal property, except within the scope and to the extent of the authority delegated by resolution of the Board of Directors. Authority may be given by the Board for any of the above purposes and may be general or limited to specific instances.

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SECTION 7. Deposits. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies, or other depositories as the Board of Directors may approve or designate, and all such funds shall be withdrawn only upon checks, drafts, notes or other orders for payment signed by such one or more officers, employees or other persons as the Board shall from time to time determine.

SECTION 8. Execution of Contracts, Deeds, etc. The Board of Directors may authorize any officer or officers, agent or agents, in the name and on behalf of the Corporation to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances.

SECTION 9. Voting of Stock in Other Corporations. If authorized by the Board of Directors, any officer of the Corporation may appoint an attorney or attorneys (who may be or include such officer), in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as a shareholder or otherwise in any other corporation any of whose shares or other securities are held by or for the Corporation, at meetings of the holders of the shares or other securities of such other corporation, or in connection with the ownership of such shares or other securities, to consent in writing to any action by such other corporation, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its seal such written proxies or other instruments as such proxy may deem necessary or proper in the circumstances.

SECTION 10. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of punch cards, magnetic tape, photographs, microphotographs, or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same.

29

SECTION 11. Repurchase of Stock. Without the approval of the holders of a majority of the issued and outstanding stock of the Corporation entitled to vote at any meeting of shareholders, the Corporation shall not knowingly purchase, either directly or indirectly, any of the Corporation's Common Stock at a price materially in excess of its market price from any person, unless (i) such purchase is pursuant to the same offer and terms as made on a pro-rata basis to all holders of such shares, (ii) such purchase is made by the Corporation from an employee benefit or similar plan now or hereafter maintained by the Corporation or its subsidiaries or affiliates, or (iii) such purchase is made from a holder of less than one hundred shares.

ARTICLE VIII

Amendments

These By-Laws may be amended or repealed or new By-Laws may be adopted (a) by action of the holders of at least eighty percent (80%) of the voting power of all outstanding voting stock of the Corporation entitled to vote generally at any annual or special meeting of shareholders or (b) by action of the Board of Directors at a regular or special meeting thereof. Any By-Law or By-Laws made by the Board of Directors may be amended or repealed by action of the shareholders by the vote required by (a) above at any annual or special meeting of shareholders.

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ARTICLE IX

Definitions

Section 1. "Certificate of Incorporation." The term "Certificate of Incorporation," as used herein, includes not only the original Certificate of Incorporation filed to create the Corporation but also all other certificates, agreements of merger or consolidation, plans of reorganization, or other instruments, howsoever designated, which are filed pursuant to the Delaware General Corporation Law, and which have the effect of amending or supplementing in some respect this Corporation's original Certificate of Incorporation.

Section 2. "Electronic Transmission." The term "electronic transmission" as used herein shall mean any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such recipient through an automated process or that otherwise may be permitted as an electronic transmission by the Delaware General Corporation law, as amended from time to time.

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EX-12

Exhibit 12

CIGNA CORPORATION

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(Dollars in millions)

	Year ended December 31,
	2005		2004		2003		2002			2001
Income (loss) from continuing operations    before income taxes (benefits)	$	1,793	$	2,375	$	848	$	(645	)	$	1,392
Adjustments:
Loss (income) from equity investees		1		1		4		4			(79	)
Income (loss) from continuing operations    before income taxes (benefits), as    adjusted	$	1,794	$	2,376	$	852	$	(641	)	$	1,313
Fixed charges included in income:
Interest expense	$	105	$	107	$	111	$	121		$	118
Interest portion of rental expense		36		43		54		52			50
		141		150		165		173			168
Interest credited to contractholders		1		446		877		1,036			1,071
	$	142	$	596	$	1,042	$	1,209		$	1,239
Income available for fixed charges    (including interest credited to    contractholders)	$	1,936	$	2,972	$	1,894	$	568		$	2,552
Income available for fixed charges    (excluding interest credited to    contractholders) (1)	$	1,935	$	2,526	$	1,017	$	-		$	1,481
RATIO OF EARNINGS TO FIXED CHARGES:
Including interest credited to       contractholders(1)		13.6		5.0		1.8		-			2.1
SUPPLEMENTAL RATIO:
Excluding interest credited to       contractholders(1)		13.7		16.8		6.2		-			8.8

________________________

(1) Due to the loss in 2002, the ratio coverage was less than 1:1. CIGNA must generate additional earnings of $641 million to achieve a coverage of 1:1.

EX-13

HIGHLIGHTS

(Dollars in millions, except per share amounts)	2005			2004			2003			2002			2001
REVENUES
Premiums and fees and other revenues	$	15,332		$	16,010		$	16,063		$	16,870		$	15,940
Net investment income		1,359			1,643			2,594			2,716			2,842
Realized investment gains (losses)		(7	)		523			151			(238	)		(175	)
TOTAL REVENUES	$	16,684		$	18,176		$	18,808		$	19,348		$	18,607
RESULTS OF OPERATIONS:
Health Care	$	688		$	763		$	429		$	446		$	658
Disability and Life		227			182			155			133			72
International		109			76			55			31			95
Run-off Retirement		209			282			222			200			194
Run-off Reinsurance		(64	)		(115	)		(359	)		(1,070	)		57
Other Operations		130			142			111			105			103
Corporate		(12	)		(114	)		(127	)		(136	)		(146	)
Realized investment gains (losses), net of taxes		(11	)		361			98			(155	)		(112	)
Income (loss) from continuing operations		1,276			1,577			584			(446	)		921
Income (loss) from discontinued operations, net of taxes		349			—			48			(1	)		18
Cumulative effect of accounting change, net of taxes		—			(139	)		—			—			—
NET INCOME (LOSS)	$	1,625		$	1,438		$	632		$	(447	)	$	939
Income (loss) per share from continuing operations:
Basic	$	10.02		$	11.55		$	4.18		$	(3.17	)	$	6.23
Diluted	$	9.83		$	11.44		$	4.16		$	(3.17	)	$	6.15
Net income (loss) per share:
Basic	$	12.76		$	10.54		$	4.52		$	(3.18	)	$	6.35
Diluted	$	12.52		$	10.43		$	4.50		$	(3.18	)	$	6.27
Common dividends declared per share	$	0.10		$	0.41		$	1.32		$	1.32		$	1.28
Total assets	$	44,863		$	81,059		$	90,199		$	89,019		$	91,639
Long-term debt	$	1,338		$	1,438		$	1,500		$	1,500		$	1,626
Shareholders’ equity	$	5,360		$	5,203		$	4,607		$	3,936		$	5,105
Per share	$	44.23		$	39.41		$	32.77		$	28.24		$	36.06
Common shares outstanding (in thousands)		121,191			132,007			140,591			139,370			141,553
Shareholders of record		9,440			10,249			9,608			9,945			10,437
Employees		28,000			28,600			32,700			41,200			44,600

In 2004, CIGNA adopted the fair value method of accounting for stock options. Prior periods were restated. See Note 2 for additional information.

In January 2003, CIGNA sold the operations of Lovelace Health Systems, Inc., an integrated health care system and subsidiary of CIGNA. This business has been reported as discontinued operations. Prior year financial information was reclassified.

21

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

INDEX

22	Introduction
22	Overview
23	Consolidated Results of Operations
29	Acquisitions and Dispositions
30	Other Matters
33	Health Care
35	Disability and Life
35	International
36	Run-off Retirement
37	Run-off Reinsurance
39	Other Operations
39	Corporate
40	Discontinued Operations
40	Liquidity and Capital Resources
45	Investment Assets
46	Market Risk
48	Cautionary Statement

INTRODUCTION

In this filing and in other marketplace communications, CIGNA makes certain forward-looking statements relating to its financial condition and results of operations, as well as to trends and assumptions that may affect CIGNA. Generally, forward-looking statements can be identified through the use of predictive words (e.g., “Outlook for 2006”). Actual results may differ from CIGNA’s predictions. Some factors that could cause results to differ are discussed throughout Management’s Discussion and Analysis, including in the Cautionary Statement on page 48.

Certain reclassifications have been made to prior years’ amounts to conform to the 2005 presentation.

OVERVIEW

CIGNA Corporation’s subsidiaries provide health care and related benefits offered through the workplace. Key product lines include medical coverages and related specialty health care products and services such as pharmacy, behavioral health, dental benefits, and disease management as well as group disability, life and accident insurance, and disability and workers’ compensation case management and related services. In addition, CIGNA has an international operation that offers products (that are generally similar to those offered domestically) to businesses and individuals in selected markets, and has certain inactive businesses, including a run-off retirement operation and a run-off reinsurance operation.

CIGNA’s results are influenced by a range of economic and other factors, including:

• cost trends and inflation levels for medical and related services;

• patterns of utilization of medical and other services;

• employment levels;

• the tort liability system;

• interest rates and equity market returns;

• regulations and tax rules related to the provision and administration of employee benefit plans; and

• initiatives to increase health care regulation.

CIGNA generates revenues, net income and cash flow from operations by maintaining and growing its relationships with employers and consumers, charging prices that reflect emerging experience and investing available cash at attractive rates of return for appropriate durations. CIGNA’s ability to increase operating results in terms of growth in revenues, net income and operating cash flow is directly related to its ability to execute plans that address broad economic factors as well as company-specific drivers.

Key company-specific drivers affecting CIGNA’s results include:

• competitiveness of CIGNA’s product design and service quality;

• the absolute level of and trends in benefit costs;

• the volume of customers served and the mix of products and services purchased by those customers;

• the ability to price products and services competitively at levels that appropriately account for underlying cost inflation and utilization patterns; and

• the relationship between administrative costs and revenue.

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MANAGEMENT’SDISCUSSIONANDANALYSIS

CIGNA regularly monitors trends in the above mentioned economic and other factors and the company-specific drivers of operating results. CIGNA develops strategic and tactical plans designed to improve performance and maximize its competitive position in the markets served. CIGNA’s ability to achieve its financial objectives is dependent upon its ability to effectively execute these plans and to appropriately respond to emerging economic and company-specific trends.

CIGNA is focused, in particular, on continuing to improve the performance of the health care operations, profitably growing the disability and life insurance and international businesses and managing the risks associated with the run-off reinsurance operations. In the health care operations, CIGNA has initiatives in place to (1) offer products that meet emerging consumer and market trends; (2) improve medical membership results; (3) lower medical cost trends; (4) deliver quality member service; and (5) lower administrative expenses (see page 34 for further discussion).

CIGNA believes that the health care business model is changing to one that focuses more directly on the consumer. CIGNA has developed product designs, educational resources and customer support tools with a goal of enabling consumers to make informed choices about their health care, to ultimately improve health outcomes and reduce costs. These changes in the business model are in the early stages, and CIGNA believes that its capabilities in consumerism, health advocacy and the delivery of useful information position it to meet the emerging trend.

CIGNA’s disability and life insurance operations continue to focus on profitable growth with a particular emphasis on middle market disability business. The international business is focused on profitable growth particularly in the life, accident and health insurance and expatriate benefits businesses. In the run-off reinsurance operations, CIGNA maintains a program to reduce the equity market risk associated with its guaranteed minimum death benefit reinsurance exposures. CIGNA is also pursuing the resolution of disputes associated with workers’ compensation and other reinsurance contracts through audits of claims from assumed business and managing collections from retrocessionaires (see page 38 for further discussion).

CONSOLIDATED RESULTS OF OPERATIONS

(In millions)
Financial Summary	2005			2004			2003
Premiums and fees	$	13,695		$	14,236		$	15,460
Net investment income		1,359			1,643			2,594
Other revenues		1,637			1,774			603
Realized investment gains (losses)		(7	)		523			151
Total revenues		16,684			18,176			18,808
Benefits and expenses		14,891			15,801			17,960
Income from continuing operations before taxes		1,793			2,375			848
Income taxes		517			798			264
Income from continuing operations		1,276			1,577			584
Income from discontinued operations, net of taxes		349			—			48
Income before cumulative effect of accounting change		1,625			1,577			632
Cumulative effect of accounting change, net of taxes ( See Note 2 to the Financial Statements)		—			(139	)		—
Net income	$	1,625		$	1,438		$	632
Realized investment gains (losses), net of taxes	$	(11	)	$	361		$	98

In 2004, CIGNA adopted Statement of Financial Accounting Standards No. 123, as revised in 2004 (SFAS 123R) which requires the fair value method of accounting for stock-based compensation. As permitted, CIGNA retroactively applied this standard to all prior periods.

CIGNA’s income from continuing operations includes special items, which are discussed below. Excluding special items, income from continuing operations in 2005 reflected:

• lower losses in the Run-off Reinsurance segment (see page 37) and Corporate (see page 39);

• lower net earnings in the ongoing operating businesses due to the impact of membership losses in the Health Care segment (see page 33), partially offset by higher earnings in the Disability and Life (see page 35) and International (see page 35) segments; and

• lower results in the Run-off Retirement segment (see page 36).

Excluding special items, income from continuing operations improved significantly in 2004 due to the gain on the sale of the retirement benefits business, higher earnings in the Health Care segment and reduced losses in the Run-off Reinsurance segment.

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Income Taxes

During 2005, the Congressional Joint Committee on Taxation approved CIGNA’s refund claim relating to a tax loss incurred from the sale of a business in 1999 and the completion of the IRS audit for 2000-2002. Pursuant to this approval, CIGNA recorded total tax related benefits of $437 million consisting of:

• $287 million resulting from capital losses realized in connection with the divestiture of the property and casualty insurance operations in 1999, which is included in income from discontinued operations; and

• $150 million resulting primarily from the release of tax reserves and valuation allowances. This amount consists of:

• $88 million (of which $81 million is reported as a special item) reported in the International segment, Other Operations and Corporate as income from continuing operations. This amount includes $4 million of interest income; and

• $62 million related to the divestiture of CIGNA’s Brazilian health care business, which is included in income from discontinued operations.

As of December 31, 2005, CIGNA had recovered approximately $220 million in net cash relating to its refund claim and the settlement of audit issues.

In order to facilitate an understanding and comparison of results of operations and permit analysis of trends in underlying revenue, expenses and net income, the following table presents special items, which management believes are not representative of the underlying results of continuing operations. See “Quarterly Financial Data” on page 87 for special items reported quarterly in 2005 and 2004.

SPECIAL ITEMS
(In millions)	Pre-Tax Benefit (Charge)			After-Tax Benefit (Charge)
2005
Accelerated amortization of deferred gain on sale of retirement benefits business (see page 29)	$	322		$	204
Cost reduction charge (see page 30)		(51	)		(33	)
IRS tax settlement (see page 24)		6			81
Charge associated with a modified coinsurance arrangement (see  page 29)		(12	)		(8	)
Total	$	265		$	244
2004
Accelerated amortization of deferred gain on sale of retirement benefits business	$	338		$	220
Cost reduction charge		(75	)		(49	)
Federal tax refund		5			28
Net charge associated with modified coinsurance arrangements		(39	)		(25	)
Effect of new accounting pronouncement		(17	)		(11	)
Gain on sale of investment advisory businesses		18			12
Total	$	230		$	175
2003
Reserve charge on guaranteed minimum death benefit contracts	$	(441	)	$	(286	)
Health care provider litigation		(57	)		(37	)
Reduction in allowance against amounts recoverable from pension policyholders		51			33
Cost reduction charge, net1		26			17
Intangible asset write-off for provider contracts		(16	)		(10	)
Gain on sale of Japanese pension operations		8			5
Total	$	(429	)	$	(278	)

¹ Restructuring items in 2003 include a pre-tax benefit of $39 million ($26 million after-tax) reflecting a reduction in costs associated with the 2002 and 2001 health care restructuring programs (including gains on other postretirement benefits, see Note 8 to the Financial Statements), and a pre-tax charge of $13 million ($9 million after-tax) related to restructuring certain corporate staff functions.

24

MANAGEMENT’SDISCUSSIONANDANALYSIS

Revenues

Revenues decreased in 2005 primarily because of:

• lower premiums and fees in the Health Care segment due to lower membership; and

• lower realized gains and reduced net investment income associated with the sale of the retirement benefits business.

Revenues decreased in 2004 primarily because of:

• lower premiums and fees in the Health Care segment due to lower membership; and

• reduced net investment income as a result of the sale of the retirement benefits business.

These 2004 declines were partially offset by:

• higher other revenues in the Run-off Retirement segment including deferred gain recognition associated with the sale of the retirement benefits business;

• higher realized investment gains, primarily on assets transferred in connection with the sale of the retirement benefits business; and

• lower losses in the Run-off Reinsurance segment from futures and forward contracts entered in connection with the program to reduce equity market risks.

Outlook for 2006

CIGNA expects full year 2006 income from continuing operations excluding realized investment results and special items to be lower than the comparable 2005 amount subject to the factors cited in the Cautionary Statement, primarily because of the significant amount of favorable prior year claim development recognized in 2005. Excluding the favorable prior year claim development in 2005, CIGNA expects 2006 income from continuing operations excluding realized investment results and special items to be higher than 2005 due to fundamental improvement in the health care operations.

Information is not available for management to reasonably estimate future realized investment gains (losses) or special items. Special items for 2006 may include:

• any gain resulting from a decision by the buyer of the retirement benefits business to terminate their contract with CIGNA relating to the previously sold single premium annuity business;

• additional accelerated recognition of the deferred gain on the sale of the retirement benefits business; and

• additional charges associated with a modified coinsurance arrangement.

Other than these items, information is not available for management to identify or reasonably estimate 2006 special items.

Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:

• it requires assumptions to be made that were uncertain at the time the estimate was made; and

• changes in the estimate or different estimates that could have been selected could have a material effect on CIGNA’s consolidated results of operations or financial condition.

Management has discussed the development and selection of its critical accounting estimates with the Audit Committee of CIGNA’s Board of Directors and the Audit Committee has reviewed these disclosures, which are presented below.

In addition to the estimates presented in the following table, there are other accounting estimates used in the preparation of CIGNA’s consolidated financial statements, including estimates of liabilities for future policy benefits other than those identified in the following table, as well as estimates with respect to unpaid claims and claim expenses, postemployment and postretirement benefits other than pensions, certain compensation accruals, and income taxes.

Management believes the current assumptions and other considerations used to estimate amounts reflected in CIGNA’s consolidated financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in CIGNA’s consolidated financial statements, the resulting changes could have a material adverse effect on CIGNA’s consolidated results of operations, and in certain situations, could have a material adverse effect on liquidity and CIGNA’s financial condition.

See Note 2 to the Financial Statements for further information on significant accounting policies that impact CIGNA.

25

The table that follows presents information about CIGNA’s most critical accounting estimates, as well as the effects of hypothetical changes in the material assumptions used to develop each estimate.

Balance Sheet Caption / Nature of Critical Estimate Item	Assumptions / Approach Used	Effect if Different Assumptions Used
Future policy benefits – Guaranteed minimum death benefits These liabilities are estimates of the present value of net amounts expected to be paid, less the present value of net future premiums expected to be received. The amounts to be paid represent the excess of the guaranteed death benefit over the values of contractholders’ accounts. The death benefit coverage in force at December 31, 2005 (representing the amount payable if all contractholders had died as of that date) was approximately $7.0 billion. CIGNA had liabilities for future policy benefits for these contracts of approximately $1.0 billion as of December 31, 2005 and December 31, 2004.	Management estimates these liabilities based on assumptions regarding lapse, partial surrender, mortality, interest rates (mean investment performance and discount rate), volatility and other considerations. These assumptions are based on CIGNA’s experience and future expectations. CIGNA monitors actual experience to update these liability estimates as necessary. Lapse refers to the full surrender of an annuity prior to a contractholder’s death. Partial surrender refers to the fact that most contractholders have the ability to withdraw substantially all of their mutual fund investments while retaining any available death benefit coverage in effect at the time of the withdrawal. Equity market declines could expose CIGNA to higher rates of partial surrender, the effect of which is not covered by the program to substantially reduce market risks. Interest rates include both (a) the mean investment performance assumption considering CIGNA’s program to reduce equity market exposures using futures and forward contracts, and (b) the liability discount rate assumption. Volatility refers to market fluctuations that affect the costs of the program adopted by CIGNA to reduce equity market risks associated with these liabilities. See Note 6 to the Financial Statements for additional information.	If a 10% unfavorable change were to occur for the following assumptions, the approximate after-tax decrease in net income would be as follows: •     Mortality – $65 million •     Volatility – $40 million •     Lapse – $25 million •     Interest rates: •     Mean investment performance – $40 million •     Discount rate – $30 million •     Future partial surrenders – $5 million Management believes the current assumptions and other considerations used to estimate these liabilities are appropriate. However, if actual experience differs from the assumptions and other considerations (including lapse, partial surrender, mortality, interest rates and volatility) used in estimating these liabilities, the resulting changes could have a material adverse effect on CIGNA’s consolidated results of operations, and in certain situations, could have a material adverse effect on CIGNA’s financial condition. The amounts would be reflected in the Run-off Reinsurance segment.
Health Care medical claims payable Medical claims payable for the Health Care segment include both reported claims and estimates for losses incurred but not yet reported. Liabilities for medical claims payable as of December 31 were as follows: •     2005 – gross $1.2 billion; net $823 million •     2004 – gross $1.6 billion; net $1.1 billion •     2003 – gross $2.2 billion; net $1.5 billion These liabilities generally exclude amounts for administrative services only business. During 2004, CIGNA reclassified certain future policy benefits and unpaid claims and claim expenses to present all medical claims payable for the Health Care segment under one balance sheet caption. These medical claims payable are now presented above both gross and net of reinsurance and other recoverables.	Medical claims payable for the Health Care segment are estimated using actuarial models based on historical data for payment patterns, cost trends, product mix, seasonality, utilization of health care services and other relevant factors. The estimation process for determining liabilities for medical claims in the Health Care segment inherently results in adjustments each year for claims incurred (but not paid) in preceding years. See Note 5 to the Financial Statements for additional information.	A 1% increase in the assumed medical cost trend would reduce net income by approximately $30 million after-tax annually.

26

MANAGEMENT’SDISCUSSIONANDANALYSIS

Balance Sheet Caption / Nature of Critical Estimate Item	Assumptions / Approach Used	Effect if Different Assumptions Used
Accounts payable, accrued expenses and other liabilities, and Other assets – Guaranteed minimum income benefits These liabilities are estimates of the present value of net amounts expected to be paid, less the present value of net future premiums expected to be received. The amounts to be paid represent the excess of the expected value of the income benefit over the value of the annuitants’ accounts at the time of annuitization. The assets associated with these contracts represent receivables in connection with reinsurance that CIGNA has purchased from third parties, which covers 55% of the exposures on these contracts. As of December 31, 2005, CIGNA had liabilities of $88 million related to these contracts and net amounts recoverable from reinsurers of $48 million. CIGNA had an additional liability of $49 million associated with the cost of reinsurance as of December 31, 2005. As of December 31, 2004, CIGNA had liabilities of $71 million related to these contracts and amounts recoverable from reinsurers of $39 million. CIGNA also had an additional liability of $41 million associated with the cost of reinsurance as of December 31, 2004.	Management estimates the fair value of the assets and liabilities associated with these contracts using assumptions as to market returns and volatility of the underlying equity and bond mutual fund investments, interest rates, mortality, lapse, credit risk and annuity election rates. Changes in fair value are reported in other operating expenses. Interest rates include both (a) the liability discount rate assumption and (b) the projected interest rates used to calculate the reinsured income benefit at the time of annuitization (claim interest rate). Lapse refers to the full surrender of an annuity prior to annuitization of the policy. Credit risk refers to the ability of these reinsurers to pay. Annuity election rates refer to the proportion of annuitants who elect to receive their income benefit as an annuity. See Note 20 to the Financial Statements for additional information.	If a 10% unfavorable change were to occur for the following assumptions, the approximate after-tax decrease in net income would be as follows: •     Mortality – $1 million •     Market Returns – $8 million •     Volatility – $3 million •     Lapse – $2 million •     Interest rates: •     Discount Rate – $3 million •     Claim Interest Rate – $8 million If annuity election rates were assumed to be 10% annually, (compared with the current assumption of no more than 5% annually) net income would decrease by approximately $40 million after-tax. Management believes the current assumptions used to estimate these liabilities are appropriate. The amounts would be reflected in the Run-off Reinsurance segment.
Reinsurance recoverables – Reinsurance recoverables in Run-off Reinsurance Collectibility of reinsurance recoverables requires an assessment of risks that such amounts will not be collected, including risks associated with reinsurer default and disputes with reinsurers regarding applicable coverage. Gross and net reinsurance recoverables in the Run-off Reinsurance segment for the year ended December 31, were as follows: •     2005 – gross $565 million; net $417 million •     2004 – gross $756 million; net $571 million •     2003 – gross $791 million; net $621 million	The amount of reinsurance recoverables in the Run-off Reinsurance segment, net of reserves, represents management’s best estimate of recoverability, including an assessment of the financial strength of reinsurers. The ultimate amounts received are dependent, in certain cases, on the resolution of disputes with reinsurers, including the outcome of arbitration and litigation proceedings.	A 10% reduction of net reinsurance recoverables due to uncollectibility at December 31, 2005, would reduce net income by approximately $35 million after-tax. This charge would impact the Run-off Reinsurance segment.

27

Balance Sheet Caption / Nature of Critical Estimate Item	Assumptions / Approach Used	Effect if Different Assumptions Used
Accounts payable, accrued expenses and other liabilities-pension liabilities These recorded liabilities are estimates of the present value of the qualified and nonqualified pension benefits to be paid (attributed to employee service to date) net of the fair value of plan assets. The accrued pension benefit liability was $1.0 billion as of December 31, 2005 and $1.3 billion as of December 31, 2004. See Note 8 to the Financial Statements for additional information.	Management estimates these liabilities with actuarial models using various assumptions including discount rates and an expected return on plan assets. Discount rates are set considering actual annualized yields for high quality, long-term corporate bonds, adjusted to reflect the duration of the pension liabilities. The expected return on plan assets for the domestic qualified pension plan is developed considering actual historical returns, current and expected market conditions, plan asset mix and management’s investment strategy. In addition, CIGNA uses a market-related asset value method to measure domestic qualified pension plan assets invested in equity securities, which is approximately 70% of total plan assets. This method recognizes market appreciation or depreciation in the equity portfolio over 5 years, a method that reduces the short-term impact of market fluctuations. The declining interest rate environment and varying actual asset returns compared to assumptions in 2000, 2001 and 2002 resulted in an accumulated unrecognized actuarial loss of $1.2 billion at December 31, 2005. The actuarial loss adjusted for unrecognized changes in market-related asset values is amortized over the remaining service life of pension plan participants if the loss exceeds 10% of the market-related value of plan assets or 10% of the projected benefit obligation, whichever is greater. As of December 31, 2005, approximately $1.0 billion of the adjusted actuarial loss exceeded 10% of the projected benefit obligation and approximately $105 million after-tax will be expensed in 2006 net income. For the year ended December 31, 2005, $92 million after-tax was expensed in net income.	Changes to CIGNA’s assumptions for discount rates and the expected return on domestic qualified plan assets will not change required cash contributions to the pension plan, as CIGNA funds at least the minimum amount required by ERISA. However, if discount rates for the qualified and nonqualified pension plans were decreased by 10%: •     annual pension costs for 2006 would increase by approximately $20 million, after-tax; •     the accrued pension benefit liability would increase by approximately $250 million as of December 31, 2005; and •     the minimum pension liabilities recorded as an after-tax charge to shareholders’ equity would increase by approximately $160 million as of December 31, 2005. If the expected return on domestic qualified pension plan assets was decreased by 10%, annual pension costs for 2006 would increase by approximately $15 million, after-tax. If the December 31, 2005 fair values of domestic qualified plan assets decreased by 10%, minimum pension liabilities recorded as an after-tax charge to shareholders’ equity would increase by approximately $205 million. These charges would primarily impact the Health Care Segment.
Investments – Fixed maturities Recognition of losses from “other than temporary” impairments of public and private placement fixed maturities Losses for “other than temporary” impairments of fixed maturities must be recognized in net income based on an estimate of fair value by management. Changes in fair value are reflected as an increase or decrease in shareholders’ equity. A decrease in fair value is recognized in net income when the decrease is determined to be “other than temporary.” Determining whether a decline in value is “other than temporary” includes an evaluation of the reasons for and the significance of the decrease in value of the security as well as the duration of the decrease.	Management estimates the amount of an “other than temporary” impairment when a decline in value is expected to persist, using quoted market prices for public securities with active markets and the present value of future cash flows for private placement bonds. Expected future cash flows are based on historical experience of the issuer and management’s expectation of future performance. CIGNA recognized “other than temporary” impairments of investments in fixed maturities as follows (after-tax, excluding policyholder share*): •     2005 – $12 million •     2004 – $10 million •     2003 – $73 million See Note 10(A) to the Financial Statements for a discussion of review of declines in fair value.	For all fixed maturities with cost in excess of their fair value, if this excess was determined to be other-than-temporary, CIGNA’s net income as of December 31, 2005 would have decreased by approximately $60 million after-tax. For private placement bonds considered impaired, a decrease of 10% of all expected future cash flows for the impaired bonds would reduce net income by approximately $2 million after-tax.

* Investment securities are attributable to CIGNA’s various business segments; amounts noted are presented from a consolidated perspective and are net of experience-rated pension policyholder share (i.e., these amounts exclude the impact of losses in 2003 on investment assets related to experience-rated pension policyholder contracts because these amounts generally accrued to the policyholders). As of October 1, 2003, investment assets related to experience-rated pension policyholder contracts were reclassified from fixed maturities to “Securities supporting experience-rated pension policyholder contracts” on CIGNA’s balance sheet and CIGNA no longer recognized other than temporary impairments because changes in the fair values of these securities were reported in net income in each period. The sale of the retirement benefits business in 2004 generally resulted in the transfer to the buyer of securities supporting experience-rated pension policyholder contracts.

28

MANAGEMENT’SDISCUSSIONANDANALYSIS

ACQUISITIONS AND DISPOSITIONS

CIGNA may from time to time acquire or dispose of assets, subsidiaries or lines of business. Significant transactions are described below.

Sale of Retirement Benefits Business

On April 1, 2004, CIGNA sold its retirement benefits business, excluding the corporate life insurance business, for cash proceeds of $2.1 billion. The sale resulted in an after-tax gain of $804 million, of which $267 million after-tax was recognized immediately. Of this amount, $259 million after-tax was recorded in realized investment gains and $8 million after-tax was recorded in other revenues. The sales agreement provides for post closing adjustments; however, any future adjustments are not expected to be material to CIGNA’s consolidated results of operations, liquidity or financial condition.

As this transaction was primarily in the form of a reinsurance arrangement under which CIGNA retains the contractual obligation to pay these liabilities, $537 million of the after-tax gain was deferred. Subsequent to the original reinsurance transaction, the buyer of the retirement benefits business has entered into agreements with most of the insured parties relieving CIGNA of any remaining contractual obligation to those parties (novation). Additional such agreements are expected.

The deferred gain is amortized at the rate that earnings from the sold business would have been expected to emerge (primarily 15 years on a declining basis) or until CIGNA is relieved of any remaining contractual obligation. At the time of novation, CIGNA accelerates amortization of a portion of the deferred gain and also reduces the associated contractholder deposit funds, future policy benefits, reinsurance recoverables and separate account balances. In 2005, liabilities decreased by $33.3 billion as a result of novation activity attributable to the sold retirement benefits business. This decrease consisted of $7.0 billion of contractholder deposit funds and future policy benefits as well as $26.3 billion of separate account liabilities. Corresponding decreases in assets of $33.3 billion consisted of $7.0 billion of reinsurance recoverables and $26.3 billion of separate account assets. See Note 7 to the Financial Statements for additional information on reinsurance recoverables associated with the sale of the retirement benefits business.

CIGNA recognized deferred gain amortization in other revenues in the Run-off Retirement segment as follows:

(In millions)	Pre-Tax		After-Tax
2005
Accelerated deferred gain amortization	$	322	$	204
Normal deferred gain amortization	$	24	$	16
2004
Accelerated deferred gain amortization	$	342	$	223
Normal deferred gain amortization	$	80	$	52

The remaining pre-tax deferred gain as of December 31, 2005 was $66 million.

On December 1, 2004, CIGNA transferred $1.2 billion of invested assets and $2.6 billion of separate account assets supporting modified coinsurance arrangements to the buyer and converted these arrangements to indemnity coinsurance. This transfer resulted in the recognition of realized investment gains of $25 million after-tax and a corresponding loss on reinsurance of $25 million after-tax in other revenues.

On January 1, 2005, CIGNA transferred the assets of substantially all of the separate accounts related to the retirement benefits business to the buyer. Since the arrangement is primarily modified coinsurance, CIGNA received units of the buyer’s separate accounts and carries those units as separate account assets on its balance sheet for the business not yet directly assumed by the buyer. At December 31, 2005, there were approximately $4.8 billion of separate account assets and liabilities associated with the business not directly assumed by the buyer.

At December 31, 2005, CIGNA had approximately $1.9 billion of invested assets, primarily fixed maturities and mortgage loans, supporting a modified coinsurance arrangement relating to the single premium annuity business sold to the buyer. These invested assets are held in a business trust established by CIGNA. CIGNA pays or receives cash quarterly to settle the results of the reinsured business, including the investment results of the assets underlying the modified coinsurance arrangement. During 2005, CIGNA recorded in other operating expenses pre-tax charges of $5 million ($3 million after-tax), of which $12 million pre-tax ($8 million after-tax) is noted as a special item, to offset realized investment results. These items had no net effect on net income.

As a result of this modified coinsurance arrangement, CIGNA has an embedded derivative that transfers to the buyer certain unrealized changes in fair value due to interest rate and credit risks of these assets. CIGNA records these effects in other liabilities and other revenues. To date CIGNA has not recorded any charge or credit for the embedded derivative. A decrease in interest rates could result in a charge to CIGNA’s consolidated net income until the modified coinsurance arrangement ends, which is expected in 2006.

The buyer has given notice that it intends to terminate its reinsurance of the single premium annuity business effective April 1, 2006. Discussions between the two parties continue. If the buyer terminates its reinsurance, CIGNA would retain the single premium annuity business, including the trust assets and the insurance liabilities. CIGNA does not expect the ultimate outcome of these discussions to have a material adverse effect on its consolidated results of operation, liquidity or financial condition.

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Sale of Investment Advisory Businesses

In the fourth quarter of 2004, CIGNA sold a significant portion of its investment advisory businesses and recorded an after-tax gain of $12 million in Other Operations.

Sale of Japanese Pension Operations

In the third quarter of 2003, CIGNA sold its interest in a Japanese pension operation for cash proceeds of $18 million and recognized an after-tax gain of $5 million in the International segment. The gain was reported in continuing operations since this operation was accounted for under the equity method of accounting.

Sale of Lovelace Health Systems Inc.

In the first quarter of 2003, CIGNA sold the operations of Lovelace, an integrated health care system, for cash proceeds of $209 million and recognized an after-tax gain of $32 million, which was reported in discontinued operations.

Sale of Brazilian Health Care Operations

In the first quarter of 2003, CIGNA sold its Brazilian health care operations. The sale generated an after-tax gain of $18 million, primarily as a result of the disposition of the net liabilities associated with these operations. The gain is reported in discontinued operations.

OTHER MATTERS

Minimum Pension Liability

During 2005, CIGNA’s minimum pension liabilities decreased due to amortization of losses from past experience and the effects of stock market appreciation on plan assets, partially offset by the reduction of long-term interest rates used to determine the accumulated benefit obligation and updates to plan census data. The net effect was an after-tax increase to shareholders’ equity of $13 million.

CIGNA contributed $544 million in 2005 as follows:

• $104 million for minimum funding requirements for the domestic pension plan and for voluntary contributions to the international pension plans; and

• $440 million for voluntary contributions to the domestic pension plan, which represent an acceleration of expected contributions to meet minimum funding requirements in 2006 and 2007.

The decision to make voluntary contributions to the domestic pension plan was based upon the favorable economic impact the contributions will have on the funding status of CIGNA’s pension plan, including the potential for reducing future additional funding requirements as well as reducing premiums to the Pension Benefit Guaranty Corporation.

Actual cash contributions made to the pension plans could vary significantly from the estimates of plan obligations based on actual future returns on pension assets and future interest rates, both of which are highly unpredictable. Further, pension legislation or regulatory changes could increase CIGNA’s funding requirements and pension cost.

See “Critical Accounting Estimates” on page 28 for the assumptions used to determine pension liabilities and the effects of hypothetical changes in those assumptions.

During 2004, CIGNA’s minimum pension liabilities increased primarily due to a reduction in long-term interest rates used to determine the accumulated benefit obligation, as well as the effect of the annual update of plan participant data, partially offset by the effect of stock market appreciation on plan assets. The net effect was an after-tax decrease to shareholders’ equity of $62 million.

See Note 8 to the Financial Statements for a detailed discussion of CIGNA’s pension and other post-retirement benefit plans including the nature of accounting for and funding of these plans.

Cost Reduction Programs

First quarter 2005 program.In the first quarter of 2005, CIGNA implemented a plan to further streamline operations in the health care business and in supporting areas. As a result, CIGNA recognized in other operating expenses a total pre-tax charge of $51 million ($33 million after-tax) for severance costs during 2005. The table below shows CIGNA’s cost reduction activity (pre-tax) related to severance for this program.

(In millions)	Health Care			Corporate			Total
2005 Charges	$	22		$	29		$	51
2005 Payments		(16	)		(16	)		(32	)
Balance as of December 31, 2005	$	6		$	13		$	19

CIGNA expects to complete this program by mid-2006 and estimates annualized after-tax savings to be approximately $65 million.

Operational effectiveness review. In 2004, CIGNA adopted a restructuring program associated with planned organizational changes to streamline functional support resources and to adjust its operations to current business volumes. As a result, CIGNA recognized in other operating expenses pre-tax charges of $86 million ($56 million after-tax), of which $75 million pre-tax ($49 million after-tax) is noted as a special item in 2004. This program, which was substantially completed in 2005, resulted in annualized after-tax savings of approximately $80 million.

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MANAGEMENT’SDISCUSSIONANDANALYSIS

The table below shows CIGNA’s restructuring activity (pre-tax) related to severance and real estate for this program:

(In millions)	Health Care/ Disability and Life*			Corporate			Total
2004 Activity:
Charges:
Severance	$	39		$	35		$	74
Real estate and other		11			1			12
Total		50			36			86
Payments:
Severance		(28	)		(26	)		(54	)
Real estate and other		(3	)		—			(3	)
Balance as of December 31, 2004	$	19		$	10		$	29
2005 payments:
Severance		(11	)		(10	)		(21	)
Real Estate and other		(3	)		—			(3	)
Balance as of December 31, 2005	$	5			—		$	5

*  Includes restructuring charges of $2 million pre-tax in the Disability and Life segment.

Corporate effectiveness initiative. In 2003, CIGNA adopted a restructuring program to attain certain operational efficiencies in its corporate staff functions and to achieve additional cost savings. As a result, CIGNA recognized in other operating expenses a pre-tax charge in Corporate of $13 million ($9 million after-tax) for severance costs. This program, which was substantially completed in 2004, resulted in annualized after-tax savings of approximately $15 million reflecting the elimination of salary and benefits costs for terminated employees.

Fourth quarter 2002 program. In 2002, CIGNA adopted a restructuring program primarily to realign the organizational structure and operations of its health care business. During 2003, CIGNA reduced the remaining liability for this program by $23 million pre-tax ($15 million after-tax). These reductions were primarily due to higher than expected attrition (which did not result in severance benefits or costs) and lower costs relating to outplacement and other services.

This restructuring program was substantially completed in the fourth quarter of 2003. Net annual after-tax savings from this program were approximately $150 million in 2004, reflecting the elimination of salary and benefit costs for terminated employees and lower facility costs.

Regulatory and Industry Developments

Employee benefits regulation. The business of administering and insuring employee benefit programs, particularly health care programs, is heavily regulated by federal and state laws and administrative agencies, such as state departments of insurance and the federal Departments of Labor and Justice, as well as the courts. Regulation and judicial decisions have resulted in changes to industry and CIGNA’s business practices and will continue to do so in the future. In addition, CIGNA’s subsidiaries are routinely involved with various claims, lawsuits and regulatory audits and investigations that could result in financial liability, changes in business practices, or both. Health care regulation in its various forms could have an adverse effect on CIGNA’s health care operations if it inhibits CIGNA’s ability to respond to market demands or results in increased medical or administrative costs without improving the quality of care or services.

Other possible regulatory changes that could have an adverse effect on CIGNA’s employee benefits businesses include:

• additional mandated benefits or services that increase costs without improving the quality of care;

• legislation that would grant plan participants broader rights to sue their health plans;

• changes in ERISA regulations resulting in increased administrative burdens and costs;

• additional restrictions on the use of prescription drug formularies;

• additional privacy legislation and regulations that interfere with the proper use of medical information for research, coordination of medical care and disease and disability management;

• additional rules establishing the time periods for payment of health care provider claims that vary from state to state;

• legislation that would exempt independent physicians from antitrust laws; and

• changes in federal tax laws, such as amendments that could affect the taxation of employer provided benefits.

The employee benefits industry remains under scrutiny by various state and federal government agencies and could be subject to government efforts to bring criminal actions in circumstances that could previously have given rise only to civil or administrative proceedings.

Distributions from policyholders’ surplus account. The American Jobs Creation Act of 2004 suspends, for a two-year period commencing January 1, 2005, the tax liability of stock life insurance companies on distributions from the policyholders’ surplus account. CIGNA’s principal subsidiary distributed, with regulatory approval, the entire account balance of $450 million to the parent company during 2005 without incurring federal income tax.

Litigation and other legal matters. In 2004, a Florida federal court handling multi-district health care litigation against CIGNA and several health care industry competitors approved a settlement agreement between the physician class and CIGNA and dismissed all claims by the physician class members against CIGNA. A dispute with a representative of certain physicians over administration of the settlement with the physician class is likely to be resolved in mid 2006. In April 2005, the court approved a settlement between CIGNA and the remaining plaintiffs, a class of non-physician health care professionals.

31

In 2003, CIGNA recorded an after-tax charge of $37 million ($57 million pre-tax) to increase the reserve for this health care litigation. CIGNA had previously recognized an after-tax charge of $50 million ($77 million pre-tax) in 2002 for expected costs associated with the multi-district litigation. The reserve reflects insurance recoveries.

Various regulators, including the New York and Connecticut Attorneys General and the Florida Insurance Department, have been investigating insurance broker compensation. Some regulators have brought suit against certain insurance brokers, including Universal Life Resources (ULR), alleging, among other things, that these brokers sought rigged bids from, and steered business to, insurers with whom they had contingent compensation arrangements. CIGNA and some of its subsidiaries are included in one such lawsuit seeking injunctive relief against these types of contingent compensation arrangements. CIGNA is also providing information about ULR in connection with an investigation by the U.S. Attorney’s Office for the Southern District of California. In addition, CIGNA is providing information about another broker in connection with an investigation by the U.S. Department of Labor. CIGNA is cooperating with the inquiries and investigations by regulators and the U.S. Attorney’s Office. Separately, several purported class action lawsuits have been filed against brokers and insurance companies, including CIGNA and certain of its subsidiaries, asserting that contingent commissions are unlawful. These suits are now in a multi-district litigation proceeding in federal court in New Jersey. CIGNA disagrees with the assertions against it in the lawsuits.

In 2004, the New York Attorney General commenced a lawsuit against Express Scripts, Inc. and two CIGNA insurance companies. Under an agreement with the CIGNA companies, Express Scripts is responsible for administering the prescription drug benefit program under New York State’s principal employee health plan, the Empire Plan. The CIGNA companies insured the prescription drug benefit program and held the contract with the New York State Department of Civil Service. The complaint primarily focuses on administration of the prescription drug benefit program.

A purported class action lawsuit and a shareholder derivative lawsuit against CIGNA and certain of its senior officers and directors allege securities law violations and breach of fiduciary duty. These suits originated in 2002.

Plaintiffs representing CIGNA Pension Plan participants who earned certain Plan benefits prior to 1998 filed a class action lawsuit against CIGNA and the CIGNA Pension Plan. The plaintiffs allege, among other things, that the Plan violated ERISA by impermissibly conditioning certain post-1997 benefit accruals on the amount of pre-1998 benefit accruals, that these conditions are not adequately disclosed to Plan participants, and that the Plan’s cash balance formula discriminates against older employees.

See “Unicover and other run-off reinsurance” on page 38 for a description of legal matters arising out of the run-off reinsurance operations.

CIGNA is routinely involved in numerous claims, lawsuits, regulatory audits, investigations and other legal matters arising, for the most part, in the ordinary course of the business of administering and insuring employee benefit programs. An increasing number of claims are being made for substantial non-economic, extra-contractual or punitive damages. The outcome of litigation and other legal matters is always uncertain, and outcomes that are not justified by the evidence can occur. CIGNA believes that it has valid defenses to the legal matters pending against it and is defending itself vigorously. Nevertheless, it is possible that resolution of one or more of the legal matters currently pending or threatened could result in losses material to CIGNA’s consolidated results of operations, liquidity or financial condition.

Summary. The eventual effect on CIGNA of the changing environment in which it operates remains uncertain. For additional information on contingencies that could affect CIGNA’s results, see Note 20 to the Financial Statements.

Accounting Pronouncements

For information on recent accounting pronouncements, see Note 2(B) to the Financial Statements.

Segment Reporting

Operating segments generally reflect groups of related products, but the International segment is generally based on geography. CIGNA measures the financial results of its segments using “segment earnings (loss),” which is defined as income (loss) from continuing operations excluding realized investment gains (losses). See Note 19 to the Financial Statements for additional segment information and a reconciliation of segment earnings (loss) to CIGNA’s consolidated income from continuing operations.

In 2004, CIGNA completed the sale of its retirement benefits business and also realigned management responsibility for operations that provide case management and related services to workers’ compensation insurers and employers who self-fund workers’ compensation and disability benefits. To appropriately reflect the impact of these actions, CIGNA changed its segment reporting, and prior periods were reclassified to conform to this presentation:

• the sold retirement benefits business is reported in the Run-off Retirement segment;

• the corporate life insurance business (previously reported in the Retirement segment) was retained and is reported in Other Operations; and

• results from the disability and workers’ compensation case management activities (previously reported in the Health Care segment) are included in the Disability and Life segment.

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MANAGEMENT’SDISCUSSIONANDANALYSIS

Also in 2004, corporate overhead previously allocated to the sold retirement benefits business was reported in Corporate.

HEALTH CARE

(In millions)
Financial Summary	2005			2004			2003
Premiums and fees	$	10,177		$	10,868		$	12,284
Net investment income		275			283			283
Other revenues		1,091			1,027			929
Segment revenues		11,543			12,178			13,496
Benefits and expenses		10,494			10,990			12,845
Income before taxes		1,049			1,188			651
Income taxes		361			425			222
Segment earnings	$	688		$	763		$	429
Realized investment gains, net of taxes	$	1		$	15		$	44
Special items (after-tax) included in segment earnings:
Cost reduction initiatives	$	(14	)	$	(28	)	$	25
Health care provider litigation	$	—		$	—		$	(37	)
Intangible asset write-off for provider contracts	$	—		$	—		$	(10	)

The Health Care segment provides health care and related products and services. Key product lines include medical coverages and related specialty health care products and services such as pharmacy, behavioral health, dental benefits and disease management. This segment also includes group disability and life insurance products that were historically sold in connection with certain experience-rated medical accounts that continue to be managed by the health care business.

Results

Segment earnings include favorable prior year claim development of $137 million in 2005, $106 million in 2004 and $33 million in 2003. Excluding prior year claim development, segment earnings decreased in 2005 primarily reflecting the impact of net membership declines on revenues, partially offset by lower operating expenses and higher earnings in specialty health care operations.

Excluding prior year claim development, segment earnings increased in 2004 primarily reflecting:

• improvement in the experience-rated, Commercial HMO and guaranteed cost businesses because of strong pricing and underwriting execution, as well as improved medical cost management; and

• higher earnings in specialty health care operations.

These increases were partially offset by the impact of membership declines in all businesses.

Premiums and Fees

Premiums and fees decreased in 2005 and 2004 primarily due to declining membership, partially offset by rate increases.

(In millions)	2005		2004		2003
Commercial HMO	$	2,646	$	3,191	$	4,060
Experience-rated medical		2,836		2,937		3,216
Dental		899		888		944
Medicare and Medicaid		286		286		450
Other medical1		1,389		1,177		895
Life and other non-medical		399		496		638
Total premiums		8,455		8,975		10,203
Fees		1,722		1,893		2,081
Total premiums and fees	$	10,177	$	10,868	$	12,284

¹ Other medical premiums include risk revenue for other guaranteed cost medical and specialty products.

Benefits and Expenses

Health Care segment benefits and expenses consist of the following:

(In millions)	2005		2004		2003
Medical claims expense	$	6,305	$	6,616	$	8,068
Other benefit expenses		347		484		616
Other operating expenses		3,842		3,890		4,161
Total benefits and expenses	$	10,494	$	10,990	$	12,845

See Note 5 to the Financial Statements for additional information about medical claims payable and medical claims expenses.

Medical Membership

CIGNA’s medical membership includes any person for whom CIGNA retains medical underwriting risk, who uses a CIGNA network for services covered under their medical coverage or for whom CIGNA administers medical claims. As of December 31, estimated medical membership was as follows:

(In thousands)	2005	2004	2003
Guaranteed cost:
Commercial HMO	813	900	1,332
Medicare and Medicaid	32	33	42
Other	214	56	74
Experience-rated2	1,129	1,257	1,420
Services	6,902	7,455	8,667
Total medical membership	9,090	9,701	11,535

² Includes minimum premium members, which have a risk profile similar to experience-rated funding arrangements. The risk portion of minimum premium revenue is reported in experience-rated medical premium whereas the self funding portion of minimum premium revenue is recorded in fees.

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Medical membership decreased in 2005 and 2004, due to a decline in new business sales and lower retention of existing accounts. These declines are primarily attributable to CIGNA maintaining underwriting discipline in a competitive pricing environment, while continuing to work to reduce medical and operating expenses, which affect the competitiveness of CIGNA’s health care products. Medical membership has been stable since January 1, 2005.

Operational Improvement

CIGNA continues to focus on improving operational effectiveness and the financial results of its health care operations. Key areas of focus are:

• offering products that meet emerging market and consumer trends;

• improving medical membership results;

• lowering medical cost trends;

• continuing to deliver quality member service; and

• lowering administrative expenses.

Offering products that meet emerging trends. CIGNA offers the CIGNA Choice Fund^SM, which is a set of consumer-directed capabilities that includes options for health reimbursement arrangements and/or health savings accounts and enables consumers to make effective health decisions using information tools provided by CIGNA. During 2005, CIGNA acquired Choicelinx, a benefits technology and services company. This acquisition adds new technology capabilities for offering personalized health care products and decision support tools to consumers. The CIGNATURE^SM suite of products, allows employers to choose the funding arrangement that is appropriate for the employer and level of medical management that is appropriate for their employee population.

Also in 2005, CIGNA announced its strategic alliance with NationsHealth, Inc. (a distribution and services company) to jointly deliver Medicare Part D prescription drug plans. CIGNA received regulatory approval for its Medicare Part D prescription plan benefit program, which took effect in January 2006.

Improving medical membership results. CIGNA is working to improve medical membership with:

• a diverse product portfolio that meets emerging consumer-directed trends;

• consistent and responsive member service delivery;

• competitive provider networks;

• strong clinical quality in medical, specialty health care and disability management;

and by continuing to implement the other operational improvements described below. Since 2004, CIGNA has formed several strategic alliances with regional health care companies and acquired Managed Care Consultants of Nevada in 2005. These strategic actions are designed to:

• strengthen CIGNA’s national provider network;

• enhance CIGNA’s ability to provide superior medical and disease management programs;

• provide administrative ease for multi-state employers; and

• grow membership in key geographic areas, as well as providing a basis for lowering medical costs.

CIGNA believes that its medical management model, focus on clinical quality and ability to integrate health and related benefit solutions position the company to improve membership results.

Lowering medical cost trend. CIGNA operates under a centralized medical management model, which helps facilitate consistent levels of care for its members and reduces infrastructure expenses.

CIGNA is focused on reducing its medical cost trend by managing unit medical costs more effectively. To help achieve this end, CIGNA continues to focus on renegotiating contracts with certain facilities to limit increases in medical reimbursement costs. In addition, CIGNA seeks to strengthen its network position through acquisitions and strategic alliances in selected markets.

Continuing to deliver quality member service. Substantially all health care members are served on a service and systems platform that was introduced in 2002. Since 2003, customer satisfaction rates related to the migration process have been strong.

Lowering administrative expenses. Early in 2005 and 2004, CIGNA took additional steps to realign its organization and consolidate support functions in an effort to increase efficiency and responsiveness to customers. Reducing costs and operating more efficiently are components of CIGNA’s plan to improve profitability. CIGNA continues to perform operational reviews in order to identify additional cost savings.

34

MANAGEMENT’SDISCUSSIONANDANALYSIS

DISABILITY AND LIFE

(In millions)
Financial Summary	2005			2004			2003
Premiums and fees	$	2,065		$	1,923		$	1,807
Net investment income		264			253			250
Other revenues		198			202			197
Segment revenues		2,527			2,378			2,254
Benefits and expenses		2,208			2,125			2,043
Income before taxes		319			253			211
Income taxes		92			71			56
Segment earnings	$	227		$	182		$	155
Realized investment gains (losses), net of taxes	$	(4	)	$	20		$	39
Special item (after-tax) included in segment earnings:
Restructuring items, net	$	—		$	(1	)	$	1

The Disability and Life segment includes group:

• disability insurance;

• disability and workers’ compensation case management;

• life insurance; and

• accident and specialty association insurance.

Results

Disability and Life segment earnings increased in 2005, primarily reflecting:

• favorable mortality experience in the life and accident insurance businesses;

• improved operating expense margins; and

• continued strong disability earnings.

Disability and Life segment earnings increased in 2004, primarily reflecting:

• favorable mortality experience in the life insurance business;

• improved expense management in part due to restructuring related actions; and

• higher premiums and fees in the disability and life insurance businesses.

These factors were partially offset by lower results in the accident and specialty association businesses.

Premiums and Fees

Premiums and fees increased in 2005 and 2004 primarily reflecting higher new business and strong customer retention in both the life and disability insurance businesses.

INTERNATIONAL

(In millions)
Financial Summary	2005			2004		2003
Premiums and fees	$	1,243		$	1,026	$	855
Net investment income		71			58		49
Other revenues		(4	)		5		11
Segment revenues		1,310			1,089		915
Benefits and expenses		1,155			971		830
Income before taxes		155			118		85
Income taxes		46			42		30
Segment earnings	$	109		$	76	$	55
Realized investment gains, net of taxes	$	—		$	1	$	5
Special items (after-tax) included in segment earnings:
IRS tax settlement	$	7		$	—	$	—
Gain on sale of Japanese pension operations	$	—		$	—	$	5

Results

Excluding the special item noted above, International segment earnings increased in 2005 primarily due to:

• strong revenue growth in the life, accident and health insurance business, particularly in South Korea; and

• earnings growth in the expatriate employee benefits business.

Excluding the special item noted in 2003, International segment earnings increased in 2004 primarily due to:

• strong revenue growth in the life, accident and health insurance business, particularly in South Korea;

• favorable prior year claims development as well as membership growth in the expatriate employee benefits business; and

• the positive impact of the divestiture of non-strategic businesses.

Premiums and Fees

Premiums and fees increased in 2005 and 2004 reflecting:

• new sales growth and improved customer retention in the life, accident and health insurance operations, particularly in South Korea; and

• higher premiums and fees for the expatriate employee benefits business resulting from membership growth.

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Other Matters

International’s products include coverages for employees and individuals who may be exposed to acts of terrorism, the events of a war zone or natural disasters. These risks could result in a concentration of loss if a single adverse event affected many covered individuals, and in certain situations could lead to losses that could be material to segment earnings and CIGNA’s consolidated results.

South Korea represents the single largest geographic market for CIGNA’s international businesses. In 2005, South Korea generated 27% of International’s revenues and 41% of its segment earnings. International’s business in South Korea would be vulnerable to adverse consumer credit conditions in that country. In addition, geopolitical and economic events in South Korea could have a significant impact on the International segment.

RUN-OFF RETIREMENT

(In millions)
Financial Summary	2005			2004			2003
Premiums and fees	$	2		$	215		$	271
Net investment income		144			467			1,413
Other revenues		348			562			(126	)
Segment revenues		494			1,244			1,558
Benefits and expenses		180			828			1,238
Income before taxes		314			416			320
Income taxes		105			134			98
Segment earnings	$	209		$	282		$	222
Realized investment gains, net of taxes	$	5		$	296		$	32
Special items (after-tax) included in segment earnings:
Accelerated recognition of deferred gain on sale of retirement benefits business	$	204		$	220		$	—
Net charge associated with modified coinsurance arrangements	$	(8	)	$	(25	)	$	—
Effect of new accounting pronouncement ( see Note 2 to the Financial Statements)	$	—		$	(11	)	$	—
Reduction in allowance against amounts recoverable from pension policyholders	$	—		$	—		$	33

Segment earnings for Run-off Retirement include:

• gain recognition related to the sale of the retirement benefits business;

• results of modified coinsurance arrangements;

• expenses associated with the run-off of this business; and

• results of the retirement benefits business prior to the April 2004 sale.

Since completing the sale of the retirement benefits business on April 1, 2004, net investment income represents amounts associated with the portion of the retirement benefits business reinsured under modified coinsurance arrangements and is offset by amounts included in benefits and expenses.

Results

Run-off Retirement segment earnings include the special items noted in the table above. Excluding these items, segment earnings decreased for 2005 due to the absence of earnings after the sale of this business in 2004 and due to lower normal deferred gain amortization reflecting significant acceleration of gains in 2004 and early 2005 resulting from transfers of underlying contracts to the buyer of the retirement benefits business.

Excluding special items, segment earnings decreased in 2004 primarily due to the sale of the retirement benefits business and higher compensation and related benefit expenses to retain key employees associated with this business. These decreases were partially offset by the recognition of normal deferred gain amortization.

Other Revenues

Other revenues include:

(In millions, pre-tax)	2005		2004			2003
Normal deferred gain amortization	$	24	$	80		$	—
Accelerated deferred gain amortization	$	322	$	342	*	$	—
Changes in fair value of securities supporting experience-rated pension policyholder contracts	$	—	$	165		$	(126	)

* Of this amount, $338 million is noted as a special item.

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MANAGEMENT’SDISCUSSIONANDANALYSIS

RUN-OFF REINSURANCE

(In millions)
Financial Summary	2005			2004			2003
Premiums and fees	$	92		$	80		$	84
Net investment income		99			92			82
Other revenues		(48	)		(162	)		(551	)
Segment revenues		143			10			(385	)
Benefits and expenses		219			118			155
Loss before taxes (benefits)		(76	)		(108	)		(540	)
Income taxes (benefits)		(12	)		7			(181	)
Segment loss	$	(64	)	$	(115	)	$	(359	)
Realized investment gains (losses), net of taxes	$	(2	)	$	5		$	13
Special item (after-tax) included in segment earnings:
Reserve charge on guaranteed minimum death benefit contracts	$	—		$	—		$	(286	)

CIGNA’s reinsurance businesses are in run-off. No new reinsurance business has been underwritten since the sale of the U.S. individual life, group life and accidental death reinsurance business in 2000.

Results

Segment loss for Run-off Reinsurance was lower in 2005 reflecting:

• lower reserve increases for personal accident and workers’ compensation lines of business; and

• lower reserves for credit risk.

Excluding the special item noted above, segment loss in 2004 was higher than 2003 due to:

• increases in reserves for disputed contracts and reserves for credit risk; and

• increases to a valuation allowance against deferred tax assets from continued losses.

These factors were partially offset by lower reserve increases in the workers’ compensation and personal accident businesses.

Other Revenues

CIGNA maintains a program to substantially reduce the equity market exposures relating to guaranteed minimum death benefit contracts by entering into exchange-traded futures contracts and foreign currency forward contracts (see below). Other revenues include pre-tax losses of $48 million in 2005, $165 million in 2004 and $550 million in 2003 from these contracts. Expense offsets reflecting corresponding changes in liabilities for these guaranteed minimum death benefit contracts were included in benefits and expenses. The notional amount of the futures contract positions held by CIGNA at December 31, 2005 was $1.0 billion. There were no foreign currency forward contracts held at December 31, 2005.

Other Matters

Guaranteed minimum death benefit contracts. CIGNA’s reinsurance operations, which were discontinued in 2000 and are now an inactive business in run-off mode, reinsured a guaranteed minimum death benefit 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 majority of CIGNA’s exposure arises under annuities that guarantee that the benefit received at death will be no less than the highest historical account value of the related mutual fund investments on a contractholder’s anniversary date. Under this type of death benefit, CIGNA is liable to the extent the highest historical anniversary account value exceeds the fair value of the related mutual fund investments at the time of a contractholder’s death. Other annuity designs that CIGNA reinsured guarantee that the benefit received at death will be:

• the contractholder’s account value as of the last anniversary date (anniversary reset); or

• no less than net deposits paid into the contract accumulated at a specified rate or net deposits paid into the contract.

In periods of declining equity markets and in periods of flat equity markets following a decline, CIGNA’s liabilities for these guaranteed minimum death benefits increase. Similarly, in periods of rising equity markets, CIGNA’s liabilities for these guaranteed minimum death benefits decrease. Beginning in 2002 with the implementation of the program to reduce equity market exposure discussed below, the favorable and unfavorable effects of the equity market on the reserve are largely offset in other revenues as a result of the related futures gains or losses.

The determination of liabilities for guaranteed minimum death benefits requires CIGNA to make critical accounting estimates. CIGNA describes the assumptions used to develop the reserves for these death benefits, and provides the effects of hypothetical changes in those assumptions on page 26. See Note 6 to the Financial Statements for additional information about these assumptions and the reserve balances.

During the first quarter of 2005, CIGNA completed its normal review of assumptions and recorded an after-tax charge of $11 million ($17 million pre-tax). This charge primarily resulted from an update to lapse assumptions based on emerging experience. The charge also reflects updates to partial surrender assumptions, reflecting the impact of stock market declines, as well as other assumptions. Also in 2005, CIGNA updated its mortality and expense assumptions for these contracts.

37

In the second quarter of 2003, CIGNA recognized an after-tax charge of $286 million ($441 million pre-tax) to increase reserves following an analysis of experience and reserve assumptions ( see Note 6 to the Financial Statements for additional information on this charge). Prior to the second quarter of 2003, CIGNA’s experience of partial surrenders under its guaranteed minimum death benefit contracts was not sufficient to support an explicit reserve assumption. Separately, from mid-2002 through the first quarter of 2003, CIGNA experienced continued adverse mortality development under these contracts. During the second quarter of 2003, CIGNA conducted a special review of the emerging partial surrender activity to determine if sufficient credible data existed for an explicit reserve assumption. The review also included a detailed study of other reserve assumptions, including mortality, to validate the cause of the adverse experience and to determine whether or not long-term mortality expectations should be changed.

As a result of the review, CIGNA recorded the after-tax charge of $286 million referenced above consisting of the following:

• $169 million for the addition of an explicit assumption for both actual and projected future partial surrenders. This estimate is based on annual election rates that vary depending on the net amount at risk for each policy ( see Note 6 for more information);

• $56 million primarily reflecting refinements to assumptions relating to the timing of lapses, death benefits and premiums to better reflect CIGNA’s experience;

• $39 million due to higher assumed mortality reflecting adverse experience based on contractholder deaths during the period from late 2000 into 2003; and

• $22 million resulting from a decrease in assumed mean investment performance reflecting experience and future expectations based on history for similar investments and considering CIGNA’s program to reduce equity market exposures (described below).

As a result of equity market declines and volatility early in the third quarter of 2002, CIGNA evaluated alternatives for addressing the exposures associated with these reinsurance contracts, considering the possibility of continued depressed equity market conditions, the potential effects of further equity market declines and the impact on future earnings and capital. As a result of this evaluation, CIGNA implemented a program to substantially reduce the equity market exposures of this business by selling exchange-traded futures contracts, which are expected to rise in value as the equity market declines and decline in value as the equity market rises.

During 2003, CIGNA began using foreign currency forward contracts as part of its program to reduce international equity market risks associated with this business. During 2005, CIGNA replaced these forward contracts with foreign currency futures contracts. CIGNA expects to adjust the futures contract positions and may enter into other contract positions over time, to reflect changing equity market levels and changes in the investment mix of the underlying variable annuity investments. For further information and details on these contracts and the program adopted to reduce related equity market risk, refer to Note 6 of the Financial Statements.

As of December 31, 2005, the aggregate fair value of the underlying mutual fund investments was approximately $40.2 billion. The death benefit coverage in force as of that date (representing the amount that CIGNA would have to pay if all 1.0 million contractholders had died on that date) was approximately $7.0 billion. The death benefit coverage in force represents the excess of the guaranteed benefit amount over the fair value of the underlying mutual fund investments.

Guaranteed minimum income benefit contracts. CIGNA has also written reinsurance contracts with issuers of variable annuity contracts that provide annuitants with certain guarantees related to minimum income benefits. See page 43 for further information about these contracts.

Unicover and other run-off reinsurance. The Run-off Reinsurance operations participate in a workers’ compensation reinsurance pool, which ceased accepting new risks in early 1999. This pool was formerly managed by Unicover Managers, Inc. The pool purchased significant reinsurance (retrocessional) protection for its assumed risks. Disputes concerning these retrocessional contracts have resulted in a number of arbitrations, most of which have been resolved or settled. The remaining disputes are expected to be resolved in 2006.

Run-off Reinsurance also includes other (non-Unicover) workers’ compensation reinsurance contracts, as well as personal accident reinsurance contracts, including contracts assumed in the London market. CIGNA is in dispute and arbitration with some ceding companies over the amount of liabilities assumed under their contracts, and expects that these disputes and arbitrations will be substantially resolved by the end of 2007.

In addition, CIGNA obtained retrocessional reinsurance coverage for a significant portion of its liabilities under these contracts and some of these retrocessionaires have disputed the validity of their contracts with CIGNA. Many of these disputes with retrocessionaires have been resolved or settled. Most of the remaining significant disputes relating to the retrocessional reinsurance coverage are expected to be resolved in 2006. CIGNA bears the risk of loss if the retrocessionaires are unable to meet their reinsurance obligations to CIGNA.

Unfavorable claims experience related to workers’ compensation and personal accident exposures is possible and could result in future losses, including losses attributable to the inability to recover amounts from retrocessionaires (either due to disputes with the retrocessionaires or their financial condition).

38

MANAGEMENT’SDISCUSSIONANDANALYSIS

Summary. CIGNA’s reserves for amounts recoverable from retrocessionaires, as well as for underlying reinsurance exposures assumed by CIGNA, are considered appropriate as of December 31, 2005, based on current information. However, it is possible that future developments could have a material adverse effect on CIGNA’s consolidated results of operations, and, in certain situations, could have a material adverse effect on CIGNA’s financial condition.

OTHER OPERATIONS

(In millions)
Financial Summary	2005			2004		2003
Premiums and fees	$	116		$	124	$	159
Net investment income		465			475		517
Other revenues		100			173		216
Segment revenues		681			772		892
Benefits and expenses		512			559		720
Income before taxes		169			213		172
Income taxes		39			71		61
Segment earnings	$	130		$	142	$	111
Realized investment gains (losses), net of taxes	$	(11	)	$	24	$	(35	)
Special items included in segment earnings:
IRS tax settlement	$	11		$	—	$	—
Gain on sale of investment advisory businesses	$	—		$	12	$	—

Other Operations consist of:

• deferred gains recognized from the 1998 sale of the individual life insurance and annuity business;

• corporate life insurance (including policies on which loans are outstanding);

• settlement annuity business; and

• certain investment management services (a significant portion of which were sold in 2004).

Results

Excluding the special item noted above, segment earnings for Other Operations in 2005 reflect:

• the absence of a favorable reserve adjustment recorded in 2004 related to participating corporate life insurance policies;

• the absence of severance and employee retention costs recorded in 2004 associated with the investment operations supporting the sold retirement benefits business; and

• favorable tax adjustments.

Segment earnings for Other Operations increased in 2004 primarily because of higher earnings in the leveraged corporate insurance business due to year over year changes in the dividend liability for participating policies and favorable reserve adjustments as a result of policy surrenders ( see Other Matters below).

This increase was partially offset by:

• lower 2004 earnings in the individual life insurance and annuity business due to a favorable gain adjustment recognized in 2003, an increase to litigation reserves and lower amortized gains; and

• higher severance and employee retention costs associated with the investment operations supporting the sold retirement benefits business and the sale of the investment advisory businesses.

Other Matters

Tax benefits for corporate life insurance. Federal legislation in 1996 eliminated on a prospective basis the tax deductibility of policy loan interest for most leveraged corporate life insurance products, and an Internal Revenue Service (IRS) initiative in 2001 encouraged policyholders to settle tax disputes regarding these products. As a result, some customers have surrendered their policies and management expects earnings associated with these products to continue to decline.

CORPORATE

(In millions)
Financial Summary	2005			2004			2003
Segment loss	$	(12	)	$	(114	)	$	(127	)
Special items (after-tax) included in segment loss:
IRS tax settlement	$	63		$	—		$	—
Cost reduction charge	$	(19	)	$	(20	)	$	(9	)
Federal tax refund	$	—		$	28		$	—

Corporate reflects amounts not allocated to segments, such as interest expense on corporate debt, net investment income on unallocated investments, intersegment eliminations, compensation cost for stock options and certain corporate overhead expenses.

Excluding special items, the decline in 2005 segment loss reflects:

• lower stock compensation expense primarily due to a decrease in the number of stock options granted and higher forfeitures;

• favorable tax adjustments;

• overhead costs included in 2004 associated with the sold retirement benefits business; and

• costs recorded in 2004 associated with retiring $76 million of long-term debt.

Excluding special items, the loss increased in 2004 primarily due to:

• the inclusion of overhead costs previously allocated to the sold retirement benefits business;

39

• costs associated with retiring $76 million of long-term debt; and

• higher stock option expenses in 2004.

These factors were partially offset by higher investment income, lower expenses and favorable tax adjustments.

DISCONTINUED OPERATIONS

(In millions)
Financial Summary	2005			2004		2003
Loss before income tax benefits	$	—		$	—	$	(3	)
Income tax benefits		(349	)		—		(1	)
Income (loss) from operations		349			—		(2	)
Gains on sales, net of tax of $25		—			—		50
Income from discontinued operations, net of taxes	$	349		$	—	$	48

Income from discontinued operations in 2005 represents income tax benefits recognized in 2005 from past divestitures. See page 24 for additional information.

Income from discontinued operations in 2003 was primarily after-tax gains on sales of businesses, including:

• $32 million related to Lovelace ( see page 30); and

• $18 million related to the Brazilian health care operations ( see page 30).

LIQUIDITY AND CAPITAL RESOURCES

(In millions)
Financial Summary	2005		2004		2003
Short-term investments	$	439	$	71	$	147
Cash and cash equivalents	$	1,709	$	2,519	$	1,392
Short-term debt	$	100	$	—	$	—
Long-term debt	$	1,338	$	1,438	$	1,500
Shareholders’ equity	$	5,360	$	5,203	$	4,607

Liquidity

CIGNA normally meets its operating requirements by:

• maintaining appropriate levels of cash, cash equivalents and short-term investments;

• using cash flows from operating activities; and

• matching investment maturities to the estimated duration of the related insurance and contractholder liabilities ( see page 46 for additional information).

CIGNA’s insurance and HMO subsidiaries are subject to regulatory restrictions that limit the amount of dividends or other distributions (such as loans or cash advances) these subsidiaries may provide to the parent company without prior approval of regulatory authorities. CIGNA does not expect these restrictions to limit the use of operating cash flows of the insurance and HMO subsidiaries for CIGNA’s general corporate purposes.

Cash flows from continuing operations for the years ended December 31 were as follows:

(In millions)	2005			2004			2003
Operating activities	$	718		$	1,450		$	2,415
Investing activities	$	258		$	1,218		$	(796	)
Financing activities	$	(1,785	)	$	(1,541	)	$	(1,802	)

Cash and cash equivalents decreased $810 million in 2005 and increased $1.1 billion in 2004.

Cash flows from operating activities consist of cash receipts and disbursements for premiums and fees, gains (losses) recognized in connection with CIGNA’s program to manage equity market risk related to reinsured guaranteed minimum death benefit contracts, investment income, taxes, and benefits and expenses.

2005:

The full year decrease in cash flows from operating activities was affected by the following items in 2005 and 2004:

• absence of the 2004 net proceeds from sales and maturities of securities supporting experience-rated pension policyholder contracts of $1.0 billion. These proceeds were used to fund most of the 2004 withdrawals from contractholder deposit funds discussed below under financing;

• 2005 voluntary pension contributions of $440 million;

• lower tax payments in 2005 compared with 2004 of $552 million, primarily due to the taxes paid in 2004 related to the sale of the retirement benefits business and a refund received in 2005 associated with the sale of the property and casualty insurance business (reported as discontinued operations); and

• lower losses in 2005 compared with 2004 of $117 million associated with futures and forward contracts entered into as part of a program to manage equity market risks in the run-off reinsurance segment.

Excluding these items, cash flow from operating activities increased. The decline in cash revenues, which resulted from membership losses in the health care operations, was more than offset by lower paid benefits and operating expenses.

Cash provided by investing activities primarily consists of:

• net sales of investments ($338 million), partially offset by;

• net purchases of property and equipment ($61 million).

Cash used in financing activities consists of:

• repurchase of and payments of dividends on common stock ($1.6 billion);

• net withdrawals from contractholder deposit funds ($284 million); and

• change in cash overdraft position ($216 million).

40

MANAGEMENT’SDISCUSSIONANDANALYSIS

These factors were partially offset by proceeds of $346 million from issuances of common stock due to stock option exercises.

2004:

The decline in cash flows from operating activities compared with 2003 primarily reflects the following factors:

• net tax payments in 2004 of $687 million compared with tax refunds in 2003 of $245 million (primarily reflecting loss carrybacks attributable to net losses reported in 2002);

• lower cash flow as a result of the sale of the retirement benefits business in 2004;

• higher contributions to CIGNA’s pension trust; and

• payment of $70 million related to the provider class action litigation (charges reported in the prior year).

These decreases were partially offset by the following:

• an increase in net proceeds from sales and maturities of securities supporting experience-rated pension policyholder contracts of $182 million. Such proceeds were used to fund most of the withdrawals from contractholder deposit funds discussed below under financing; and

• lower losses in 2004 compared with 2003 of $385 million associated with futures and forward contracts entered into as part of a program to manage equity market risks in the Run-off Reinsurance segment.

Cash provided by investing activities primarily consists of:

• proceeds from the sale of the retirement benefits business of $2.1 billion, partially offset by;

• net purchases of investments ($841 million); and

• net purchases of property and equipment ($38 million).

Cash used in financing activities consists of:

• repurchase of and payments of dividends on common stock ($776 million);

• net withdrawals from contractholder deposit funds ($739 million); and

• repayment of debt ($76 million).

Interest Expense

Interest expense was $105 million in 2005, $107 million in 2004 and $111 million in 2003.

Capital Resources

CIGNA’s capital resources (primarily retained earnings and the proceeds from the issuance of long-term debt and equity securities) provide protection for policyholders, furnish the financial strength to underwrite insurance risks and facilitate continued business growth.

Senior management, guided by regulatory requirements and rating agency capital guidelines, determines the amount of capital resources that CIGNA maintains. Management allocates resources to new long-term business commitments when returns, considering the risks, look promising and when the resources available to support existing business are adequate.

CIGNA has sufficient capital resources to:

• provide capital necessary to support growth and maintain or improve the financial strength ratings of subsidiaries;

• consider acquisitions that are strategically and economically advantageous; and

• return capital to investors through share repurchase.

CIGNA has $500 million remaining under an effective shelf registration statement filed with the Securities and Exchange Commission, which may be issued as debt securities, equity securities or both. Management and the Board of Directors will consider market conditions and internal capital requirements when deciding whether CIGNA should issue new securities.

In May 2004, CIGNA entered into a three-year syndicated revolving credit and letter of credit agreement for $1.0 billion. Of this amount, up to $600 million may be used to support an internal reinsurance arrangement.

Liquidity and Capital Resources Outlook

The availability of resources at the parent/holding company level is partially dependent on dividends from CIGNA’s subsidiaries, most of which are subject to regulatory restrictions and rating agency capital guidelines. CIGNA expects, based on current projections for cash activity (including projections for dividends from subsidiaries), to have sufficient liquidity to meet its obligations, including:

• debt service requirements and dividend payments to CIGNA shareholders; and

• pension plan funding requirements.

However, if CIGNA’s projections are not realized, the demand for funds could exceed available cash if:

• management uses cash for investment opportunities;

• a substantial insurance or contractholder liability becomes due before related investment assets mature;

• a substantial increase in funding is required for CIGNA’s program to reduce the equity market risks associated with the guaranteed minimum death benefit contracts; or

• regulatory restrictions prevent the insurance and HMO subsidiaries from distributing cash to the parent company.

In those cases, CIGNA has the flexibility to satisfy liquidity needs through short-term borrowings, such as lines of credit.

41

See page 30 for information on the accelerated contributions in 2005 to CIGNA’s pension plans.

Ratings

CIGNA and certain of its insurance subsidiaries are rated by nationally recognized rating agencies. Ratings are always subject to change and there can be no assurance that CIGNA’s current ratings will continue for any given period of time. As of February 21, 2006, the current ratings of CIGNA and CG Life were as follows:

	CG Life Insurance Ratings	CIGNA Corporation Debt Ratings
		Senior Debt	Commercial Paper
A.M. Best	A-	—	—
Moody’s	A3	Baa3	P3
S&P	A-	BBB	A2
Fitch	A	BBB	F2

CIGNA is committed to maintaining appropriate levels of capital in its subsidiaries to support ratings that meet customers’ expectations, and to improving the earnings of the health care business. Ratings downgrades of CG Life could adversely affect new sales and retention of current business. Lower ratings at the parent company level would increase the cost to borrow funds.

For additional information, refer to the Ratings section in CIGNA’s 2005 Form 10-K.

Guarantees and Contractual Obligations

CIGNA, through its subsidiaries, is contingently liable for various financial guarantees provided and contractual obligations entered into in the ordinary course of business.

Financial guarantees primarily associated with the retirement benefits business. Separate account assets, primarily associated with the sold retirement benefits business, are contractholder funds maintained in accounts with specific investment objectives. CIGNA records separate account liabilities equal to separate account assets. In certain cases, CIGNA guarantees a minimum level of benefits for retirement and insurance contracts written in separate accounts. CIGNA establishes an additional liability if management believes that CIGNA will be required to make a payment under these guarantees.

Except as noted below, these guarantees are fully reinsured by an affiliate of the buyer of the retirement benefits business:

• CIGNA guarantees that separate account assets will be sufficient to pay certain retiree or life benefits. The sponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these benefits and are required to maintain assets that exceed a certain percentage of benefit obligations. This percentage varies depending on the asset class within a sponsoring employer’s portfolio (for example, a bond fund would require a lower percentage than a riskier equity fund) and thus will vary as the composition of the portfolio changes. If employers do not maintain the required levels of separate account assets, CIGNA or an affiliate of the buyer has the right to redirect the management of the related assets to provide for benefit payments. As of December 31, 2005, employers maintained assets that exceeded the benefit obligations. Benefit obligations under these arrangements were $2.1 billion as of December 31, 2005. As of December 31, 2005, approximately 80% of these guarantees are reinsured by an affiliate of the buyer of the retirement benefits business. There were no additional liabilities required for these guarantees as of December 31, 2005.

• CIGNA guarantees that separate account assets, primarily fixed income investments, will be sufficient to pay retiree benefits for participants under a certain group annuity contract. These guarantees are fully reinsured by an affiliate of the buyer of the retirement benefits business. These guaranteed benefit obligations were $30 million as of December 31, 2005. CIGNA had no additional liabilities for these guarantees as of December 31, 2005.

Other financial guarantees. CIGNA had indemnification obligations to lenders of up to $336 million as of December 31, 2005 related to borrowings by certain real estate joint ventures which CIGNA either records as an investment or consolidates. These borrowings, which are nonrecourse to CIGNA, are secured by the joint ventures’ real estate properties with fair values in excess of the loan amounts and mature at various dates from 2006 to 2017. CIGNA’s indemnification obligations would require payment to lenders for any actual damages resulting from certain acts such as unauthorized ownership transfers, misappropriation of rental payments by others or environmental damages. Based on initial and ongoing reviews of property management and operations, CIGNA does not expect that payments will be required under these indemnification obligations. Any payments that might be required could be recovered through a refinancing or sale of the assets. In some cases, CIGNA also has recourse to partners for their proportionate share of amounts paid. There were no liabilities required for these indemnification obligations as of December 31, 2005.

To enhance investment returns, CIGNA guaranteed principal payments for groups of primarily investment grade corporate debt issuers by entering into Dow Jones indexed credit default swaps with notional amounts of $290 million as of December 31, 2005. Under these contracts, CIGNA receives periodic fees to provide future payment if an issuer of an underlying corporate bond defaults on scheduled payments or files for bankruptcy through 2010. If a default or bankruptcy occurs, CIGNA will make payment for par value of the underlying corporate bond and may subsequently sell or hold that bond as an invested asset. CIGNA has recorded liabilities of less than $1 million for the fair value of these indexed credit default swaps as of December 31, 2005.

42

MANAGEMENT’SDISCUSSIONANDANALYSIS

As of December 31, 2005, CIGNA guaranteed that it would compensate the lessor for a shortfall of up to $49 million in the market value of leased equipment at the end of the lease. Guarantees of $21 million expire in 2006 and $28 million expire in 2012.

CIGNA had additional liabilities for these guarantees of $2 million as of December 31, 2005.

CIGNA guaranteed construction loans of $23 million as of December 31, 2005 related to real estate joint venture investments. The loans are secured by joint venture real estate property with fair values in excess of the loan amounts and mature by 2008, including extension options. CIGNA would be required to repay the construction loans if permanent financing could not be obtained. There were no liabilities required for these guarantees as of December 31, 2005.

CIGNA had indemnification obligations as of December 31, 2005 in connection with acquisition and disposition transactions. These indemnification obligations are triggered by the breach of representations or covenants provided by CIGNA, such as representations for the presentation of financial statements, the filing of tax returns, compliance with law or the identification of outstanding litigation. These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential amount due is subject to contractual limitations based on a percentage of the transaction purchase price, while in other cases limitations are not specified or applicable. CIGNA does not believe that it is possible to determine the maximum potential amount due under these obligations, since not all amounts due under these indemnification obligations are subject to limitation. As of December 31, 2005, aggregate liabilities for these obligations were less than $5 million.

CIGNA does not expect that these guarantees will have a material adverse effect on CIGNA’s consolidated results of operations, liquidity or financial condition.

Guaranteed minimum income benefit contracts. CIGNA’s reinsurance operations, which were discontinued in 2000 and are now an inactive business in run-off mode, reinsured variable annuity contracts that provide annuitants with certain guarantees related to minimum income benefits. When annuitants elect to receive these minimum income benefits, CIGNA may be required to make payments based on changes in underlying mutual fund values and interest rates.

During 2005, CIGNA completed its normal review of assumptions and recorded an after-tax charge of $9 million ($14 million pre-tax). This charge primarily reflects updates to the lapse assumption. See page 27 for additional information on critical accounting estimates for these contracts.

CIGNA is required to disclose the maximum potential undiscounted future payments for guarantees related to minimum income benefits using hypothetical adverse assumptions defined as follows:

• No annuitants surrendered their accounts; and

• All annuitants lived to elect their benefit; and

• All annuitants elected to receive their benefit on the first available date (beginning in 2006 through 2014); and

• All underlying mutual fund investment values remained at the December 31, 2005, value of $3.3 billion, with no future returns.

The maximum potential undiscounted payment that CIGNA would make under those assumptions would aggregate to $1.3 billion before reinsurance recoveries. CIGNA believes the likelihood of such payment is remote and expects the amount of actual payments to be significantly less than this hypothetical undiscounted aggregate amount. CIGNA has purchased reinsurance from third parties which covers 55% of the exposures on these contracts.

As of December 31, 2005, CIGNA had liabilities of $88 million related to these contracts and net amounts recoverable from reinsurers of $48 million. CIGNA had an additional liability of $49 million associated with the cost of reinsurance as of December 31, 2005. As of December 31, 2004, CIGNA had liabilities of $71 million related to these contracts and amounts recoverable from reinsurers of $39 million. CIGNA also had an additional liability of $41 million associated with the cost of reinsurance as of December 31, 2004.

43

Contractual obligations. The maturities of CIGNA’s principal contractual cash obligations, as of December 31, 2005, are estimated to be as follows:

(In millions, on an undiscounted basis)	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
On-Balance Sheet:
Insurance liabilities:
Contractholder deposit funds	$	5,129	$	946	$	773	$	629	$	2,781
Future policy benefits		11,957		649		1,059		955		9,294
Health Care medical claims payable		1,165		1,147		16		—		2
Unpaid claims and claim expenses		5,011		1,406		991		680		1,934
Short-term debt		100		100		—		—		—
Long-term debt		2,427		102		557		139		1,629
Non-recourse obligations		79		20		29		4		26
Other long-term liabilities		492		158		160		52		122
Off-Balance Sheet:
Purchase obligations		1,034		733		242		44		15
Operating leases		447		85		144		83		135
Total	$	27,841	$	5,346	$	3,971	$	2,586	$	15,938

• Insurance liabilities. Contractual obligations on insurance liabilities represent estimated benefit payments for health, life and disability insurance policies and annuity contracts less amounts CIGNA expects to recover under certain reinsurance arrangements. Actual obligations in any single year will vary based on actual morbidity, mortality, lapse and withdrawal experience. The amounts associated with the sold retirement benefits and individual life insurance and annuity businesses are excluded from the table above as net cash flow associated with them does not impact CIGNA. The total amount of these reinsured reserves excluded is approximately $7.8 billion. The sum of the obligations presented above exceeds the corresponding insurance liabilities of $16.5 billion recorded on the balance sheet because these liabilities reflect discounting for interest. CIGNA manages its investment portfolios to generate cash flows needed to satisfy contractual obligations. Any shortfall from expected yields could result in increases to recorded reserves and adversely impact results of operations.

• Short-term debt represents current maturities of long-term debt.

• Long-term debt includes scheduled interest payments.

• Non-recourse obligations represent principal and interest payments for which repayment may be limited to the value of specified assets, such as real estate properties held in joint ventures.

• Other long-term liabilities. These items are presented in accounts payable, accrued expenses and other liabilities in CIGNA’s consolidated balance sheet. This table includes estimated payments for pension and other postretirement and postemployment benefit obligations, supplemental and deferred compensation plans, interest rate and foreign currency contracts and certain reinsurance liabilities. Estimated payments of $105 million for deferred compensation, non-qualified and International pension plans and other postretirement and postemployment benefit plans are expected to be paid in less than one year. CIGNA expects to make additional payments subsequent to 2006 for these obligations, however subsequent payments have been excluded from the table as their timing is based on plan assumptions which may materially differ from actual activities ( see Note 8 to the Financial Statements for further information on pension and other postretirement benefit obligations). CIGNA does not expect to make qualified domestic pension plan contributions in 2006, assuming no changes to minimum funding requirements. Current Congressional discussions to change minimum funding requirements may increase CIGNA’s required funding and result in additional contributions in 2006.

• Purchase obligations. As of December 31, 2005, purchase obligations consisted of estimated payments required under contractual arrangements for future services and investment commitments as follows (in millions):

Fixed maturities	$	13
Mortgage loans		360
Real estate		9
Limited liability entities (other long-term investments)		389
Total investment commitments		771
Future service commitments		263
Total purchase obligations	$	1,034

• Operating leases. For additional information, see Note 18 to the Financial Statements.

Share Repurchase

CIGNA has a share repurchase program, which was authorized by its Board of Directors. Decisions to repurchase shares depend on market conditions and alternative uses of capital.

CIGNA repurchased 15.4 million shares in 2005 for $1.6 billion, and 10.0 million shares in 2004 for $690 million. The total remaining share repurchase authorization as of February 21, 2006, was $650 million.

See also the table in Part II, Item 5 of CIGNA’s Form 10-K for more information on share repurchase activity for the year ended December 31, 2005.

44

MANAGEMENT’SDISCUSSIONANDANALYSIS

INVESTMENT ASSETS

Additional information regarding CIGNA’s investment assets and related accounting policies is included in Notes 2, 10, 11 and 14 to the Financial Statements and in CIGNA’s 2005 Form 10-K.

Fixed Maturities

Investments in fixed maturities (bonds) include publicly traded and privately placed debt securities, mortgage and other asset-backed securities and preferred stocks redeemable by the investor. Fixed maturities also include securities classified as trading.

The fair value of investments in fixed maturities as of December 31 was as follows:

(In millions)	2005		2004
Federal government and agency	$	914	$	834
State and local government		2,512		2,661
Foreign government		818		833
Corporate		9,489		9,961
Federal agency mortgage-backed		44		101
Other mortgage-backed		504		873
Other asset-backed		666		767
Total	$	14,947	$	16,030

Quality ratings. As of December 31, 2005, $14.1 billion, or 95%, of the fixed maturities in CIGNA’s investment portfolio were investment grade (Baa and above, or equivalent), and the remaining $0.8 billion were below investment grade. Most of the bonds that are below investment grade are rated at the higher end of the non-investment grade spectrum.

Private placement investments are generally less marketable than public bonds, but yields on these investments tend to be higher than yields on publicly offered debt with comparable credit risk. The fair value of private placement investments was $5.8 billion as of December 31, 2005, and $6.2 billion as of December 31, 2004. CIGNA maintains controls on its participation in private placement investments. In particular, CIGNA performs a credit analysis of each issuer, diversifies investments by industry and issuer and requires financial and other covenants that allow CIGNA to monitor issuers for deteriorating financial strength so CIGNA can take remedial actions, if warranted. See “Critical Accounting Estimates” on page 28 for additional information.

Because of the higher yields and the inherent risk associated with privately placed investments and below investment grade securities, gains or losses from such investments could significantly affect future results of operations. However, management does not expect such gains or losses to be material to CIGNA’s liquidity or financial condition.

Mortgage Loans

CIGNA’s mortgage loans are diversified by property type, location and borrower to reduce exposure to potential losses. Loans are secured by the related property and are generally made at less than 75% of the property’s value. CIGNA routinely monitors and evaluates the status of its mortgage loans by reviewing loan and property-related information, including cash flows, expiring leases, financial health of the borrower and major tenants, loan payment history, occupancy and room rates for hotels and, for commercial properties, significant new competition. CIGNA evaluates this information in light of current economic conditions as well as geographic and property type considerations.

Problem and Potential Problem Investments

“Problem” bonds and mortgage loans are either delinquent by 60 days or more or have been restructured as to terms (interest rate or maturity date). “Potential problem” bonds and mortgage loans are fully current, but management believes they have certain characteristics that increase the likelihood that they will become “problems.” For example, CIGNA considers mortgage loans to be potential problems if the borrower has requested restructuring, or principal or interest payments are past due by more than 30 but fewer than 60 days.

CIGNA recognizes interest income on “problem” bonds and mortgage loans only when payment is actually received because of the risk profile of the underlying investment. The amount that would have been reflected in net income if interest on non-accrual investments had been recognized in accordance with the original terms was $6 million in 2005, $13 million in 2004 and $8 million in 2003.

The following table shows problem and potential problem investments, net of valuation reserves and write-downs as of December 31:

(In millions)	2005		2004
Problem bonds	$	25	$	37
Potential problem bonds	$	45	$	44
Problem mortgage loans	$	10	$	65
Potential problem mortgage loans	$	47	$	72
Foreclosed real estate	$	—	$	10

Problem mortgages decreased in 2005 primarily as a result of loan payoffs. In addition, CIGNA sold the remaining foreclosed real estate in 2005.

Summary

The effect of investment asset write-downs and changes in valuation reserves on CIGNA’s net income are shown below. Other includes amounts attributable to future policy benefits for certain annuities and experience-rated pension policyholder contracts and a modified coinsurance arrangement associated with the sold retirement benefits business.

(In millions)	2005		2004		2003
CIGNA	$	14	$	16	$	103
Other	$	2	$	8	$	61

45

CIGNA’s portion of these losses is a component of realized investment results. The 2004 amounts attributable to policyholder contracts generally decreased because securities supporting experience-rated pension policyholder business were classified as trading beginning in October 2003 through April 1, 2004, when the retirement benefits business was sold.

The weakness in certain sectors of the economy and rising interest rates may cause additional investment losses. These investment losses could materially affect future results of operations, although CIGNA does not currently expect them to have a material effect on its liquidity or financial condition, or to result in a significant decline in the aggregate carrying value of its assets.

MARKET RISK

Financial Instruments

CIGNA’s assets and liabilities include financial instruments subject to the risk of potential losses from adverse changes in market rates and prices. CIGNA’s primary market risk exposures are:

• Interest-rate risk on fixed-rate, domestic, medium-term instruments. Changes in market interest rates affect the value of instruments that promise a fixed return.

• Foreign currency exchange rate risk of the U.S. dollar to the South Korean won, Taiwan dollar, Hong Kong dollar, Chilean peso, EURO, New Zealand dollar and British pound. An unfavorable change in exchange rates reduces the carrying value of net assets denominated in foreign currencies.

• Equity price risk for domestic equity securities and for reinsurance contracts that guarantee minimum death or income benefits resulting from unfavorable changes in variable annuity account values based on underlying mutual fund investments.See pages 37 and 43 for further discussion of guaranteed minimum death and income benefit contracts.

CIGNA’s Management of Market Risks

CIGNA predominantly relies on three techniques to manage its exposure to market risk:

• Investment/liability matching.CIGNA generally selects investment assets with characteristics (such as duration, yield, currency and liquidity) that correspond to the underlying characteristics of its related insurance and contractholder liabilities so that CIGNA can match the investments to its obligations. Shorter-term investments support generally shorter-term life and health liabilities. Medium-term, fixed-rate investments support interest-sensitive and health liabilities. Longer-term investments generally support products with longer pay out periods such as annuities and long-term disability liabilities.

• Use of local currencies for foreign operations.CIGNA generally conducts its international business through foreign operating entities that maintain assets and liabilities in local currencies. This substantially limits exchange rate risk to net assets denominated in foreign currencies.

• Use of derivatives.CIGNA generally uses derivative financial instruments to minimize certain market risks and enhance investment returns.

See Notes 2(C) and 10(G) to the Financial Statements for additional information about financial instruments, including derivative financial instruments.

Effect of Market Fluctuations on CIGNA

The examples that follow illustrate the effect of hypothetical changes in market rates or prices on the fair value of certain financial instruments including:

• hypothetical changes in market rates for interest and foreign currencies primarily for fixed maturities and mortgage loans; and

• hypothetical changes in market prices for equity exposures primarily for equity securities and contracts that guarantee minimum income benefits.

In addition, hypothetical effects of changes in equity indices, foreign exchange rates and interest rates are presented separately for futures contracts used in a program for guaranteed minimum death benefits and an embedded derivative under a modified coinsurance arrangement.

Management believes that actual results could differ materially from these examples because:

• these examples were developed using estimates and assumptions;

• changes in the fair values of all insurance-related assets and liabilities have been excluded because their primary risks are insurance rather than market risk;

• changes in the fair values of investments recorded using the equity method of accounting and liabilities for pension and other postretirement and postemployment benefit plans (and related assets) have been excluded, consistent with the disclosure requirements; and

• changes in the fair values of other significant assets and liabilities such as goodwill, deferred acquisition costs, taxes, and various accrued liabilities have been excluded; because they are not financial instruments, their primary risks are other than market risk.

46

MANAGEMENT’SDISCUSSIONANDANALYSIS

The effects of hypothetical changes in market rates or prices on the fair values of certain of CIGNA’s financial instruments, subject to the exclusions noted above (particularly insurance liabilities), would have been as follows as of December 31:

Market scenario for certain noninsurance financial instruments	Loss in fair value
	2005		2004
100 basis point increase in interest rates	$	1.1 billion	$	1.1 billion
10% strengthening in U.S. dollar to foreign currencies	$	150 million	$	130 million
10% decrease in market prices for equity exposures	$	30 million	$	20 million

The effect of a hypothetical increase in interest rates was determined by estimating the present value of future cash flows using various models, primarily duration modeling. The effect of a hypothetical strengthening of the U.S. dollar relative to the foreign currencies held by CIGNA was estimated to be 10% of the U.S. dollar equivalent fair value. The effect of a hypothetical decrease in the market prices of equity exposures was estimated based on a 10% decrease in the mutual fund values underlying guaranteed minimum income benefits reinsured by CIGNA and a 10% decrease in the value of equity securities held by CIGNA.

CIGNA uses futures contracts as part of a program to substantially reduce the effect of equity market changes on certain reinsurance contracts that guarantee minimum death benefits based on unfavorable changes in variable annuity account values. The hypothetical effect of a 10% increase in the S&P 500, Russell 2000, NASDAQ, TOPIX (Japanese), EUROSTOXX and FTSE (British) equity indices and a 10% weakening in the U.S. dollar to the Japanese yen, British pound and EURO would have been a decrease of approximately $100 million in the fair value of the futures contracts outstanding under this program as of December 31, 2005. A corresponding decrease in liabilities for guaranteed minimum death benefit contracts would result from the hypothetical 10% increase in these equity indices and 10% weakening in the U.S. dollar. See Note 6 to the Financial Statements for further discussion of this program and related guaranteed minimum death benefit contracts.

In addition, CIGNA reports the effects of embedded derivatives under a modified coinsurance arrangement that transfers to the buyer of the retirement benefits business certain unrealized changes in fair value due to interest rate and credit risks of the underlying invested assets, primarily fixed maturities and mortgage loans. As of December 31, 2005, a hypothetical 100 basis point decline in interest rates would decrease net income by approximately $15 million for the effects of these embedded derivatives. A hypothetical 200 basis point decline in interest rates would decrease net income by approximately $100 million for the effects of these embedded derivatives. Associated increases in the fair values of the underlying fixed maturities would be reflected in shareholders’ equity.

As noted above, CIGNA manages its exposure to market risk by matching investments to its obligations.

Stock Market Performance

The performance of equity markets can have a significant effect on CIGNA’s businesses, including on:

• risks and exposures associated with guaranteed minimum death benefit ( see page 37) and income benefit contracts ( see page 43); and

• minimum pension liabilities since equity securities comprise a significant portion of the assets of CIGNA’s employee pension plans.

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CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

CIGNA and its representatives may from time to time make written and oral forward-looking statements, including statements contained in press releases, in CIGNA’s filings with the Securities and Exchange Commission, in its reports to shareholders and in meetings with analysts and investors. Forward-looking statements may contain information about financial prospects, economic conditions, trends and other uncertainties. For example, this Management’s Discussion and Analysis includes forward-looking information regarding, among other things, CIGNA’s restructuring programs and activities, litigation and other legal matters, operational improvement in the health care operations, and the outlook for CIGNA’s full year 2006 results. You should not place undue reliance on these forward-looking statements. CIGNA cautions that actual results could differ materially from those that management expects, depending on the outcome of certain factors. Some factors that could cause actual results to differ materially from the forward-looking statements include:

1. increased medical costs that are higher than anticipated in establishing premium rates in CIGNA’s health care operations, including increased use and costs of medical services;

2. increased medical, administrative, technology or other costs resulting from new legislative and regulatory requirements imposed on CIGNA’s employee benefits businesses (see Employee benefits regulation on page 31 for more information);

3. challenges and risks associated with implementing the improvement initiatives in the health care operations, the organizational realignment and the reduction of overall CIGNA and health care cost structure, including that operational efficiencies and medical cost benefits do not emerge as expected and that medical membership does not grow as expected;

4. risks associated with the amount and timing of gain recognition on the sale of CIGNA’s retirement benefits business;

5. risks associated with pending and potential state and federal class action lawsuits, purported securities class action lawsuits, disputes regarding reinsurance arrangements, other litigation and regulatory actions challenging CIGNA’s businesses and the outcome of pending government proceedings and federal tax audits;

6. heightened competition, particularly price competition, which could reduce product margins and constrain growth in CIGNA’s businesses, primarily the health care business;

7. significant changes in interest rates;

8. downgrades in the financial strength ratings of CIGNA’s insurance subsidiaries, which could, among other things, adversely affect new sales and retention of current business;

9. limitations on the ability of CIGNA’s insurance subsidiaries to dividend capital to the parent company as a result of downgrades in the subsidiaries’ financial strength ratings, changes in statutory reserve or capital requirements or other financial constraints;

10. inability of the program adopted by CIGNA to substantially reduce equity market risks for reinsurance contracts that guarantee minimum death benefits under certain variable annuities (including possible market difficulties in entering into appropriate futures contracts and in matching such contracts to the underlying equity risk);

11. adjustments to the reserve assumptions and other considerations (including lapse, partial surrender, mortality, interest rates and volatility) used in estimating CIGNA’s liabilities for reinsurance contracts that guarantee minimum death benefits under certain variable annuities;

12. adjustments to the assumptions (including annuity election rates and reinsurance recoverables) used in estimating CIGNA’s assets and liabilities for reinsurance contracts that guarantee minimum income benefits under certain variable annuities;

13. significant stock market declines, which could, among other things, result in increased pension expenses in CIGNA’s pension plan in future periods and the recognition of additional pension obligations;

14. unfavorable claims experience related to workers’ compensation and personal accident exposures of the run-off reinsurance business, including losses attributable to the inability to recover claims from retrocessionaires;

15. significant deterioration in economic conditions, which could have an adverse effect on CIGNA’s operations and investments;

16. changes in federal laws, such as amendments to income tax laws, which could affect the taxation of employer provided benefits, and pension legislation, which could increase pension cost;

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MANAGEMENT’SDISCUSSIONANDANALYSIS

17. potential public health epidemics and bio-terrorist activity, which could, among other things, cause our covered medical and disability expenses, pharmacy costs and mortality experience to rise significantly, and cause operational disruption, depending on the severity of the event and number of individuals affected; and

18. risks associated with security or interruption of information systems, which could among other things cause operational disruption.

This list of important factors is not intended to be exhaustive. Other sections of the annual report on Form 10-K, including the “Risk Factors” section, and CIGNA’s quarterly reports on Form 10-Q, current reports on Form 8-K and other documents filed with the Securities and Exchange Commission include both expanded discussion of these factors and additional risk factors and uncertainties that could preclude CIGNA from realizing the forward-looking statements. While CIGNA may periodically update this discussion of risk factors, CIGNA does not undertake to update any forward-looking statement that may be made by or on behalf of CIGNA prior to its next required filing with the Securities and Exchange Commission.

49

CIGNA Corporation

Consolidated Statements of Income

(In millions, except per share amounts)
For the years ended December 31,	2005			2004			2003
Revenues
Premiums and fees	$	13,695		$	14,236		$	15,460
Net investment income		1,359			1,643			2,594
Other revenues		1,637			1,774			603
Realized investment gains (losses)		(7	)		523			151
Total revenues		16,684			18,176			18,808
Benefits and Expenses
Health Care medical claims expense		6,305			6,616			8,068
Other benefit expenses		3,341			3,648			4,152
Other operating expenses		5,245			5,537			5,740
Total benefits and expenses		14,891			15,801			17,960
Income from Continuing Operations before Income Taxes		1,793			2,375			848
Income taxes (benefits):
Current		123			870			96
Deferred		394			(72	)		168
Total taxes		517			798			264
Income from Continuing Operations		1,276			1,577			584
Income from Discontinued Operations, Net of Taxes		349			—			48
Income before Cumulative Effect of Accounting Change		1,625			1,577			632
Cumulative Effect of Accounting Change, Net of Taxes		—			(139	)		—
Net Income	$	1,625		$	1,438		$	632
Basic Earnings Per Share:
Income from continuing operations	$	10.02		$	11.55		$	4.18
Income from discontinued operations		2.74			—			0.34
Income before cumulative effect of accounting change		12.76			11.55			4.52
Cumulative effect of accounting change, net of taxes		—			(1.01	)		—
Net income	$	12.76		$	10.54		$	4.52
Diluted Earnings Per Share:
Income from continuing operations	$	9.83		$	11.44		$	4.16
Income from discontinued operations		2.69			—			0.34
Income before cumulative effect of accounting change		12.52			11.44			4.50
Cumulative effect of accounting change, net of taxes		—			(1.01	)		—
Net income	$	12.52		$	10.43		$	4.50

In 2004, CIGNA adopted the fair value method of accounting for stock options. Prior periods were restated. See Note 2 for additional information.

The accompanying Notes to the Financial Statements are an integral part of these statements.

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CIGNA Corporation

Consolidated Balance Sheets

(In millions, except per share amounts)
As of December 31,				2005						2004
Assets
Investments:
Fixed maturities, at fair value (amortized cost, $13,873; $14,711)				$	14,947					$	16,030
Equity securities, at fair value (cost, $113; $112)					135						139
Mortgage loans					3,934						3,529
Policy loans					1,337						1,594
Real estate					80						78
Other long-term investments					504						478
Short-term investments					439						71
Total investments					21,376						21,919
Cash and cash equivalents					1,709						2,519
Accrued investment income					282						285
Premiums, accounts and notes receivable					1,598						1,628
Reinsurance recoverables					7,018						14,595
Deferred policy acquisition costs					618						544
Property and equipment					638						777
Deferred income taxes					1,087						1,383
Goodwill					1,622						1,620
Other assets, including other intangibles					306						312
Separate account assets					8,609						35,477
Total assets				$	44,863					$	81,059
Liabilities
Contractholder deposit funds				$	9,676					$	17,168
Future policy benefits					8,626						8,904
Unpaid claims and claim expenses					4,281						4,327
Health Care medical claims payable					1,165						1,594
Unearned premiums and fees					515						522
Total insurance and contractholder liabilities					24,263						32,515
Accounts payable, accrued expenses and other liabilities					5,127						6,359
Short-term debt					100						—
Long-term debt					1,338						1,438
Nonrecourse obligations					66						67
Separate account liabilities					8,609						35,477
Total liabilities					39,503						75,856
Contingencies — Note 20
Shareholders’ Equity
Common stock (shares issued, 160; 160)					40						40
Additional paid-in capital					2,385						2,360
Net unrealized appreciation, fixed maturities	$	195					$	390
Net unrealized appreciation, equity securities		24						17
Net unrealized depreciation, derivatives		(14	)					(16	)
Net translation of foreign currencies		2						2
Minimum pension liability adjustment		(716	)					(729	)
Accumulated other comprehensive loss					(509	)					(336	)
Retained earnings					5,162						3,679
Less treasury stock, at cost					(1,718	)					(540	)
Total shareholders’ equity					5,360						5,203
Total liabilities and shareholders’ equity				$	44,863					$	81,059
Shareholders’ Equity Per Share				$	44.23					$	39.41

In 2004, CIGNA adopted the fair value method of accounting for stock options. Prior periods were restated. See Note 2 for additional information.

The accompanying Notes to the Financial Statements are an integral part of these statements.

51

CIGNA Corporation

Consolidated Statements of Comprehensive Income and Changes in Shareholders’ Equity

(In millions, except per share amounts)
For the years ended December 31,	2005						2004						2003
	Compre- hensive Income			Share- holders’ Equity			Compre- hensive Income			Share- holders’ Equity			Compre- hensive Income			Share- holders’ Equity
Common Stock, beginning of year				$	40					$	69					$	68
Retirement of treasury stock					—						(29	)					—
Effect of issuance of stock for employee benefit plans					—						—						1
Common Stock, end of year					40						40						69
Additional Paid-In Capital, beginning of year					2,360						3,647						3,525
Retirement of treasury stock					—						(1,400	)					—
Effect of issuance of stock for employee benefit plans					25						113						122
Additional Paid-In Capital, end of year					2,385						2,360						3,647
Accumulated Other Comprehensive Loss, beginning of year					(336	)					(54	)					(202	)
Net unrealized appreciation (depreciation), fixed maturities	$	(195	)		(195	)	$	(220	)		(220	)	$	98			98
Net unrealized appreciation (depreciation), equity securities		7			7			(12	)		(12	)		3			3
Net unrealized appreciation (depreciation) on securities		(188	)					(232	)					101
Net unrealized appreciation (depreciation), derivatives		2			2			(4	)		(4	)		(18	)		(18	)
Net translation of foreign currencies		—			—			16			16			18			18
Minimum pension liability adjustment		13			13			(62	)		(62	)		47			47
Other comprehensive income (loss)		(173	)					(282	)					148
Accumulated Other Comprehensive Loss, end of year					(509	)					(336	)					(54	)
Retained Earnings, beginning of year					3,679						9,502						9,055
Net income		1,625			1,625			1,438			1,438			632			632
Effects of issuance of stock for employee benefit plans					(129	)					—						—
Retirement of treasury stock					—						(7,204	)					—
Common dividends declared (per share: $0.10; $0.41; $1.32)					(13	)					(57	)					(185	)
Retained Earnings, end of year					5,162						3,679						9,502
Treasury Stock, beginning of year					(540	)					(8,557	)					(8,510	)
Repurchase of common stock					(1,621	)					(690	)					—
Retirement of treasury stock					—						8,633						—
Other, primarily issuance of treasury stock for employee benefit plans					443						74						(47	)
Treasury Stock, end of year					(1,718	)					(540	)					(8,557	)
Total Comprehensive Income and Shareholders’ Equity	$	1,452		$	5,360		$	1,156		$	5,203		$	780		$	4,607

In 2004, CIGNA adopted the fair value method of accounting for stock options. Prior periods were restated. See Note 2 for additional information.

The accompanying Notes to the Financial Statements are an integral part of these statements.

52

CIGNA Corporation

Consolidated Statements of Cash Flows

(In millions)
For the years ended December 31,	2005			2004			2003
Cash Flows from Operating Activities
Net income	$	1,625		$	1,438		$	632
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations		(349	)		—			(48	)
Cumulative effect of accounting change, net of taxes		—			139			—
Insurance liabilities		(580	)		(771	)		(71	)
Reinsurance recoverables		93			218			186
Deferred policy acquisition costs		(71	)		(99	)		(80	)
Premiums, accounts and notes receivable		179			358			62
Accounts payable, accrued expenses and other liabilities		(345	)		(437	)		140
Current income taxes		(265	)		179			341
Deferred income taxes		394			(72	)		168
Realized investment (gains) losses		7			(523	)		(151	)
Depreciation and amortization		221			230			246
Gains on sales of businesses (excluding discontinued operations)		(396	)		(472	)		(92	)
Proceeds from sales and maturities of securities supporting experience-rated pension policyholder contracts, net of purchases		—			1,049			867
Cash provided by operating activities of discontinued operations		222			—			—
Other, net		(17	)		213			215
Net cash provided by operating activities		718			1,450			2,415
Cash Flows from Investing Activities
Proceeds from investments sold:
Fixed maturities		3,028			3,095			7,984
Equity securities		12			154			292
Mortgage loans		612			386			886
Other (primarily short-term investments)		767			2,082			2,611
Investment maturities and repayments:
Fixed maturities		968			766			2,210
Mortgage loans		348			651			1,310
Investments purchased:
Fixed maturities		(3,108	)		(4,899	)		(11,271	)
Equity securities		(15	)		(13	)		(55	)
Mortgage loans		(1,364	)		(1,032	)		(2,067	)
Other (primarily short-term investments)		(910	)		(2,031	)		(2,820	)
Proceeds on sales of businesses, net		—			2,121			231
Property and equipment, net		(61	)		(38	)		(107	)
Other, net		(19	)		(24	)		—
Net cash provided by (used in) investing activities		258			1,218			(796	)
Cash Flows from Financing Activities
Deposits and interest credited to contractholder deposit funds		607			2,368			7,963
Withdrawals and benefit payments from contractholder deposit funds		(891	)		(3,107	)		(9,349	)
Change in cash overdraft position		(216	)		(14	)		(107	)
Net change in short-term debt		—			—			(3	)
Repayment of long-term debt		—			(76	)		(127	)
Repurchase of common stock		(1,618	)		(676	)		—
Issuance of common stock		346			64			6
Common dividends paid		(13	)		(100	)		(185	)
Net cash used in financing activities		(1,785	)		(1,541	)		(1,802	)
Effect of foreign currency rate changes on cash and cash equivalents		(1	)		—			—
Net increase (decrease) in cash and cash equivalents		(810	)		1,127			(183	)
Cash and cash equivalents, beginning of year		2,519			1,392			1,575
Cash and cash equivalents, end of year	$	1,709		$	2,519		$	1,392
Supplemental Disclosure of Cash Information:
Income taxes paid (received), net of refunds	$	135		$	687		$	(245	)
Interest paid	$	104		$	109		$	114

In 2004, CIGNA adopted the fair value method of accounting for stock options. Prior periods were restated. See Note 2 for additional information.

The accompanying Notes to the Financial Statements are an integral part of these statements.

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Notes to the Financial Statements

Note 1 – Description of Business

CIGNA Corporation’s subsidiaries provide health care and related benefits offered through the workplace. Key product lines include medical coverages and related specialty health care products, and services such as pharmacy, behavioral health, dental benefits, and disease management as well as group disability, life and accident insurance and disability and workers’ compensation case management and related services. In addition, CIGNA has an international operation that offers products (that are generally similar to those offered domestically) to businesses and individuals in selected markets, and has certain inactive businesses including a run-off retirement operation and a run-off reinsurance operation.

Note 2 – Summary of Significant Accounting Policies

A. Basis of Presentation

The consolidated financial statements include the accounts of CIGNA Corporation, its significant subsidiaries, and variable interest entities of which CIGNA is the primary beneficiary, which are referred to collectively as “CIGNA.” Intercompany transactions and accounts have been eliminated in consolidation.

These consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America. Amounts recorded in the financial statements reflect management’s estimates and assumptions about medical costs, investment valuation, interest rates and other factors. Significant estimates are discussed throughout these Notes; however, actual results could differ from those estimates.

Certain reclassifications have been made to prior years’ amounts to conform to the 2005 presentation including the elimination of certain intercompany purchases and sales of short-term investments in the investing activities section of the statement of cash flows. This reclassification had no net impact to the prior years’ net purchases and sales of short-term investments or the total cash flows from investing activities.

Discontinued Operations. Summarized financial data for discontinued operations (which includes certain tax benefits recognized in 2005 as disclosed in Note 16, the sale of Lovelace Health Systems Inc. and the gain on the sale of the Brazilian health care operations in 2003 as disclosed in Notes 3(D) and 3(E)) is outlined below. Unless otherwise indicated, amounts in these Notes exclude the effects of discontinued operations.

(In millions)	2005			2004		2003
Loss before income tax benefits	$	—		$	—	$	(3	)
Income tax benefits		(349	)		—		(1	)
Income (loss) from operations		349			—		(2	)
Gains on sales, net of taxes of $25		—			—		50
Income from discontinued operations, net of taxes	$	349		$	—	$	48

Variable interest entities. At December 31, CIGNA was the primary beneficiary of certain real estate joint ventures and entities that issue investment products secured by commercial loan pools. As a result, CIGNA consolidated assets and liabilities as follows:

(In millions)	2005				2004
	Real estate joint ventures1		Collateralized loan obligations2		Real estate joint ventures1		Collateralized loan obligations2
Assets	$	83	$	145	$	88	$	145
Variable rate debt (due in 2007)	$	14	$	—	$	14	$	—
Nonrecourse obligations		46		20		46		21
Other liabilities		9		14		7		13
Total liabilities and minority interest	$	69	$	34	$	67	$	34

¹ Assets are primarily real estate investments and cash and cash equivalents.

² Assets are primarily fixed maturities and other long-term investments.

B. Recent Accounting Pronouncements

Other-than-temporary impairment. In 2005, the staff of the Financial Accounting Standards Board (FASB) provided guidance on evaluating fixed maturities and equity securities for other-than-temporary impairment. Because this guidance is largely a summary of existing accounting principles generally accepted in the United States, CIGNA does not expect any material effect in accounting for fixed maturities and equity securities with other-than-temporary impairments at implementation on January 1, 2006. See Note 10 for a review of declines in fair value of fixed maturities and equity securities.

Deferred acquisition costs. In 2005, the American Institute of Certified Public Accountants issued a Statement of Position (SOP), “Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection With Modifications or Exchanges of Insurance Contracts,” for implementation in the first quarter of 2007. The SOP requires that deferred acquisition costs be expensed in full when the original contract is substantially changed by election or amendment of an existing contract feature or by replacement with a new contract. CIGNA expects to implement the SOP for contract changes beginning in the first quarter of 2007 with no material effects to the financial statements.

Stock compensation. On October 1, 2004, CIGNA elected to early adopt Statement of Financial Accounting Standards (SFAS) No. 123 (as revised in 2004 and referred to as SFAS 123R) “Share-Based Payment.” Prior period financial statements were restated to comply with SFAS 123R. This standard requires companies to recognize in net income an estimate of expense for stock awards and options over their vesting periods typically determined as of the date of grant.

54

NOTESTOTHEFINANCIALSTATEMENTS

Compensation expense for stock options is recorded over their vesting periods based on the estimated fair value of the stock options using an option-pricing model. Compensation expense continues to be recorded for restricted stock grants and deferred stock units over their vesting periods based on fair value, which is equal to the market price of CIGNA common stock on the date of grant.

In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107, which provided additional guidance to stock option expensing provisions under SFAS 123R. This guidance had no significant impact on CIGNA’s early adoption of SFAS 123R; however, CIGNA considered the additional guidance in establishing assumptions to value newly granted stock options under SFAS 123R. See Note 17 for a further discussion of CIGNA’s stock plans and the cost of stock compensation.

Long-duration contracts. Effective January 1, 2004, CIGNA implemented SOP 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts.”

The SOP addresses accounting for certain contractual features of investment-related and universal life contracts and for separate accounts. The cumulative effect of implementing the SOP in 2004 was a reduction to net income of $139 million, of which $136 million resulted from recording liabilities for certain experience-rated pension policyholder contracts based on the appreciated value of associated pools of investments, primarily mortgage loans and real estate. CIGNA recorded additional benefits expense of $17 million pre-tax ($11 million after-tax) in 2004 to reflect the post-implementation effect of this accounting requirement. The sale of CIGNA’s retirement benefits business generally resulted in the transfer to the buyer of the pool of investments and securities supporting experience-rated pension policyholder contracts discussed below. See Note 3(A) for information about this sale.

The remaining cumulative effect resulted from implementing the SOP’s requirements applicable to universal life contracts. CIGNA’s accounting for reinsurance of guaranteed minimum death benefit contracts and guaranteed minimum income benefit contracts was not affected by the provisions of the SOP.

Derivative instruments. In April 2003, the FASB issued an amendment and finalized an implementation issue related to SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133). Implementation of the SFAS 133 amendment and the implementation issue in the third quarter of 2003 had no material effect on CIGNA’s financial statements.

As permitted by the implementation issue and the Statement of Position (SOP) described above, CIGNA reclassified securities supporting experience-rated pension policyholder contracts associated with its retirement benefits business to trading in the fourth quarter of 2003, and reported these securities in a separate balance sheet caption until the sale of the retirement benefits business on April 1, 2004. Under the experience-rating process, unrealized gains and losses recognized for these securities accrued to policyholders. Accordingly, the reclassification did not affect CIGNA’s net income.

Additional information regarding SFAS 133 and the nature and accounting treatment of CIGNA’s derivative financial instruments is included in Note 10(G).

Other postretirement benefits.See Note 8 for a discussion of the effects of the Medicare Prescription Drug Improvement and Modernization Act of 2003.

Certain financial instruments. In 2006, the FASB issued an amendment related to SFAS No. 133, “Accounting for Derivatives and Hedging Activities,” for implementation in the first quarter of 2007. The amendment clarifies when certain financial instruments and features of financial instruments must be treated as derivatives and reported on the balance sheet at fair value with changes in fair value reported in net income. CIGNA will implement the amendment beginning with financial instruments acquired in the first quarter of 2007, with no material effects to the financial statements expected at adoption. However, this amendment may affect future income recognition for certain financial instruments if additional derivatives are identified because any changes in their fair values will be recognized in net income in each period.

C. Financial Instruments

In the normal course of business, CIGNA enters into transactions involving various types of financial instruments. These financial instruments may include:

• various investments (such as fixed maturities, mortgage loans and equity securities);

• short- and long-term debt; and

• off-balance-sheet instruments (such as investment and certain loan commitments and financial guarantees).

These instruments may change in value due to interest rate and market fluctuations, and most also have credit risk. CIGNA evaluates and monitors each financial instrument individually and, when management considers it appropriate, uses a derivative instrument or obtains collateral or another form of security to minimize risk of loss.

55

Most financial instruments that are subject to fair value disclosure requirements are carried in the financial statements at amounts that approximate fair value. The following table shows the fair values and carrying values of CIGNA’s financial instruments not carried at fair value, at the end of 2005 and 2004:

(In millions)	2005				2004
	Fair Value		Carrying Value		Fair Value		Carrying Value
Mortgage loans	$	3,949	$	3,934	$	3,748	$	3,529
Contractholder deposit funds, excluding universal life products	$	1,937	$	1,953	$	9,822	$	9,821
Long-term debt	$	1,482	$	1,338	$	1,614	$	1,438

Fair values of off-balance-sheet financial instruments were not material.

Fair values of financial instruments are based on quoted market prices when available. When market prices are not available, management estimates fair value based on discounted cash flow analyses, which use current interest rates for similar financial instruments with comparable terms and credit quality. Management estimates the fair value of the liabilities for contractholder deposit funds using the amount payable on demand and, for those deposit funds not payable on demand, using discounted cash flow analyses. In many cases, the estimated fair value of a financial instrument may differ significantly from the amount that could be realized if the instrument were sold immediately.

D. Investments

CIGNA’s accounting policies for investment assets are discussed below:

Fixed maturities and equity securities. Fixed maturities include bonds, mortgage- and other asset-backed securities and preferred stocks redeemable by the investor. Equity securities include common stocks and preferred stocks that are non-redeemable or redeemable only by the issuer. These investments are primarily classified as available for sale and are carried at fair value with changes in fair value recorded in shareholders’ equity. Fixed maturities and equity securities are considered impaired, and their cost basis is written down to fair value through earnings, when management expects a decline in value to persist (i.e. the decline is “other than temporary”). Fixed maturities include certain securities classified as trading and carried at fair value with changes in fair value reported in other revenues.

Mortgage loans. Mortgage loans are carried at unpaid principal balances. Impaired loans are carried at the lower of unpaid principal or fair value of the underlying collateral. CIGNA estimates the fair value of the underlying collateral primarily using internal appraisals. Mortgage loans are considered impaired when it is probable that CIGNA will not collect amounts due according to the terms of the loan agreement.

Policy loans. Policy loans are carried at unpaid principal balances.

Real estate. Investment real estate can be “held and used” or “held for sale”. CIGNA accounts for real estate as follows:

• Real estate “held and used” is expected to be held longer than one year and includes real estate acquired through the foreclosure of mortgage loans. CIGNA carries real estate held and used at depreciated cost less any write-downs to fair value due to impairment and assesses impairment when cash flows indicate that the carrying value may not be recoverable. Depreciation is generally calculated using the straight-line method based on the estimated useful life of the particular real estate asset.

• Real estate is “held for sale” when a buyer’s investigation is completed, a deposit has been received and the sale is expected to be completed within the next year. Real estate held for sale is carried at the lower of carrying value or current fair value, less estimated costs to sell, and is not depreciated. Valuation reserves reflect any changes in fair value.

• CIGNA uses several methods to determine the fair value of real estate, but relies primarily on discounted cash flow analyses and, in some cases, third party appraisals.

At the time of foreclosure, properties are reclassified from mortgage loans to real estate. CIGNA rehabilitates, re-leases and sells foreclosed properties. This process usually takes from 2 to 4 years unless management considers a near-term sale preferable.

Other long-term investments. Other long-term investments, which include investments in unconsolidated entities in which CIGNA has significant influence, are carried at cost plus CIGNA’s ownership percentage of reported income or loss. These entities include certain limited partnerships and limited liability companies holding real estate, securities or loans. Also included in other long-term investments are loans to unconsolidated real estate entities secured by the equity interests of these real estate entities. These loans are carried at unpaid principal balances.

Short-term investments. CIGNA classifies short-term investments as available for sale and carries them at fair value, which approximates cost.

Derivative financial instruments.Note 10(G) discusses CIGNA’s accounting policies for derivative financial instruments.

Net investment income. When interest and principal payments on investments are current, CIGNA recognizes interest income when it is earned. CIGNA stops recognizing interest income when interest payments are delinquent or when certain terms (interest rate or maturity date) of the investment have been restructured. Net investment income on these investments is only recognized when interest payments are actually received.

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NOTESTOTHEFINANCIALSTATEMENTS

Investment gains and losses. Investment gains and losses result from sales, investment asset write-downs, changes in fair value of certain derivatives and changes in valuation reserves based on specifically identified assets. Realized investment gains and losses are net of amounts required to adjust future policy benefits for certain annuities and amounts that were attributable to experience-rated pension policyholder contracts prior to the reclassification of securities in late 2003. Unrealized gains and losses on fixed maturities and equity securities carried at fair value and certain derivatives are included in accumulated other comprehensive income (loss), net of:

• amounts required to adjust future policy benefits;

• amounts required to adjust other liabilities under a modified coinsurance arrangement ( See Note 3A for additional information); and

• deferred income taxes.

E. Cash and Cash Equivalents

Cash equivalents consist of short-term investments that will mature in three months or less from the time of purchase.

F. Reinsurance Recoverables

Reinsurance recoverables are estimates of amounts that CIGNA will receive from reinsurers and are recorded net of amounts management believes will not be received.

G. Deferred Policy Acquisition Costs

Acquisition costs consist of sales compensation, commissions, premium taxes and other costs that CIGNA incurs in connection with new and renewal business. Depending on the product line they relate to, CIGNA records acquisition costs in different ways. Acquisition costs for:

• Universal life products are deferred and amortized in proportion to the present value of total estimated gross profits over the expected lives of the contracts.

• Annuity and other individual life insurance (primarily international) and group health indemnity products are deferred and amortized, generally in proportion to the ratio of periodic revenue to the estimated total revenues over the contract periods.

• Other products are expensed as incurred.

Management estimates the present value of future revenues less expected payments for products for which policy acquisition costs are deferred. If that estimate is less than the deferred costs, CIGNA reduces deferred policy acquisition costs and records an expense. There are no deferred policy acquisition costs attributable to the run-off retirement or run-off reinsurance operations. CIGNA recorded in other operating expenses amortization for policy acquisition costs of $149 million in 2005, $154 million in 2004 and $156 million in 2003.

H. Property and Equipment

Property and equipment is carried at cost less accumulated depreciation. When applicable, cost includes interest, real estate taxes and other costs incurred during construction. Also included in this category is internal-use software that is acquired, developed or modified, solely to meet CIGNA’s internal needs, with no plan to market externally. Costs directly related to obtaining, developing or upgrading internal-use software are capitalized. Unamortized internal-use software costs were $306 million at December 31, 2005, and $387 million at December 31, 2004.

Most of the unamortized internal-use software costs relate to CIGNA’s health care business, which has converted to systems and processes designed in recent years to support business growth and service to customers. CIGNA has incurred total costs for this project of approximately $1.1 billion from 1999 through 2005, of which $453 million has been capitalized and $657 million has been expensed as incurred.

Capitalized costs for this multi-year project are amortized over a 7.5 year period. The amounts of amortization will increase as additional members are migrated to the new systems. Accumulated amortization of capitalized amounts for this project was $153 million at December 31, 2005, and $87 million at December 31, 2004.

For other capitalized costs, CIGNA calculates depreciation and amortization principally using the straight-line method based on the estimated useful life of each asset.

Accumulated depreciation and amortization on property and equipment was $1.4 billion at December 31, 2005 and $1.3 billion at December 31, 2004.

I. Goodwill

Goodwill represents the excess of the cost of businesses acquired over the fair value of their net assets. CIGNA evaluates goodwill for impairment annually based on discounted cash flow analyses and writes it down through earnings if impaired. Substantially all goodwill relates to the Health Care segment.

J. Other Assets, including Other Intangibles

Other assets consist primarily of various insurance-related assets. CIGNA’s other intangible assets include purchased customer lists and provider networks. CIGNA amortizes other intangibles on a straight-line basis over periods from 3 to 10 years. Management revises amortization periods if it believes there has been a change in the length of time that an intangible asset will continue to have value. In 2003, CIGNA recorded a $16 million pre-tax charge ($10 million after-tax) in other operating expenses in the Health Care segment for the impairment of provider contracts that had been terminated or substantially amended. Other assets also include the gain position of certain derivatives ( see Note 10(G)).

57

The gross carrying value of CIGNA’s other intangible assets was $215 million at December 31, 2005 and $198 million at December 31, 2004. The accumulated amortization was $181 million at December 31, 2005 and $142 million at December 31, 2004.

K. Separate Account Assets and Liabilities

Separate account assets and liabilities are contractholder funds maintained in accounts with specific investment objectives. The assets of these accounts are legally segregated and are not subject to claims that arise out of any of CIGNA’s other businesses. These accounts are carried at fair value. The investment income, gains and losses of these accounts generally accrue to the contractholders and are not included in CIGNA’s revenues and expenses. Fees earned for asset management services are reported in premiums and fees.

L. Contractholder Deposit Funds

Liabilities for contractholder deposit funds include deposits received from customers for investment-related and universal life products and investment earnings on their fund balances. These liabilities are adjusted to reflect administrative charges, policyholder share of changes in fair value of related investment assets and, for universal life fund balances, mortality charges.

M. Future Policy Benefits

Future policy benefits are liabilities for the present value of estimated future obligations under traditional life and health insurance policies and annuity products currently in force. These obligations are estimated using actuarial methods and primarily consist of reserves for annuity contracts, life insurance benefits, and guaranteed minimum death benefit contracts.

Obligations for annuities represent specified periodic benefits to be paid to an individual or groups of individuals over their remaining lives. Obligations for life insurance policies represent benefits to be paid to policyholders, net of future premiums to be received. Management estimates these obligations based on assumptions as to premiums, interest rates, mortality and surrenders, allowing for adverse deviation. Mortality and surrender assumptions are based on either CIGNA’s own experience or actuarial tables. Interest rate assumptions are based on management’s judgment considering CIGNA’s experience and future expectations, and range from 1.25% to 11.70%. Obligations for certain annuities include adjustments for amounts that would be required had related investments been sold at their current fair values.

Certain reinsurance contracts guarantee a minimum death benefit under variable annuities issued by other insurance companies. These obligations represent the guaranteed death benefit in excess of the contractholder’s account values (based on underlying equity and bond mutual fund investments). These obligations are estimated based on assumptions regarding lapse, partial surrenders, mortality, interest rates (mean investment performance and discount rate), market volatility and other considerations as well as investment returns and premiums, consistent with the requirements of generally accepted accounting principles when a premium deficiency exists. Lapse, partial surrenders, mortality, interest rates and volatility are based on management’s judgment considering CIGNA’s experience and future expectations. The results of futures and forward contracts are reflected in the liability calculation as a component of investment returns. See also Note 6 for additional information.

N. Unpaid Claims and Claims Expenses

Liabilities for unpaid claims and claim expenses are estimates of payments to be made under insurance coverages, (primarily long-term disability, workers’ compensation and life and health), for reported claims and for losses incurred but not yet reported. Liabilities for disability insurance policies are based upon benefit payments to be made to policyholders, net of future premiums to be received. Reserves for claims incurred but not yet reported are developed using actuarial methods and assumptions which consider contractual requirements, claim incidence rates, claim resolution rates and other relevant factors. Claim resolution rate assumptions are based on CIGNA’s own experience, typically vary by year of claim incurral and may include a provision for adverse deviation. CIGNA discounts certain claim liabilities related to group long-term disability and workers’ compensation. Interest rate assumptions are based on projected investment returns for the asset portfolios that support these liabilities and range from 3% to 6.5%. When estimates change, CIGNA records the adjustment in benefits and expenses in the period in which in the change in estimate is identified.

O. Health Care Medical Claims Payable

Liabilities for Health Care medical claims are estimates of payments to be made under insurance coverages for reported claims and for losses incurred but not yet reported. Management develops these estimates using actuarial methods based upon historical data for payment patterns, cost trends, product mix, seasonality, utilization of health care services and other relevant factors. Since CIGNA’s reserve process is primarily based upon historical data, management may adjust for known or anticipated operational and environmental changes and trends.

The estimation process for determining these liabilities inherently relies on assumptions and estimates that are subject to change. Each period when new information becomes available, CIGNA records the adjustment in Health Care medical claims expenses in the period in which the change in estimate is identified, although the adjustment may relate to a prior period. Such adjustments to prior period reserves (prior year claim development) may be favorable (claims ultimately settled for less than originally estimated) or unfavorable (claims settled for more than originally estimated).

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P. Unearned Premiums and Fees

Premiums for life, accident and health insurance are recognized as revenue on a pro rata basis over the contract period. Fees for mortality and contract administration of universal life products are recognized ratably over the coverage period.

The unrecognized portion of these amounts is recorded as unearned premiums and fees.

Q. Accounts Payable, Accrued Expenses and Other Liabilities

Accounts payable, accrued expenses and other liabilities consist principally of pension, postretirement and postemployment benefits and various insurance-related liabilities, including amounts related to reinsurance contracts and insurance-related assessments that management can reasonably estimate. Accounts payable, accrued expenses and other liabilities also include the loss position of certain derivatives ( see Note 10(G)).

R. Translation of Foreign Currencies

CIGNA generally conducts its international business through foreign operating entities that maintain assets and liabilities in local currencies, which are generally their functional currencies. CIGNA uses exchange rates as of the balance sheet date to translate assets and liabilities into U.S. dollars. Translation gains or losses on functional currencies, net of applicable taxes, are recorded in accumulated other comprehensive income (loss). CIGNA uses average exchange rates during the year to translate revenues and expenses into U.S. dollars.

S. Premiums and Fees, Revenues and Related Expenses

Premiums for life, accident and health insurance and managed care coverages are recognized as revenue on a pro rata basis over the contract period. Benefits and expenses are recognized when incurred.

Premiums for individual life insurance and individual and group annuity products, excluding universal life and investment-related products, are recognized as revenue when due. Benefits and expenses are matched with premiums.

Revenue for investment-related products is recognized as follows:

• Net investment income on assets supporting investment-related products is recognized as earned.

• Fair value changes of securities supporting experience-rated pension policyholder contracts were recognized in other revenues.

• Contract fees, which are based upon related administrative expenses, are assessed against the customer’s fund balance ratably over the contract year and recognized as earned in premiums and fees.

Benefits and expenses for investment-related products consist primarily of income credited to policyholders in accordance with contract provisions and policyholder share of other revenues.

Revenue for universal life products is recognized as follows:

• Net investment income on assets supporting universal life products is recognized as earned.

• Fees for mortality are recognized ratably over the coverage period.

• Administration fees are recognized as services are provided.

• Surrender charges are recognized as earned.

Benefits and expenses for universal life products consist of benefit claims in excess of policyholder account balances. Expenses are recognized when claims are filed, and income is credited in accordance with contract provisions.

Contract fees and expenses for administrative services only programs and pharmacy programs and services are recognized as services are provided.

T. Participating Business

CIGNA’s participating life insurance policies entitle policyholders to earn dividends that represent a portion of the earnings of CIGNA’s life insurance subsidiaries. Participating insurance accounted for approximately 2% of CIGNA’s total life insurance in force at the end of 2005, 2004 and 2003.

U. Income Taxes

CIGNA and its domestic subsidiaries file a consolidated United States federal income tax return. CIGNA’s foreign subsidiaries file tax returns in accordance with applicable foreign law. U.S. taxation of foreign affiliates may differ in timing and amount from taxation under foreign laws. Reportable amounts, including credits for foreign tax paid by those affiliates, are reflected in the U.S. tax return of the affiliates’ domestic parent.

CIGNA generally recognizes deferred income taxes when assets and liabilities have different values for financial statement and tax reporting purposes. Note 16 contains detailed information about CIGNA’s income taxes.

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Note 3 – Acquisitions and Dispositions

CIGNA may from time to time acquire or dispose of assets, subsidiaries or lines of business. Significant transactions are described below.

A. Sale of Retirement Benefits Business

On April 1, 2004, CIGNA sold its retirement benefits business, excluding the corporate life insurance business, for cash proceeds of $2.1 billion. The sale resulted in an after-tax gain of $804 million, of which $267 million after-tax was recognized immediately. Of this amount, $259 million after-tax was recorded in realized investment gains and $8 million after-tax was recorded in other revenues. The sales agreement provides for post closing adjustments, however, any future adjustments are not expected to be material to CIGNA’s consolidated results of operations, liquidity or financial condition.

As this transaction was primarily in the form of a reinsurance arrangement under which CIGNA retains the contractual obligation to pay these liabilities, $537 million of the after-tax gain was deferred. Subsequent to the original reinsurance transaction, the buyer of the retirement benefits business has entered into agreements with most of the insured parties relieving CIGNA of any remaining contractual obligation to those parties (novation). Additional such agreements are expected.

The deferred gain is amortized at the rate that earnings from the sold business would have been expected to emerge (primarily 15 years on a declining basis) or until CIGNA is relieved of any remaining contractual obligation. At the time of novation, CIGNA accelerates amortization of a portion of the deferred gain and also reduces the associated contractholder deposit funds, future policy benefits, reinsurance recoverables and separate account balances. In 2005, liabilities decreased by $33.3 billion as a result of novation activity attributable to the sold retirement benefits business. This decrease consisted of $7.0 billion of contractholder deposit funds and future policy benefits as well as $26.3 billion of separate account liabilities. Corresponding decreases in assets of $33.3 billion consisted of $7.0 billion of reinsurance recoverables and $26.3 billion of separate account assets. See Note 7 to the Financial Statements for additional information on reinsurance recoverables associated with the sale of the retirement benefits business.

CIGNA recognized deferred gain amortization in other revenues in the Run-off Retirement segment as follows:

(In millions)	Pre-Tax		After-Tax
2005
Accelerated deferred gain amortization	$	322	$	204
Normal deferred gain amortization	$	24	$	16
2004
Accelerated deferred gain amortization	$	342	$	223
Normal deferred gain amortization	$	80	$	52

The remaining pre-tax deferred gain as of December 31, 2005 was $66 million.

On December 1, 2004, CIGNA transferred $1.2 billion of invested assets and $2.6 billion of separate account assets supporting modified coinsurance arrangements to the buyer and converted these arrangements to indemnity coinsurance. This transfer resulted in the recognition of realized investment gains of $25 million after-tax and a corresponding loss on reinsurance of $25 million after-tax in other revenues.

On January 1, 2005, CIGNA transferred the assets of substantially all of the separate accounts related to the retirement benefits business to the buyer. Since the arrangement is primarily modified coinsurance, CIGNA received units of the buyer’s separate accounts and carries those units as separate account assets on its balance sheet for the business not directly assumed by the buyer. At December 31, 2005, there were approximately $4.8 billion of separate account assets and liabilities associated with the business not yet directly assumed by the buyer.

At December 31, 2005, CIGNA had approximately $1.9 billion of invested assets, primarily fixed maturities and mortgage loans, supporting a modified coinsurance arrangement relating to the single premium annuity business sold to the buyer. These invested assets are held in a business trust established by CIGNA. CIGNA pays or receives cash quarterly to settle the results of the reinsured business, including the investment results of the assets underlying the modified coinsurance arrangement.

As a result of this modified coinsurance arrangement, CIGNA has an embedded derivative that transfers to the buyer certain unrealized changes in fair value due to interest rate and credit risks of these assets. CIGNA records these effects in other liabilities and other revenues. To date CIGNA has not recorded any charge or credit for the embedded derivative. A decrease in interest rates could result in a charge to CIGNA’s consolidated net income until the modified coinsurance arrangement ends, which is expected in 2006.

The buyer has given notice that it intends to terminate its reinsurance of the single premium annuity business effective April 1, 2006. Discussions between the two parties continue. If the buyer terminates its reinsurance, CIGNA would retain the single premium annuity business, including the trust assets and the insurance liabilities. CIGNA does not expect the ultimate outcome of these discussions to have a material adverse effect on its consolidated results of operation, liquidity or financial condition.

B. Sale of Investment Advisory Businesses

In the fourth quarter of 2004, CIGNA sold a significant portion of its investment advisory businesses and recorded an after-tax gain of $12 million in Other Operations.

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C. Sale of Japanese Pension Operations

In September 2003, CIGNA sold its interest in a Japanese pension operation for cash proceeds of $18 million and recognized an after-tax gain of $5 million in the International segment. The gain was reported in continuing operations since this operation was accounted for under the equity method of accounting.

D. Sale of Lovelace Health Systems, Inc.

In January 2003, CIGNA sold the operations of Lovelace, an integrated health care system, for cash proceeds of $209 million and recognized an after-tax gain of $32 million, which was reported in discontinued operations.

E. Sale of Brazilian Health Care Operations

In January 2003, CIGNA sold its Brazilian health care operations. The sale generated an after-tax gain of $18 million, primarily as a result of the disposition of the net liabilities associated with these operations. The gain was reported in discontinued operations.

F. Sale of Individual Life Insurance and Annuity Business

In 1998, CIGNA sold its individual life insurance and annuity business for cash proceeds of $1.4 billion. The sale generated an after-tax gain of approximately $800 million, the majority of which was deferred and is recognized at the rate that earnings from the sold business would have been expected to emerge (primarily over 15 years on a declining basis). This gain reflects an increase in 2003 of $23 million after-tax resulting from an account review. CIGNA recognized deferred gains of $32 million after-tax in 2005, $37 million after-tax in 2004, and $54 million after-tax in 2003 (which included $13 million as a result of the 2003 review). The remaining deferred gain as of December 31, 2005, was $183 million after-tax.

Note 4 – Earnings Per Share

Basic and diluted earnings per share (EPS) for income from continuing operations are computed as follows for the years ended December 31:

(In millions, except per share amounts)	Basic		Effect of Dilution			Diluted
2005
Income from continuing operations	$	1,276	$	—		$	1,276
Shares (in thousands):
Weighted average		127,348		—			127,348
Options and restricted stock grants				2,458			2,458
Total shares		127,348		2,458			129,806
EPS	$	10.02	$	(0.19	)	$	9.83
2004
Income from continuing operations	$	1,577	$	—		$	1,577
Shares (in thousands):
Weighted average		136,493		—			136,493
Options and restricted stock grants				1,391			1,391
Total shares		136,493		1,391			137,884
EPS	$	11.55	$	(0.11	)	$	11.44
2003
Income from continuing operations	$	584	$	—		$	584
Shares (in thousands):
Weighted average		139,747		—			139,747
Options and restricted stock grants				663			663
Total shares		139,747		663			140,410
EPS	$	4.18	$	(0.02	)	$	4.16

The following outstanding employee stock options as of December 31, were not included in the computation of diluted earnings per share because their effect would have increased diluted earnings per share (antidilutive) as the estimated proceeds from their exercise was greater than the average share price of CIGNA’s common shares for the period.

(In millions)	2005	2004	2003
Antidilutive options	2.6	11.8	15.3

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Note 5 – Health Care Medical Claims Payable

Activity in medical claims payable was as follows for the years ended December 31:

(In millions)	2005			2004			2003
Balance at January 1,	$	1,594		$	2,173		$	2,067
Less: Reinsurance and other amounts recoverable		497			719			688
Balance at January 1, net		1,097			1,454			1,379
Incurred related to:
Current year		6,631			6,889			8,237
Prior years		(326	)		(273	)		(169	)
Total incurred		6,305			6,616			8,068
Paid related to:
Current year		5,844			5,914			6,871
Prior years		735			1,059			1,122
Total paid		6,579			6,973			7,993
Balance at December 31, net		823			1,097			1,454
Add: Reinsurance and other amounts recoverable		342			497			719
Balance at December 31,	$	1,165		$	1,594		$	2,173

Medical claims payable are estimated using actuarial models as described in Note 2(O). The estimation process for determining these liabilities inherently results in adjustments each year for claims incurred (but not paid) in preceding years. Negative amounts reported for claims incurred related to prior years result from claims ultimately being settled for amounts less than originally estimated (favorable development). Positive amounts reported for claims incurred related to prior years result from claims ultimately being settled for amounts greater than originally estimated (unfavorable development).

Reinsurance and other amounts recoverable reflect amounts due from policyholders to cover incurred but not reported and pended claims for minimum premium products and certain administrative services only business where the right of offset does not exist.

As presented above, amounts incurred related to prior years do not directly correspond to an increase or decrease in pre-tax income in the period recognized. CIGNA’s reserving practice is to consistently recognize the actuarial best estimate of the ultimate liability within a level of confidence required by actuarial standards. Thus, only when the release of a prior year reserve is not offset with the same level of conservatism in estimating the current year reserve will a net reduction in medical claim expense for the current year occur.

In addition, due to the nature of CIGNA’s retrospectively experience-rated business, only adjustments to medical costs incurred associated with accounts in deficit affect net income. In accordance with contractual agreements, amounts incurred related to accounts in surplus accrue directly to the policyholders and are offset by equivalent revenue adjustments.

As a result, the gross amount of incurred claims related to prior years, when netted for the factors discussed above, favorably impacted CIGNA’s net income (after-tax) by $137 million in 2005, $106 million in 2004, and $33 million in 2003.

Note 6 – Guaranteed Minimum Death Benefit Contracts

CIGNA’s reinsurance operations, which were discontinued in 2000 and are now an inactive business in run-off mode, reinsured a guaranteed minimum death benefit 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 majority of CIGNA’s exposure arises under annuities that guarantee that the benefit received at death will be no less than the highest historical account value of the related mutual fund investments on a contractholder’s anniversary date. Under this type of death benefit, CIGNA is liable to the extent the highest historical anniversary account value exceeds the fair value of the related mutual fund investments at the time of a contractholder’s death. Other annuity designs that CIGNA reinsured guarantee that the benefit received at death will be:

• the contractholder’s account value as of the last anniversary date (anniversary reset); or

• no less than net deposits paid into the contract accumulated at a specified rate or net deposits paid into the contract.

In periods of declining equity markets and in periods of flat equity markets following a decline, CIGNA’s liabilities for these guaranteed minimum death benefits increase. Similarly, in periods of rising equity markets, CIGNA’s liabilities for these guaranteed minimum death benefits decrease. Beginning in 2002 with the implementation of the program to reduce equity market exposures discussed below, the favorable and unfavorable effects of the equity market on the reserve are largely offset in other revenues as a result of the related futures gains or losses.

Activity in future policy benefit reserves for these guaranteed minimum death benefit contracts was as follows:

(In millions)	2005		2004			2003
Balance at January 1	$	988	$	1,182		$	1,427
Less: Reinsurance recoverable		30		52			66
Add: Incurred benefits		105		(28	)		53
Less: Paid benefits		136		144			284
Add: Reinsurance recoverable		24		30			52
Balance at December 31	$	951	$	988		$	1,182

Benefits paid and incurred are net of ceded amounts. Incurred benefits reflect the favorable or unfavorable impact of a rising or falling equity market on the liability. As discussed below,

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losses or gains have been recorded in other revenues as a result of the program to reduce equity market exposures. In addition, incurred benefits in 2005 and 2003 reflect the impact of reserve actions also discussed below.

Management estimates reserves for variable annuity death benefit exposures based on assumptions regarding lapse, partial surrender, mortality, interest rates (mean investment performance and discount rate), volatility and other considerations. These estimates are based on CIGNA’s experience and future expectations. CIGNA monitors actual experience to update these reserve estimates as necessary.

Lapse refers to the full surrender of an annuity prior to a contractholder’s death. Partial surrender refers to the fact that most contractholders have the ability to withdraw substantially all of their mutual fund investments while retaining the death benefit coverage in effect at the time of the withdrawal. Mean investment performance and fluctuations refer to the market return and market volatility respectively that affects the costs of the program adopted by CIGNA to reduce equity market risks associated with these liabilities.

CIGNA regularly evaluates the assumptions used in establishing reserves and changes its estimates if actual experience or other evidence suggests that earlier assumptions should be revised. If actual experience differs from the assumptions and other considerations used in estimating these reserves, the resulting change could have a material adverse effect on CIGNA’s consolidated results of operations, and in certain situations, could have a material adverse effect on CIGNA’s financial condition. See page 26 for the effects of hypothetical changes in those assumptions.

The following provides information about CIGNA’s reserving methodology and assumptions for guaranteed minimum death benefits for December 31, 2005:

• The reserves represent estimates of the present value of net amounts expected to be paid, less the present value of net future premiums. Included in net amounts expected to be paid is the excess of the guaranteed death benefits over the values of the contractholders’ accounts (based on underlying equity and bond mutual fund investments).

• The reserves include an estimate for partial surrenders that essentially lock in the death benefit for a particular policy based on annual election rates that vary from 0-23% depending on the net amount at risk for each policy and whether surrender charges apply.

• The mean investment performance assumption is 5% considering CIGNA’s program to reduce equity market exposures using futures contracts (described below).

• The volatility assumption is 15-30%, varying by equity fund type; 3-8%, varying by bond fund type; and 1% for money market funds.

• The discount rate is 5.75%.

• The mortality assumption is 70-75% of the 1994 Group Annuity Mortality table, with 1% annual improvement beginning January 1, 2000.

• The lapse rate assumption is 0-15%, depending on contract type, policy duration and the ratio of the net amount at risk to account value.

The table below presents the account value, net amount at risk and average attained age of underlying contractholders for guarantees in the event of death, by type of benefit as of December 31. The net amount at risk is the death benefit coverage in force or the amount that CIGNA would have to pay if all contractholders had died as of the specified date, and represents the excess of the guaranteed benefit amount over the fair value of the underlying mutual fund investments.

(Dollars in millions)	2005		2004
Highest anniversary annuity value
Account value	$	33,370	$	38,249
Net amount at risk	$	5,902	$	7,725
Average attained age of contractholders		66		65
Anniversary value reset
Account value	$	2,911	$	3,147
Net amount at risk	$	108	$	178
Average attained age of contractholders		61		60
Other
Account value	$	3,891	$	4,306
Net amount at risk	$	941	$	1,080
Average attained age of contractholders		65		64
Total
Account value	$	40,172	$	45,702
Net amount at risk	$	6,951	$	8,983
Average attained age of contractholders (weighted by exposure)		66		65
Number of contractholders		1.0 million		1.2 million

During the first quarter of 2005, CIGNA completed its normal review of assumptions and recorded an after-tax charge of $11 million ($17 million pre-tax). This charge primarily resulted from an update to lapse assumptions based on emerging experience. The charge also reflects updates to partial surrender assumptions, reflecting the impact of stock market declines, as well as other assumptions. Also in 2005, CIGNA updated its mortality and expense assumptions for these contracts.

In the second quarter of 2003, CIGNA recognized an after-tax charge of $286 million ($441 million pre-tax) to increase reserves following an analysis of experience and reserve assumptions. Prior to the second quarter of 2003, CIGNA’s experience of partial surrenders under its guaranteed minimum death benefit contracts was not sufficient to support an explicit reserve assumption. Separately, from mid-2002 through the first quarter of 2003, CIGNA experienced continued adverse mortality development under

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these contracts. During the second quarter of 2003, CIGNA conducted a special review of the emerging partial surrender activity to determine if sufficient credible data existed for an explicit reserve assumption. The review also included a detailed study of other reserve assumptions, including mortality, to validate the cause of the adverse experience and to determine whether or not long-term mortality expectations should be changed.

As a result of the review, CIGNA recorded the after-tax charge of $286 million referenced above consisting of the following:

• $169 million for the addition of an explicit assumption for both actual and projected future partial surrenders. This estimate is based on annual election rates that vary depending on the net amount at risk for each policy (see below for more information);

• $56 million primarily reflecting refinements to assumptions relating to the timing of lapses, death benefits and premiums to better reflect CIGNA’s experience;

• $39 million due to higher assumed mortality reflecting adverse experience based on contractholder deaths during the period from late 2000 into 2003; and

• $22 million resulting from a decrease in assumed mean investment performance reflecting experience and future expectations based on history for similar investments and considering CIGNA’s program to reduce equity market exposures (discussed below).

As a result of equity market declines and volatility early in the third quarter of 2002, CIGNA evaluated alternatives for addressing the exposures associated with these reinsurance contracts, considering the possibility of continued depressed equity market conditions, the potential effects of further equity market declines and the impact on future earnings and capital. As a result of this evaluation, CIGNA implemented a program to substantially reduce the equity market exposures of this business by selling exchange-traded futures contracts, which are expected to rise in value as the equity market declines and decline in value as the equity market rises.

During 2003, CIGNA began using foreign currency forward contracts as part of its program to reduce international equity market risks associated with this business. During 2005, CIGNA replaced these forward contracts with foreign currency futures contracts. CIGNA expects to adjust the futures contract positions and may enter into other contract positions over time, to reflect changing equity market levels and changes in the investment mix of the underlying variable annuity investments.

CIGNA recorded in other revenues pre-tax losses of $48 million in 2005, $165 million in 2004, and $550 million in 2003 from the futures and forward contracts. Expense offsets reflecting corresponding changes in liabilities for these guaranteed minimum death benefit contracts were included in benefits and expenses. The notional amount of the futures contract positions held by CIGNA at December 31, 2005, was $1.0 billion. There were no foreign currency forward contracts held at December 31, 2005.

CIGNA has also written reinsurance contracts with issuers of variable annuity contracts that provide annuitants with certain guarantees related to minimum income benefits. See Note 20 for further information.

Note 7 – Reinsurance

In the normal course of business, CIGNA’s insurance subsidiaries enter into agreements with other insurance companies to assume and cede reinsurance. Reinsurance is ceded primarily to limit losses from large exposures and to permit recovery of a portion of direct losses. Reinsurance does not relieve the originating insurer of liability. CIGNA evaluates the financial condition of its reinsurers and monitors their concentrations of credit risk.

Retirement benefits business. CIGNA had a reinsurance recoverable of $1.2 billion at December 31, 2005 and $8.6 billion at December 31, 2004 from Prudential Retirement Insurance and Annuity Company resulting from the sale of the retirement benefits business, which was primarily in the form of a reinsurance arrangement. The reinsurance recoverable is secured primarily by fixed maturities and mortgage loans held in a business trust established by the reinsurer. This recoverable is reduced as CIGNA’s reinsured liabilities are paid or directly assumed by the reinsurer.

Individual life and annuity reinsurance. CIGNA had a reinsurance recoverable of $5.0 billion at December 31, 2005, and $5.2 billion at December 31, 2004, from Lincoln National Corporation that arose from the 1998 sale of CIGNA’s individual life insurance and annuity business to Lincoln through an indemnity reinsurance arrangement.

Unicover and other run-off reinsurance. The Run-off Reinsurance operations participate in a workers’ compensation reinsurance pool, which ceased accepting new risks in early 1999. This pool was formerly managed by Unicover Managers, Inc. The pool purchased significant reinsurance (retrocessional) protection for its assumed risks. Disputes concerning these retrocessional contracts have resulted in a number of arbitrations, most of which have been resolved or settled. The remaining disputes are expected to be resolved in 2006.

Run-off Reinsurance also includes other (non-Unicover) workers’ compensation reinsurance contracts, as well as personal accident reinsurance contracts, including contracts assumed in the London market. CIGNA is in dispute and arbitration with some ceding companies over the amount of liabilities assumed under their contracts, and expects that these disputes and arbitrations will be substantially resolved by the end of 2007.

In addition, CIGNA obtained retrocessional reinsurance coverage for a significant portion of its liabilities under these contracts and some of these retrocessionaires have disputed the validity of their contracts with CIGNA. Many of these

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disputes with retrocessionaires have been resolved or settled. Most of the remaining significant disputes relating to the retrocessional reinsurance coverage are expected to be resolved in 2006. CIGNA bears the risk of loss if the retrocessionaires are unable to meet their reinsurance obligations to CIGNA.

Unfavorable claims experience related to workers’ compensation and personal accident exposures is possible and could result in future losses, including losses attributable to the inability to recover amounts from retrocessionaires (either due to disputes with the retrocessionaires or their financial condition).

CIGNA’s reserves for amounts recoverable from retrocessionaires, as well as for underlying reinsurance exposures assumed by CIGNA, are considered appropriate as of December 31, 2005, based on current information. However, it is possible that future developments could have a material adverse effect on CIGNA’s consolidated results of operations, and, in certain situations, could have a material adverse effect on CIGNA’s financial condition.

Other reinsurance. CIGNA could have losses if reinsurers fail to indemnify CIGNA on other reinsurance arrangements, either because of reinsurer insolvencies or contract disputes. However, management does not expect charges for other unrecoverable reinsurance to have a material adverse effect on CIGNA’s consolidated results of operations, liquidity or financial condition.

Effects of reinsurance. In CIGNA’s consolidated income statements, premiums and fees were net of ceded premiums, and benefits and expenses were net of reinsurance recoveries, in the following amounts:

(In millions)	2005			2004			2003
Premiums and fees
Short-duration contracts:
Direct	$	12,849		$	13,183		$	14,229
Assumed		414			383			450
Ceded		(156	)		(121	)		(132	)
		13,107			13,445			14,547
Long-duration contracts:
Direct		845			1,071			1,214
Assumed		72			78			86
Ceded:
Individual life insurance     and annuity business sold		(270	)		(301	)		(329	)
Other		(59	)		(57	)		(58	)
		588			791			913
Total	$	13,695		$	14,236		$	15,460
Reinsurance recoveries
Individual life insurance and annuity business sold	$	332		$	326		$	298
Other		141			166			168
Total	$	473		$	492		$	466

The effects of reinsurance on written premiums and fees for short-duration contracts were not materially different from the recognized premium and fee amounts shown in the above table.

Note 8 – Pension and Other Postretirement Benefit Plans

A. Pension and Other Postretirement Benefit Plans

CIGNA and certain of its subsidiaries provide pension, health care and life insurance defined benefits to eligible retired employees, spouses and other eligible dependents through various plans.

CIGNA measures the assets and obligations of its domestic pension and other postretirement benefit plans as of December 31. The following table summarizes the projected obligations and assets related to CIGNA’s domestic and international pension and other postretirement benefit plans as of, and for the years ended, December 31:

	Pension Benefits						Other Postretirement Benefits
(In millions)	2005			2004			2005			2004
Change in benefit obligation
Benefit obligation, January 1	$	3,952		$	3,683		$	538		$	580
Service cost		72			73			2			2
Interest cost		221			221			27			31
Loss (gain) from past experience		181			244			(31	)		(5	)
Benefits paid from plan assets		(233	)		(227	)		(3	)		(3	)
Benefits paid—other		(31	)		(33	)		(36	)		(36	)
Amendments		13			(14	)		—			(29	)
Curtailment		—			5			(5	)		(2	)
Benefit obligation, December 31		4,175			3,952			492			538
Change in plan assets
Fair value of plan assets, January 1		2,542			2,356			35			37
Actual return on plan assets		256			263			1			1
Benefits paid		(233	)		(227	)		(3	)		(3	)
Contributions		544			150			—			—
Fair value of plan assets, December 31		3,109			2,542			33			35
Net benefit obligation		1,066			1,410			459			503
Unrecognized net gains (losses) from past experience		(1,201	)		(1,236	)		37			9
Unrecognized prior service cost		4			19			123			136
Net amount recognized in the balance sheet	$	(131	)	$	193		$	619		$	648
Accrued benefit liability	$	971		$	1,315		$	619		$	648
Accumulated other comprehensive loss (after-tax $716, $729)		(1,102	)		(1,122	)		—			—
Net amount recognized in the balance sheet	$	(131	)	$	193		$	619		$	648

Pension benefits.During 2005, CIGNA’s minimum pension liabilities decreased due to amortization of losses from past experience and the effects of stock market appreciation on

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plan assets, partially offset by the reduction of long-term interest rates used to determine the accumulated benefit obligation and updates to plan census data. The net effect was an after-tax increase to shareholders’ equity of $13 million.

During 2004, CIGNA’s minimum pension liabilities increased primarily due to a reduction in long-term interest rates used to determine the accumulated benefit obligation, as well as the annual update of plan participant data, partially offset by the effect of stock market appreciation on plan assets. The net effect was an after-tax decrease to shareholders’ equity of $62 million.

As a result of the effect of equity market declines on the value of pension plan assets in 2002 and earlier and reduced long-term interest rates, CIGNA had underfunded pension plans with accumulated benefit obligations as of December 31, 2005 of $4.1 billion. The fair value of plan assets related to these plans were $3.1 billion and projected benefit obligations were $4.2 billion. The accumulated benefit obligations as of December 31, 2004 were $3.8 billion, the fair values of plan assets were $2.5 billion and projected benefit obligations were $3.9 billion.

CIGNA funds its qualified pension plans at least at the minimum amount required by the Employee Retirement Income Security Act of 1974 (ERISA). CIGNA contributed $544 million in 2005 as follows:

• $104 million for minimum funding requirements for the domestic pension plan and for voluntary contributions to the international pension plans; and

• $440 million for voluntary contributions to the domestic pension plan, which represent an acceleration of expected contributions to meet minimum funding requirements in 2006 and 2007.

The decision to make voluntary contributions to the domestic pension plan was based upon the favorable economic impact the contributions will have on the funding status of CIGNA’s pension plan, including the potential for reducing future additional funding requirements as well as reducing premiums to the Pension Benefit Guaranty Corporation.

CIGNA does not expect to make domestic plan contributions in 2006, assuming no changes to minimum funding requirements. Current Congressional discussions to change minimum funding requirements may increase CIGNA’s required funding and result in contributions in 2006.

Components of net pension cost, for the years ended December 31 were as follows:

(In millions)	2005			2004			2003
Service cost	$	72		$	73		$	80
Interest cost		221			221			221
Expected return on plan assets		(181	)		(189	)		(200	)
Amortization of:
Net loss from past experience		141			104			23
Prior service cost		(1	)		(2	)		—
Net pension cost	$	252		$	207		$	124

CIGNA also recognized pre-tax curtailment losses for pension benefits in 2004 of $7 million as part of the 2004 operational effectiveness review and sale of the retirement benefits business.

Other postretirement benefits.In 2004, CIGNA recognized the effects of the Medicare Prescription Drug Improvement and Modernization Act of 2003, retroactive to January 1, 2004, in determining its accumulated other postretirement benefit obligation and net other postretirement benefit costs. The effects of retroactive application were to reduce the accumulated other postretirement benefit obligation as of January 1, 2004, by approximately $20 million pre-tax and to reduce the net other postretirement benefit cost by less than $1 million pre-tax. In addition, in 2004, CIGNA amended its postretirement medical benefits plan to integrate pharmacy benefits with the 2003 Act and reduced its accumulated other postretirement benefit obligation by $29 million pre-tax.

Unfunded retiree health benefit plans had accumulated benefit obligations of $341 million at December 31, 2005, and $386 million at December 31, 2004. At the end of 2005, retiree life insurance plans with accumulated benefit obligations of $151 million were partially funded with plan assets of $33 million, compared with accumulated benefit obligations of $152 million, partially funded with plan assets of $35 million, at the end of 2004.

Components of net other postretirement benefit cost for the years ended December 31 were as follows:

(In millions)	2005			2004			2003
Service cost	$	2		$	2		$	3
Interest cost		27			31			36
Expected return on plan assets		(2	)		(2	)		(2	)
Amortization of:
Net gain from past experience		(2	)		—			(1	)
Prior service cost		(17	)		(16	)		(17	)
Net other postretirement benefit cost	$	8		$	15		$	19

CIGNA also recognized pre-tax curtailment gains for other postretirement benefits as follows:

(In millions)	2005		2004		2003
Operational effectiveness review	$	—	$	12	$	—
Sale of the retirement benefits business		—		8		—
2002 Health Care restructuring		—		—		12
Dental plan amendment		2		—		—
Total curtailment gains	$	2	$	20	$	12

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The estimated rate of future increases in the per capita cost of health care benefits beginning in 2006 was 9%, decreasing to 5% over four years. This estimate reflects CIGNA’s current claim experience and management’s estimate that rates of growth will decline in the future. A 1% increase or decrease in the estimated rate would change 2005 reported amounts as follows:

(In millions)	Increase		Decrease
Effect on total service and interest cost	$	1	$	(1	)
Effect on postretirement benefit obligation	$	16	$	(15	)

Plan assets. The following summarizes the fair value of assets related to pension plans as of December 31:

Plan Asset Category	Percent of Total Fair Value		Target Allocation Percentage
	2005	2004	2005
Equity securities	73%	70%	68%
Fixed income	17%	16%	20%
Real estate	5%	8%	7%
Other	5%	6%	5%

The target investment allocation percentages are developed by management as guidelines, although the fair values of each asset category are expected to vary as a result of changes in market conditions. The pension plan asset portfolio has been most heavily weighted towards equity securities, consisting of domestic and international investments, in an effort to synchronize the expected higher rate of return on equities over the long-term with the overall long-term nature of the pension benefit obligations. The diversification of the pension plan assets into other investments is intended to mitigate the volatility in returns, while also providing adequate liquidity to fund benefit distributions.

Substantially all pension plan assets are invested in the separate accounts of Connecticut General Life Insurance Company (CGLIC) and Life Insurance Company of North America, which are CIGNA subsidiaries, or immediate participation guaranteed investment contracts issued by CGLIC. Most of these separate accounts and investment contracts are reinsured and managed by the buyer of the retirement benefits business. During 2005, the pension plan liquidated its position in CIGNA common stock. At December 31, 2004, plan assets included 292,500 shares of CIGNA common stock with a fair value of $24 million.

The other postretirement plan assets are invested in fixed income investments in the general account of CGLIC.

Assumptions for pension and other postretirement benefit plans. Management determined the present value of the projected pension benefit obligation and the accumulated other postretirement benefit obligation based on the following weighted average assumptions as of and for the years ended December 31:

	2005	2004
Discount rate:
Pension benefit obligation	5.5%	5.75%
Other postretirement benefit obligation	5.5%	5.5%
Pension benefit cost	5.75%	6.00%
Other postretirement benefit cost	5.5%	6.15%
Expected return on plan assets:
Projected pension benefit obligation	7.5%	7.5%
Pension benefit cost	7.5%	7.5%
Accumulated other postretirement benefit obligation	5%	7%
Other postretirement benefit cost	7%	7%
Expected rate of compensation increase:
Projected pension benefit obligation	3.5%	3.5%
Pension benefit cost	3.5%	3.5%
Accumulated other postretirement benefit obligation	3%	3%
Other postretirement benefit cost	3%	3%

The discount rates were developed considering actual annualized yields as of the measurement date for high quality, long-term corporate bonds adjusted to reflect the durations of the pension and other postretirement benefit obligations. Expected rates of return on plan assets were developed considering actual historical returns, current and expected market conditions, plan asset mix and management’s investment strategy.

CIGNA uses a market-related asset valuation method to measure domestic pension plan assets invested in equity securities. The market-related value of pension assets recognizes market appreciation or depreciation in the portfolio over 5 years, a method that reduces the short-term impact of market fluctuations.

The average remaining service period of active employees associated with CIGNA’s pension plan is approximately 6 years. The average remaining service period of active employees associated with the other postretirement benefit plans is approximately 10 years.

Changes to CIGNA’s assumptions for the discount rates and expected rate of return on domestic qualified plan assets will not change required cash contributions to the pension plan as CIGNA funds at least the minimum amount required by ERISA. However, for the effects of hypothetical changes in discount rates and the expected rate of return see page 28.

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Benefit payments. The following benefit payments, including expected future services, are expected to be paid in:

			Other Postretirement Benefits
(In millions)	Pension Benefits		Gross		Net of Medicare Part D Subsidy
2006	$	278	$	47	$	43
2007	$	280	$	45	$	43
2008	$	279	$	45	$	43
2009	$	279	$	45	$	42
2010	$	279	$	44	$	42
2011-2015	$	1,477	$	205	$	195

B. 401(k) Plans

CIGNA sponsors a 401(k) plan in which CIGNA matches a portion of employees’ pre-tax contributions. Another 401(k) plan with an employer match was frozen in 1999. Participants in the active plan may invest in a fund that invests in CIGNA common stock, several diversified stock funds, a bond fund and a fixed-income fund.

CIGNA may elect to increase its matching contributions if CIGNA’s annual performance meets certain targets. A substantial amount of CIGNA’s matching contributions are invested in CIGNA common stock. CIGNA’s expense for these plans was $36 million for 2005 and 2003, and $38 million for 2004.

Note 9 – Cost Reduction Programs

A. First Quarter 2005 Program

In the first quarter of 2005, CIGNA implemented a plan to further streamline operations in the health care business and in supporting areas. As a result, CIGNA recognized in other operating expenses a pre-tax charge of $51 million ($33 million after-tax) for severance costs during 2005. The table below shows CIGNA’s cost reduction activity (pre-tax) related to severance for this program:

(In millions)	Health Care			Corporate			Total
Total Charges	$	22		$	29		$	51
Total Payments		(16	)		(16	)		(32	)
Balance as of December 31, 2005	$	6		$	13		$	19

B. Operational Effectiveness Review

In 2004, CIGNA adopted a restructuring program associated with planned organizational changes to streamline functional support resources and to adjust its operations to current business volumes. As a result, CIGNA recognized in other operating expenses total pre-tax charges of $86 million ($56 million after-tax).

The table below shows CIGNA’s restructuring activity (pre-tax) related to severance and real estate for this program:

(In millions)	Health Care/ Disability and Life*			Corporate			Total
2004 Activity:
Charges:
Severance	$	39		$	35		$	74
Real estate and other		11			1			12
Total		50			36			86
Payments:
Severance		(28	)		(26	)		(54	)
Real estate and other		(3	)		—			(3	)
Balance as of December 31, 2004		19			10			29
2005 Activity:
Payments:
Severance		(11	)		(10	)		(21	)
Real estate and other		(3	)		—			(3	)
Balance as of December 31, 2005	$	5		$	—		$	5

*Includes restructuring charges of $2 million pre-tax in the Disability and Life segment.

C. Corporate Effectiveness Initiative

In 2003, CIGNA adopted a restructuring program to attain certain operational efficiencies in its corporate staff functions and to achieve additional cost savings. As a result, CIGNA recognized in other operating expenses a pre-tax charge in Corporate of $13 million ($9 million after-tax) for severance costs. This program was substantially completed in 2004.

D. Fourth Quarter 2002 Program

In 2002, CIGNA adopted a restructuring program primarily to realign the organizational structure and operations of its health care business. During 2003, CIGNA reduced the remaining liability for this program by $23 million pre-tax ($15 million after-tax). These reductions were primarily due to higher than expected attrition (which did not result in severance benefits or costs) and lower costs relating to outplacement and other services. This restructuring program was substantially completed in the fourth quarter of 2003.

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NOTESTOTHEFINANCIALSTATEMENTS

Note 10 – Investments

CIGNA’s investments, as recorded on the balance sheet, include amounts attributable to experience-rated pension policyholder contracts up through the sale of the retirement benefits business in 2004. See Note 2(D) for discussion of the investment gains and losses associated with these amounts.

A. Fixed Maturities and Equity Securities

Fixed maturities included securities classified as trading and carried at fair value of $39 million (amortized cost of $38 million) as of December 31, 2005 and $56 million (amortized cost of $54 million) as of December 31, 2004. The changes in the net holding gain or loss on these securities held at December 31, 2005 and 2004 were not significant. The change in holding gain or loss held at December 31, 2003 was a pre-tax net loss of $174 million, and was reported in other revenues. The change in fair values of these securities sold during 2003 was a pre-tax net gain of $48 million. As a result of the sale of the retirement benefits business, substantially all of these securities were transferred to the buyer in 2004.

Fixed maturities and equity securities included $49 million at December 31, 2005 and $68 million at December 31, 2004, primarily corporate securities, that were pledged as collateral to brokers as required under futures contracts.

The following information about fixed maturities excludes securities classified as trading. The amortized cost and fair value by contractual maturity periods for fixed maturities were as follows at December 31, 2005:

(In millions)	Amortized Cost		Fair Value
Due in one year or less	$	647	$	658
Due after one year through five years		3,074		3,193
Due after five years through ten years		5,209		5,353
Due after ten years		3,822		4,522
Mortgage- and other asset-backed securities		1,083		1,182
Total	$	13,835	$	14,908

Actual maturities could differ from contractual maturities because issuers may have the right to call or prepay obligations, with or without penalties. Also, in some cases CIGNA may extend maturity dates.

Gross unrealized appreciation (depreciation) on fixed maturities (excluding securities classified as trading) by type of issuer is shown below.

	December 31, 2005
(In millions)	Amortized Cost		Unrealized Appreciation		Unrealized Depreciation			Fair Value
Federal government and agency	$	639	$	275	$	—		$	914
State and local government		2,387		133		(8	)		2,512
Foreign government		779		47		(8	)		818
Corporate		8,921		605		(69	)		9,457
Federal agency mortgage-backed		45		—		(1	)		44
Other mortgage-backed		488		16		(3	)		501
Other asset-backed		576		88		(2	)		662
Total	$	13,835	$	1,164	$	(91	)	$	14,908

	December 31, 2004
(In millions)
Federal government and agency	$	609	$	225	$	—		$	834
State and local government		2,502		163		(4	)		2,661
Foreign government		769		62		(1	)		830
Corporate		9,138		808		(28	)		9,918
Federal agency mortgage-backed		101		1		(1	)		101
Other mortgage-backed		830		41		(3	)		868
Other asset-backed		708		57		(3	)		762
Total	$	14,657	$	1,357	$	(40	)	$	15,974

The above table includes net appreciation of $773 million at December 31, 2005 and $717 million at December 31, 2004 for adjustments required for future policy benefits, contractholder deposit funds and modified coinsurance liabilities.

As of December 31, 2005, CIGNA had commitments to purchase $13 million of fixed maturities bearing interest at a fixed market rate. CIGNA expects to disburse the committed amount in 2006.

Review of declines in fair value. Management reviews fixed maturities and equity securities for impairment based on criteria that include:

• length of time and severity of decline;

• financial health and specific near term prospects of the issuer;

• changes in the regulatory, economic or general market environment of the issuer’s industry or geographic region; and

• ability and intent to hold until recovery.

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As of December 31, 2005, fixed maturities (primarily investment grade corporate bonds) and equity securities with a decline in fair value from cost were as follows, including the length of time of such decline:

(In millions)	Fair Value		Amortized Cost		Unrealized Depreciation
Fixed Maturities:
One year or less:
Investment grade	$	2,833	$	2,886	$	(53	)
Below investment grade	$	280	$	286	$	(6	)
More than one year:
Investment grade	$	903	$	934	$	(31	)
Below investment grade	$	22	$	23	$	(1	)
Equity securities:
Less than one year	$	48	$	50	$	(2	)
Greater than one year	$	9	$	10	$	(1	)

The unrealized depreciation of investment grade fixed maturities is primarily due to increases in interest rates since purchase. See Note 11(B) for discussion of impairments included in realized gains and losses.

B. Mortgage Loans and Real Estate

CIGNA’s mortgage loans and real estate investments are diversified by property type, location and, for mortgage loans, borrower.

At December 31, mortgage loans and real estate investments were distributed among the following property types and geographic regions:

(In millions)	2005		2004
Property type
Retail facilities	$	773	$	1,001
Office buildings		1,395		1,243
Apartment buildings		489		510
Industrial		673		441
Hotels		602		325
Other		82		87
Total	$	4,014	$	3,607
Geographic region
Central	$	674	$	692
Pacific		1,013		905
South Atlantic		1,021		731
Middle Atlantic		335		559
New England		588		380
Mountain		383		340
Total	$	4,014	$	3,607

At December 31, 2005, scheduled mortgage loan maturities were as follows (in millions, unless otherwise indicated): $213 in 2006, $411 in 2007, $273 in 2008, $377 in 2009 and $2.7 billion thereafter.

Actual maturities could differ from contractual maturities for several reasons: borrowers may have the right to prepay obligations, with or without prepayment penalties; the maturity date may be extended; and loans may be refinanced.

As of December 31, 2005, CIGNA had commitments to extend credit under commercial mortgage loan agreements of $360 million, most of which were at a fixed market rate of interest. These loan commitments are diversified by property type and geographic region. As of December 31, 2005, CIGNA had a commitment to contribute additional equity of $9 million to a real estate investment. CIGNA expects to disburse most of the committed amounts in 2006.

As of December 31, 2005, impaired mortgage loans and valuation reserves were not significant. In addition, changes in valuation reserves were not significant in 2005, 2004 and 2003.

C. Other Long-term Investments

As of December 31, other long-term investments consisted of the following:

(In millions)	2005		2004
Real estate and other entities	$	339	$	281
Mezzanine loans		134		157
Other		31		40
Total	$	504	$	478

As of December 31, 2005, CIGNA had commitments to contribute:

• $201 million to limited liability entities that hold either real estate or loans to real estate entities that are diversified by property type and geographic region; and

• $188 million to entities that hold securities diversified by issuer and maturity date.

CIGNA expects to disburse most of the committed amounts in 2006.

D. Short-Term Investments and Cash Equivalents

Short-term investments and cash equivalents included corporate securities of $1.6 billion, money market funds of $232 million and federal government securities of $64 million at December 31, 2005. CIGNA’s short-term investments and cash equivalents at December 31, 2004, included corporate securities of $1.4 billion and federal agency mortgage-backed securities of $470 million.

E. Non-Income Producing Investments

As of December 31, 2005 and 2004, non-income producing investments were not significant.

F. Concentration of Risk

As of December 31, 2005 and 2004, CIGNA did not have a concentration of investments in a single issuer or borrower exceeding 10% of shareholders’ equity.

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G. Derivative Financial Instruments

CIGNA’s investment strategy is to manage the characteristics of investment assets (such as duration, yield, currency and liquidity) to meet the varying demands of the related insurance and contractholder liabilities (such as paying claims, investment returns and withdrawals). As part of this investment strategy, CIGNA typically uses derivatives to minimize interest rate, foreign currency and equity price risks. CIGNA routinely monitors exposure to credit risk associated with derivatives and diversifies the portfolio among approved dealers of high credit quality to minimize credit risk. In addition, CIGNA has written or sold contracts:

• to guarantee minimum income benefits;

• for certain modified coinsurance arrangements; and

• to enhance investment returns.

CIGNA uses hedge accounting when derivatives are designated, qualify and are highly effective as hedges. Under hedge accounting, the changes in fair value of the derivative and the hedged risk are generally recognized together and offset each other when reported in net income.

CIGNA accounts for derivative instruments as follows:

• Derivatives are reported on the balance sheet at fair value with changes in fair values reported in net income or accumulated other comprehensive income.

• Changes in the fair value of derivatives that hedge market risk related to future cash flows—and that qualify for hedge accounting—are reported in a separate caption in accumulated other comprehensive income. These hedges are referred to as cash flow hedges.

• A change in the fair value of a derivative instrument may not always equal the change in the fair value of the hedged item; this difference is referred to as hedge ineffectiveness. Where hedge accounting is used, CIGNA reflects hedge ineffectiveness in net income (generally as part of realized investment gains and losses).

• Features of certain investments and obligations, called embedded derivatives, are accounted for as derivatives. As permitted under SFAS No. 133, derivative accounting has not been applied to these features of such investments or obligations existing before January 1, 1999.

CIGNA recorded pre-tax realized investment gains (losses) from swaps on commercial loan pools of $7 million in 2005, $17 million in 2004, and $26 million in 2003.

See Note 6 to the Financial Statements for a discussion of derivatives associated with guaranteed minimum death benefit contracts, Note 20(C) to the Financial Statements for a discussion of derivatives associated with guaranteed minimum income benefit contracts and Note 3(A) for a discussion of derivatives embedded in certain modified coinsurance arrangements. The other effects of derivatives were not material to CIGNA’s consolidated results of operations, liquidity or financial condition for 2005, 2004 or 2003.

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The table below presents information about the nature and accounting treatment of CIGNA’s primary derivative financial instruments. Derivatives in CIGNA’s separate accounts are not included because associated gains and losses generally accrue directly to policyholders.

Instrument	Risk	Purpose	Cash Flows	Accounting Policy
Futures and foreign currency forwards	Primarily equity and foreign currency risks	To reduce domestic and international equity market exposures for certain reinsurance contracts that guarantee death benefits resulting from changes in variable annuity account values based on underlying mutual funds. Currency futures are primarily Japanese yen, euro, and British pound.	For futures, CIGNA receives (pays) cash daily in the amount of the change in fair value of the futures contracts. For foreign currency forwards, CIGNA periodically exchanges the difference between domestic and international currencies, to begin at a designated future date.	Fair value changes are reported in other revenues. Fair values of foreign currency forwards are recorded in other assets or other liabilities.
Futures	Interest rate risk	To hedge fair value changes of fixed maturity and mortgage loan investments to be purchased.	CIGNA receives (pays) cash daily in the amount of the change in fair value of the futures contracts.	Using cash flow hedge accounting, fair value changes are reported in other comprehensive income and amortized into net investment income over the life of the investments purchased.
Swaps	Interest rate and foreign currency risk	To hedge the interest or foreign currency cash flows of fixed maturities and mortgage loans to match associated liabilities. Currency swaps are primarily euros for periods of up to 16 years.	CIGNA periodically exchanges cash flows between variable and fixed interest rates or between two currencies for both principal and interest.	Using cash flow hedge accounting, fair values are reported in other long-term investments or other liabilities and other comprehensive income. Net interest cash flows are reported in net investment income.
	Credit and interest rate risk	To enhance investment returns, CIGNA sells Dow Jones indexed credit default swaps on a basket of primarily investment grade corporate bonds.	CIGNA receives quarterly fees and will make future payments if an issuer of an underlying corporate bond defaults on scheduled payments or files for bankruptcy through 2010. If an issuer defaults or files for bankruptcy, CIGNA will make payment for the par value of the underlying corporate bond and may subsequently sell or hold that bond as an invested asset. If the most current indexed swaps are determined desirable for liquidity, credit risk or other reasons, CIGNA also pays or receives cash to settle purchases and sales.	Fair values of the swaps are reported in other long-term investments or other liabilities, with changes reported in realized gains and losses. Quarterly fees and gains and losses on purchases and sales are also reported in realized gains and losses.
Swaps on commercial loan pools	Interest rate and credit risk	To obtain returns based on the performance of underlying commercial loan pools.	CIGNA receives cash based on the performance of underlying commercial loan pools.	Fair values of the swaps are reported in other long-term investments or other liabilities, with changes reported in realized investment gains and losses.
Written and Purchased Options	Primarily equity risk	CIGNA has written certain reinsurance contracts to guarantee minimum income benefits resulting from unfavorable changes in variable annuity account values based on underlying mutual funds. CIGNA purchased reinsurance contracts to hedge the market risks assumed. These contracts are accounted for as written and purchased options.	CIGNA periodically receives (pays) fees and will pay (receive) cash resulting from the unfavorable changes in account values when account holders elect to receive minimum income payments.	Fair values are reported in other liabilities and other assets. Changes in fair value are reported in other operating expenses.
Embedded derivative	Interest rate and credit risk	To transfer certain unrealized changes in fair value due to interest rate and credit risks of assets underlying modified coinsurance arrangements with the buyer of the retirement benefits business.	On conversion to indemnity coinsurance, CIGNA transfers the invested assets underlying these modified coinsurance arrangements to settle any unrealized changes in fair value.	Changes in fair values are reported in other liabilities and other revenues.

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Note 11 – Investment Income and Gains and Losses

A. Net Investment Income

The components of net investment income, for the years ended December 31 were as follows:

(In millions)	2005		2004		2003
Fixed maturities	$	921	$	970	$	1,610
Securities supporting experience-rated pension policyholder contracts		—		160		171
Equity securities		9		10		17
Mortgage loans		270		366		641
Policy loans		90		101		136
Real estate		11		18		72
Other long-term investments		37		25		26
Short-term investments and cash		69		42		29
		1,407		1,692		2,702
Less investment expenses		48		49		108
Net investment income	$	1,359	$	1,643	$	2,594

Net investment income attributable to experience-rated pension policyholder contracts (which is included in CIGNA’s revenues and is primarily offset by amounts included in benefits and expenses) was approximately $250 million for 2004 and $1.0 billion for 2003. Net investment income for separate accounts (which is not reflected in CIGNA’s revenues) was $154 million for 2005, $903 million for 2004, and $620 million for 2003.

B. Realized Investment Gains and Losses

The following realized gains and losses on investments for the years ended December 31 exclude amounts required to adjust future policy benefits for certain annuities and amounts that were attributable to experience-rated pension policyholder contracts prior to the reclassification of securities to trading in the fourth quarter of 2003:

(In millions)	2005			2004		2003
Fixed maturities	$	(2	)	$	157	$	(27	)
Equity securities		4			41		78
Mortgage loans		(2	)		228		(1	)
Real estate		—			49		74
Derivatives and other		(7	)		48		27
		(7	)		523		151
Less income taxes		4			162		53
Net realized investment gains (losses)	$	(11	)	$	361	$	98

Realized investment gains in 2004 included $397 million of immediate gain recognition as a result of the sale of the retirement benefits business. Realized investment gains and losses also included impairments in the value of investments of $24 million in 2005, $26 million in 2004, and $158 million in 2003.

Realized investment gains and losses that are not reflected in CIGNA’s revenues for the years ended December 31 were as follows:

(In millions)	2005		2004		2003
Separate accounts	$	5,361	$	1,365	$	(220	)
Investment results required to adjust future policy and contractholder benefits	$	9	$	368	$	189
Effect of 2003 trading reclassification	$	—	$	—	$	814

Separate account realized gains in 2005 and 2004 reflect the impact of transferring separate account assets to the buyer of CIGNA’s retirement benefit business. See Note 3 for additional information.

The following sales of available-for-sale fixed maturities and equity securities, for the years ended December 31 were as follows:

(In millions)	2005			2004			2003
Proceeds from sales	$	3,040		$	3,249		$	8,276
Gross gains on sales	$	40		$	273		$	393
Gross losses on sales	$	(46	)	$	(52	)	$	(78	)

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Note 12 – Debt

Short-term and long-term debt consisted of the following at December 31:

(In millions)	2005		2004
Short-term:
Current maturities of long-term debt	$	100	$	—
Long-term:
Uncollateralized debt:
6 3/8% Notes due 2006	$	—	$	100
7.4% Notes due 2007		291		291
8 1/4% Notes due 2007		85		85
7% Notes due 2011		222		222
6.375% Notes due 2011		226		226
7.65% Notes due 2023		100		100
8.3% Notes due 2023		17		17
7 7/8% Debentures due 2027		300		300
8.3% Step Down Notes due 2033		83		83
Other		14		14
Total long-term debt	$	1,338	$	1,438

CIGNA may issue commercial paper primarily to manage imbalances between operating cash flows and existing commitments, to meet working capital needs, and to take advantage of current investment opportunities. Commercial paper borrowing arrangements are supported by various lines of credit. There was no commercial paper outstanding as of December 31, 2005 and 2004.

In May 2004, CIGNA entered into a three-year syndicated revolving credit and letter of credit agreement for $1.0 billion. Of this amount, up to $600 million may be used to support an internal reinsurance arrangement and the remaining portion will serve as an available line of credit commitment for CIGNA.

As of December 31, 2005, CIGNA had $500 million remaining under an effective shelf registration statement filed with the Securities and Exchange Commission, which may be issued as debt securities, equity securities or both.

Maturities of long-term debt are as follows (in millions): $100 in 2006, $388 in 2007, $1 in 2008, none in 2009, and the remainder in years after 2010.

Interest expense was $105 million in 2005, $107 million in 2004, and $111 million in 2003.

Note 13 – Common and Preferred Stock

As of December 31, CIGNA had issued the following shares:

(Shares in thousands)	2005		2004
Common: Par value $0.25 600,000 shares authorized
Outstanding—January 1	132,007		140,591
Issued for stock option and other benefit plans	4,587		1,454
Repurchase of common stock	(15,403	)	(10,038	)
Outstanding—December 31	121,191		132,007
Treasury stock	38,838		28,022
Issued—December 31	160,029		160,029

CIGNA has a repurchase program, which was authorized by the Board of Directors. Decisions to repurchase shares depend on market conditions and alternative uses of capital. During 2004, CIGNA retired 116 million shares of treasury stock. This transaction had no net effect on shareholders’ equity.

In 1997, CIGNA’s Board of Directors adopted a shareholder rights plan, which will expire on August 4, 2007. The rights attach to all outstanding shares of common stock, and will become exercisable if a third party acquires (or announces that it will acquire) 10% or more of CIGNA’s outstanding common stock unless CIGNA’s Board of Directors approves the acquisition. When exercisable, each right entitles its holder to purchase CIGNA securities at a substantial discount or, at the discretion of the Board of Directors, to exchange the rights for CIGNA common stock on a one-for-one basis. In some cases, a right also entitles its holder to purchase securities of an acquirer at a substantial discount. CIGNA’s Board of Directors may authorize the redemption of the rights for $.0033 each before a third party acquires 10% or more of CIGNA’s common stock, and thereafter under certain circumstances.

CIGNA has authorized a total of 25 million shares of $1 par value preferred stock. No shares of preferred stock were outstanding at December 31, 2005 or 2004.

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NOTESTOTHEFINANCIALSTATEMENTS

Note 14 – Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) excludes:

• amounts required to adjust future policy benefits for certain annuities;

• amounts required to adjust other liabilities after the initial reclassification of unrealized appreciation under a modified coinsurance arrangement; and

• amounts attributable to experience-rated pension policyholder contracts prior to the reclassification of securities to trading in the fourth quarter of 2003.

Changes in accumulated other comprehensive income (loss) were as follows:

(In millions)	Pre-Tax			Tax (Expense) Benefit			After-Tax
2005
Net unrealized depreciation, securities:
Unrealized depreciation on securities held	$	(288	)	$	101		$	(187	)
Gains realized on securities		(2	)		1			(1	)
Net unrealized depreciation, securities	$	(290	)	$	102		$	(188	)
Net unrealized appreciation, derivatives	$	4		$	(2	)	$	2
Net translation of foreign currencies	$	1		$	(1	)	$	—
Minimum pension liability adjustment	$	20		$	(7	)	$	13
2004
Net unrealized depreciation, securities:
Unrealized appreciation on securities held	$	97		$	(34	)	$	63
Gains realized on securities		(198	)		69			(129	)
Reclassification to other liabilities for modified coinsurance arrangement		(256	)		90			(166	)
Net unrealized depreciation, securities	$	(357	)	$	125		$	(232	)
Net unrealized depreciation, derivatives	$	(7	)	$	3		$	(4	)
Net translation of foreign currencies	$	23		$	(7	)	$	16
Minimum pension liability adjustment	$	(95	)	$	33		$	(62	)
2003
Net unrealized appreciation, securities:
Unrealized appreciation on securities held	$	206		$	(72	)	$	134
Gains realized on securities		(51	)		18			(33	)
Net unrealized appreciation, securities	$	155		$	(54	)	$	101
Net unrealized depreciation, derivatives	$	(27	)	$	9		$	(18	)
Net translation of foreign currencies:
Net translation on foreign currencies held	$	17		$	(7	)	$	10
Foreign currency translation losses realized on sale of business		12			(4	)		8
Net translation of foreign currencies	$	29		$	(11	)	$	18
Minimum pension liability adjustment	$	71		$	(24	)	$	47

Note 15 – Shareholders’ Equity and Dividend Restrictions

State insurance departments that regulate certain of CIGNA’s subsidiaries prescribe accounting practices (which differ in some respects from generally accepted accounting principles) to determine statutory net income and surplus. CIGNA’s life insurance and HMO company subsidiaries are regulated by such statutory requirements. The statutory net income for the years ended, and surplus as of, December 31 of CIGNA’s life insurance and HMO subsidiaries were as follows:

(In millions)	2005		2004		2003
Net income (loss)	$	1,077	$	1,032	$	1,043
Surplus	$	3,597	$	3,714	$	3,945

CIGNA’s life insurance and HMO subsidiaries are also subject to regulatory restrictions that limit the amount of annual dividends or other distributions (such as loans or cash advances) insurance companies may extend to the parent company without prior approval of regulatory authorities. The maximum dividend distribution that CIGNA’s life insurance and HMO subsidiaries may make during 2006 without prior approval is approximately $1.0 billion. The amount of net assets of CIGNA that could not be distributed without prior approval as of December 31, 2005, was approximately $4.2 billion.

Note 16 – Income Taxes

During 2005, the Congressional Joint Committee on Taxation approved CIGNA’s refund claim relating to a tax loss incurred from the sale of a business in 1999 and the completion of the IRS audit for 2000-2002. Pursuant to this approval, CIGNA recorded total tax related benefits of $437 million consisting of:

• $287 million resulting from capital losses realized in connection with the divestiture of the property and casualty insurance operations in 1999, which is included in income from discontinued operations; and

• $150 million resulting primarily from the release of tax reserves and valuation allowances. This amount consists of

• $88 million reported as income from continuing operations. This amount includes $4 million of interest income; and

• $62 million related to the divestiture of CIGNA’s Brazilian health care business, which is included in income from discontinued operations.

Management believes that consolidated taxable income expected to be generated in the future will be sufficient to realize CIGNA’s net deferred tax assets of $1.1 billion as of December 31, 2005, and $1.4 billion as of December 31, 2004. This determination is based on CIGNA’s earnings history and future expectations.

CIGNA’s deferred tax asset is net of a federal and state valuation allowance. The $117 million decrease in the

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valuation allowance during 2005 relates primarily to the completion of the IRS audit for 2000-2002. The valuation allowance at December 31, 2005 primarily relates to operating losses in the run-off reinsurance operations. The valuation allowance reflects management’s assessment as to whether certain deferred tax assets will be realizable. These assessments could be revised in the near term if underlying circumstances change.

Federal operating loss carryforwards in the amount of $349 million were available at December 31, 2005. Subject to statutory limitations, the operating losses are available to offset taxable income subject to statutory limitations and begin to expire in 2020. CIGNA has no unused capital losses as of December 31, 2005.

The American Jobs Creation Act of 2004 suspends, for a two-year period commencing January 1, 2005, the tax liability of stock life insurance companies on distributions from the policyholders’ surplus account. CIGNA’s principal subsidiary distributed, with regulatory approval, the entire account balance of $450 million to the parent company during 2005 without incurring federal income tax.

CIGNA’s federal income tax returns are routinely audited by the Internal Revenue Service (IRS). In management’s opinion, adequate tax liabilities, including potential related interest charges should the IRS prevail, have been established to address potential exposures involving tax positions we have taken that may be challenged by the IRS. These liabilities could be revised in the near term if estimates of CIGNA’s ultimate liability change as a result of new developments or a change in circumstances.

Deferred income tax assets and liabilities as of December 31 are shown below.

(In millions)	2005			2004
Deferred tax assets
Employee and retiree benefit plans	$	782		$	1,024
Investments, net		43			128
Other insurance and contractholder liabilities		249			344
Deferred gain on sales of businesses		146			248
Policy acquisition expenses		116			117
Loss carryforwards		135			132
Bad debt expense		47			42
Other		93			82
Deferred tax assets before valuation allowance		1,611			2,117
Valuation allowance for deferred tax assets		(145	)		(262	)
Deferred tax assets, net of valuation allowance		1,466			1,855
Deferred tax liabilities
Depreciation and amortization		206			229
Unrealized appreciation on investments		118			221
Other		55			22
Total deferred tax liabilities		379			472
Net deferred income tax assets	$	1,087		$	1,383

As of December 31, 2005, current income taxes receivable was $58 million and was included in premiums, accounts and notes receivable in the consolidated balance sheet. As of December 31, 2004, current income taxes payable was $301 million and was included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheet.

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

(In millions)	2005			2004			2003
Current taxes
U.S. income	$	73		$	815		$	82
Foreign income		28			35			7
State income		22			20			7
		123			870			96
Deferred taxes (benefits)
U.S. income		401			(77	)		164
Foreign income		(11	)		2			(7	)
State income		4			3			11
		394			(72	)		168
Total income taxes	$	517		$	798		$	264

Total income taxes for the years ended December 31 were different from the amount computed using the nominal federal income tax rate of 35% for the following reasons:

(In millions)	2005			2004			2003
Tax expense at nominal rate	$	628		$	831		$	297
Tax-exempt interest income		(34	)		(33	)		(30	)
Dividends received deduction		(12	)		(21	)		(21	)
Resolution of Federal Tax Matters		(84	)		(31	)		—
State income tax (net of federal income tax benefit)		18			11			12
Change in valuation allowance		15			51			9
Other		(14	)		(10	)		(3	)
Total income taxes	$	517		$	798		$	264

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Note 17 – Employee Incentive Plans

The People Resources Committee of the Board of Directors awards stock options, restricted stock and deferred stock to certain employees. To a very limited extent, the Committee has issued common stock instead of cash compensation and dividend equivalent rights as part of restricted and deferred stock units. Stock appreciation rights issued with stock options are authorized but have not been issued for several years. Beginning in May 2004, CIGNA began issuing shares from Treasury stock for option exercises, awards of restricted stock and payment of deferred stock units.

Compensation cost and related tax benefits for these awards were as follows:

(In millions)	2005		2004		2003
Compensation cost	$	35	$	68	$	69
Tax benefits	$	12	$	23	$	24

CIGNA had the following number of shares of common stock available for award at December 31: 11.5 million in 2005, 11.7 million in 2004 and 11.3 million in 2003.

Stock options. CIGNA awards options to purchase CIGNA common stock at the market price of the stock on the grant date. Options vest over periods ranging from one to five years and expire no later than 10 years after the grant date.

Until June 30, 2004, senior executives were permitted to use shares of CIGNA common or restricted stock in lieu of cash to exercise outstanding options, and CIGNA issued replacement options equal to the number of shares used. Like ordinary options, replacement options were exercisable at the market price of CIGNA common stock on their grant date. Replacement options vested six months after the grant date and expired on the expiration date of the original option.

The table below shows the status of, and changes in, common stock options during the last three years:

(Options in thousands)	2005				2004				2003
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding—January 1	13,692		$	77.66	15,782		$	79.51	14,354		$	88.71
Granted	834		$	90.14	3,174		$	55.86	3,439		$	42.03
Exercised	(4,821	)	$	70.17	(1,564	)	$	50.23	(136	)	$	47.53
Expired or canceled	(833	)	$	82.02	(3,700	)	$	78.43	(1,875	)	$	83.52
Outstanding—December 31	8,872		$	82.49	13,692		$	77.66	15,782		$	79.51
Options exercisable at year-end	6,514		$	89.40	10,417		$	84.17	10,401		$	86.68

Compensation expense of $30 million related to unvested stock options at December 31, 2005 will be recognized over the next 2 years (weighted average period).

The table below summarizes information for stock options exercised during the last three years:

(In millions)	2005		2004		2003
Intrinsic value of options exercised	$	148	$	25	$	1
Cash received for options exercised	$	312	$	64	$	6
Excess tax benefits realized from options exercised	$	18	$	—	$	—

The following table summarizes information for outstanding common stock options at December 31, 2005:

(In millions, except options in thousands)	Options Outstanding		Options Exercisable
Number		8,872		6,514
Total intrinsic value	$	263	$	149
Weighted average exercise price	$	82.49	$	89.40
Weighted average remaining contractual life (years)		5.9 years		5.1 years

The weighted average fair value of options granted under employee incentive plans was $34.17 for 2005, $19.80 for 2004 and $12.62 for 2003, using the Black-Scholes option-pricing model and the following assumptions:

	2005	2004	2003
Dividend yield	0.1%	0.2%	1.9%
Expected volatility	35.0%	47.6%	44.3%
Risk-free interest rate	3.9%	2.2%	1.9%
Expected option life	5.25 years	3.3 years	3.5 years

The expected volatility reflects CIGNA’s past daily stock price volatility. CIGNA does not consider volatility implied in the market prices of traded options to be a good indicator of future volatility because remaining maturities of traded options are less than one year. CIGNA developed the expected option life of 2005 grants by considering certain factors, including assumptions used by other companies with comparable stock option plan features and CIGNA’s cancellation of a replacement option feature in June 2004. CIGNA developed the expected option life of 2004 and 2003 grants considering CIGNA’s experience.

Restricted stock. CIGNA makes restricted stock grants with vesting periods ranging from three to six years. Recipients are entitled to receive dividends and to vote during the vesting period, but forfeit their awards if their employment terminates before the vesting date.

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The table below shows the status of, and changes in, restricted stock grants during the last three years:

(Grants in thousands)	2005				2004				2003
	Grants		Weighted Average Fair Value at Grant Date		Grants		Weighted Average Fair Value at Grant Date		Grants		Weighted Average Fair Value at Grant Date
Outstanding—January 1	1,286		$	58.31	1,508		$	59.69	946		$	90.04
Granted	337		$	92.79	428		$	57.14	1,140		$	44.24
Vested	(152	)	$	86.18	(154	)	$	88.06	(190	)	$	74.93
Forfeited	(218	)	$	56.51	(496	)	$	52.42	(388	)	$	80.71
Outstanding—December 31	1,253		$	63.02	1,286		$	58.31	1,508		$	59.69

The grant date fair value of restricted stock vested was: $13 million in 2005 and $14 million in both 2004 and 2003.

At the end of 2005, approximately 2,000 employees held 1.3 million restricted shares with $31 million of related compensation expense to be recognized over the next 4 years (weighted average period).

Deferred Stock. CIGNA made deferred stock unit grants with 100% vesting in three to six years, dependent on CIGNA’s consolidated earnings per share during this vesting period. Upon meeting the stated performance objectives in 2005, the Board of Directors determined that the vesting period for the deferred stock units would be three years. On vesting, stock issuance is deferred until January of the year following an employee’s termination from CIGNA. These awards are generally forfeited if employment terminates before the vesting date. In 2003, 176,000 stock units with a weighted average fair value per unit of $44.22 were awarded. Through 2005, 9,000 units have vested and 14,000 units have been forfeited. As of December 31, 2005, 153,000 unvested units were outstanding with a weighted average fair value per unit of $44.22. Approximately $2 million of compensation cost will be recognized in 2006.

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Note 18 – Leases and Rentals

Rental expenses for operating leases, principally for office space, amounted to $148 million in 2005, $153 million in 2004 and $155 million in 2003.

As of December 31, 2005, future net minimum rental payments under non-cancelable operating leases were approximately $447 million, payable as follows (in millions): $85 in 2006, $86 in 2007, $58 in 2008, $45 in 2009, $38 in 2010, and $135 thereafter.

Note 19 – Segment Information

CIGNA’s operating segments generally reflect groups of related products, but the International segment is generally based on geography. In accordance with accounting principles generally accepted in the United States of America, operating segments that do not require separate disclosure may be combined. CIGNA measures the financial results of its segments using “segment earnings (loss),” which is defined as income (loss) from continuing operations excluding after-tax realized investment gains and losses.

In 2004, CIGNA completed the sale of its retirement benefits business and also realigned management responsibility for operations that provide case management and related services to workers’ compensation insurers and employers who self-fund workers’ compensation and disability benefits. To appropriately reflect the impact of these actions, CIGNA changed its segment reporting, and prior periods were reclassified to conform to this presentation:

• the sold retirement benefits business is reported in the Run-off Retirement segment;

• the corporate life insurance business (previously reported in the Retirement segment) was retained and is reported in Other Operations; and

• results from the disability and workers’ compensation case management activities (previously reported in the Health Care segment) are included in the Disability and Life segment.

Also in 2004, corporate overhead previously allocated to the sold retirement benefits business was reported in Corporate.

CIGNA presents segment information as follows:

Health Care CIGNA’s Health Care operations offer insured and self-funded medical, dental, behavioral health, prescription drug and other products and services that integrate to support the delivery of consumerism and health advocacy solutions. These operations also provide disability and life insurance products which were historically sold in connection with certain experience-rated medical products and continue to be managed by CIGNA’s health care business. These products and services are provided by subsidiaries of CIGNA Corporation.

Disability and Life includes group:

• disability insurance;

• disability and workers’ compensation case management;

• life insurance; and

• accident and specialty association insurance.

International includes life, accident and health coverage’s in selected markets outside the United States, primarily in Asia and Europe. In addition, CIGNA provides group benefits products to expatriate employees of multinational companies.

Run-off Retirement includes:

• gain recognition related to the sale of the retirement benefits business;

• results of modified coinsurance arrangements;

• expenses associated with the run-off of this business; and

• results of the retirement benefits business prior to the April 2004 sale.

Run-off Reinsurance consists of the run-off reinsurance business, which includes accident, domestic health, international life and health, and specialty life reinsurance businesses. CIGNA has stopped underwriting new reinsurance business.

CIGNA also reports results in two other categories.

Other Operations consist of:

• deferred gains recognized from the 1998 sale of the individual life insurance and annuity business;

• corporate life insurance (including policies on which loans are outstanding);

• settlement annuity business; and

• certain investment management services (a significant portion of which were sold in 2004).

Corporate reflects amounts not allocated to segments, such as interest expense on corporate debt, net investment income on unallocated corporate investments, intersegment eliminations, compensation cost for stock options and certain corporate overhead expenses.

CIGNA determines segment earnings (loss) consistent with the accounting policies for the consolidated financial statements, except that amounts included in Corporate are not allocated to segments. CIGNA allocates other corporate general, administrative and systems expenses on systematic bases. Income taxes are generally computed as if each segment were filing a separate income tax return.

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Summarized segment financial information for the years ended and as of December 31 was as follows:

(In millions)	2005			2004			2003
Health Care
Premiums and fees and other revenues	$	11,268		$	11,895		$	13,213
Net investment income		275			283			283
Segment revenues	$	11,543		$	12,178		$	13,496
Income taxes	$	361		$	425		$	222
Segment earnings	$	688		$	763		$	429
Disability and Life
Premiums and fees and other revenues	$	2,263		$	2,125		$	2,004
Net investment income		264			253			250
Segment revenues	$	2,527		$	2,378		$	2,254
Income taxes	$	92		$	71		$	56
Segment earnings	$	227		$	182		$	155
International
Premiums and fees and other revenues	$	1,239		$	1,031		$	866
Net investment income		71			58			49
Segment revenues	$	1,310		$	1,089		$	915
Income taxes	$	46		$	42		$	30
Equity in loss of investees	$	(1	)	$	(1	)	$	(4	)
Segment earnings	$	109		$	76		$	55
Run-off Retirement
Premiums and fees and other revenues	$	350		$	777		$	145
Net investment income		144			467			1,413
Segment revenues	$	494		$	1,244		$	1,558
Income taxes	$	105		$	134		$	98
Segment earnings	$	209		$	282		$	222
Run-off Reinsurance
Premiums and fees and other revenues	$	44		$	(82	)	$	(467	)
Net investment income		99			92			82
Segment revenues	$	143		$	10		$	(385	)
Income taxes (benefits)	$	(12	)	$	7		$	(181	)
Segment loss	$	(64	)	$	(115	)	$	(359	)

(In millions)	2005			2004			2003
Other Operations
Premiums and fees and other revenues	$	216		$	297		$	375
Net investment income		465			475			517
Segment revenues	$	681		$	772		$	892
Income taxes	$	39		$	71		$	61
Segment earnings	$	130		$	142		$	111
Corporate
Other revenues and eliminations	$	(48	)	$	(33	)	$	(73	)
Net investment income		41			15			—
Segment revenues	$	(7	)	$	(18	)	$	(73	)
Income tax benefits	$	(118	)	$	(114	)	$	(75	)
Segment loss	$	(12	)	$	(114	)	$	(127	)
Realized Investment Gains
Realized investment gains (losses)	$	(7	)	$	523		$	151
Income taxes		4			162			53
Realized investment gains (losses), net of taxes (benefits)	$	(11	)	$	361		$	98
Total
Premiums and fees and other revenues	$	15,332		$	16,010		$	16,063
Net investment income		1,359			1,643			2,594
Realized investment gains (losses)		(7	)		523			151
Total revenues	$	16,684		$	18,176		$	18,808
Income taxes	$	517		$	798		$	264
Segment earnings	$	1,287		$	1,216		$	486
Realized investment gains (losses), net of taxes (benefits)		(11	)		361			98
Income from continuing operations	$	1,276		$	1,577		$	584

Premiums and fees and other revenues by product type were as follows for the years ended December 31:

(In millions)	2005		2004		2003
Medical	$	10,344	$	10,853	$	12,071
Disability		709		653		574
Life, Accident and Health		2,432		2,311		2,301
Other		1,847		2,193		1,117
Total	$	15,332	$	16,010	$	16,063

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Note 20 – Contingencies

A. Financial Guarantees Primarily Associated with the Retirement Benefits Business

CIGNA, through its subsidiaries, is contingently liable for various financial guarantees provided in the ordinary course of business.

Separate account assets, primarily associated with the sold retirement benefits business, are contractholder funds maintained in accounts with specific investment objectives. CIGNA records separate account liabilities equal to separate account assets. In certain cases, CIGNA guarantees a minimum level of benefits for retirement and insurance contracts written in separate accounts. CIGNA establishes an additional liability if management believes that CIGNA will be required to make a payment under these guarantees. Except as noted below, these guarantees are fully reinsured by an affiliate of the buyer of the retirement benefits business:

• CIGNA guarantees that separate account assets will be sufficient to pay certain retiree or life benefits. The sponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these benefits and are required to maintain assets that exceed a certain percentage of benefit obligations. This percentage varies depending on the asset class within a sponsoring employer’s portfolio (for example, a bond fund would require a lower percentage than a riskier equity fund) and thus will vary as the composition of the portfolio changes. If employers do not maintain the required levels of separate account assets, CIGNA or an affiliate of the buyer has the right to redirect the management of the related assets to provide for benefit payments. As of December 31, 2005, employers maintained assets that exceeded the benefit obligations. Benefit obligations under these arrangements were $2.1 billion as of December 31, 2005. As of December 31, 2005 approximately 80% of these guarantees are reinsured by an affiliate of the buyer of the retirement benefits business. There were no additional liabilities required for these guarantees as of December 31, 2005.

• CIGNA guarantees that separate account assets, primarily fixed income investments, will be sufficient to pay retiree benefits for participants under a certain group annuity contract. These guarantees are fully reinsured by an affiliate of the buyer of the retirement benefits business. These guaranteed benefit obligations were $30 million as of December 31, 2005. CIGNA had no additional liabilities for these guarantees as of December 31, 2005.

B. Other Financial Guarantees

CIGNA had indemnification obligations to lenders of up to $336 million as of December 31, 2005 related to borrowings by certain real estate joint ventures which CIGNA either records as an investment or consolidates. These borrowings, which are nonrecourse to CIGNA, are secured by the joint ventures’ real estate properties with fair values in excess of the loan amounts and mature at various dates from 2006 to 2017. CIGNA’s indemnification obligations would require payment to lenders for any actual damages resulting from certain acts such as unauthorized ownership transfers, misappropriation of rental payments by others or environmental damages. Based on initial and ongoing reviews of property management and operations, CIGNA does not expect that payments will be required under these indemnification obligations. Any payments that might be required could be recovered through a refinancing or sale of the assets. In some cases, CIGNA also has recourse to partners for their proportionate share of amounts paid. There were no liabilities required for these indemnification obligations as of December 31, 2005.

To enhance investment returns, CIGNA guaranteed principal payments for groups of primarily investment grade corporate debt issuers by entering into Dow Jones indexed credit default swaps with notional amounts of $290 million as of December 31, 2005. Under these contracts, CIGNA receives periodic fees to provide future payment if an issuer of an underlying corporate bond defaults on scheduled payments or files for bankruptcy through 2010. If a default or bankruptcy occurs, CIGNA will make payment for par value of the underlying corporate bond and may subsequently sell or hold that bond as an invested asset. CIGNA has recorded liabilities of less than $1 million for the fair value of these indexed credit default swaps as of December 31, 2005.

As of December 31, 2005 CIGNA guaranteed that it would compensate the lessor for a shortfall of up to $49 million in the market value of leased equipment at the end of the lease. Guarantees of $21 million expire in 2006 and $28 million expire in 2012. CIGNA had additional liabilities for these guarantees of $2 million as of December 31, 2005.

CIGNA guaranteed construction loans of $23 million as of December 31, 2005 related to real estate joint venture investments. The loans are secured by joint venture real estate property with fair values in excess of the loan amounts and mature by 2008, including extension options. CIGNA would be required to repay the construction loans if permanent financing could not be obtained. There were no liabilities required for these guarantees as of December 31, 2005.

CIGNA had indemnification obligations as of December 31, 2005, in connection with acquisition and disposition transactions. These indemnification obligations are triggered by the breach of representations or covenants provided by CIGNA, such as representations for the presentation of financial statements, the filing of tax returns, compliance with law or the identification of outstanding litigation. These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential amount due is subject to contractual limitations based on a percentage of the transaction purchase price, while in other cases limitations are not specified or applicable. CIGNA does not believe that it is possible to determine the maximum

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potential amount due under these guarantees, since not all amounts due under these indemnification obligations are subject to limitation. As of December 31, 2005, aggregate liabilities for these obligations were less than $5 million.

CIGNA does not expect that these guarantees will have a material adverse effect on CIGNA’s consolidated results of operations, liquidity or financial condition.

C. Guaranteed Minimum Income Benefit Contracts

CIGNA’s reinsurance operations, which were discontinued in 2000 and are now an inactive business in run-off mode, reinsured variable annuity contracts that provide annuitants with certain guarantees related to minimum income benefits. When annuitants elect to receive these minimum income benefits, CIGNA may be required to make payments based on changes in underlying mutual fund values and interest rates.

CIGNA estimates the fair value of the assets and liabilities associated with these contracts using assumptions as to market returns and volatility of the underlying equity and bond mutual fund investments, interest rates, mortality, lapse, credit risk and annuity election rates.

Interest rates include both (a) the liability discount rate assumption and (b) the projected interest rates used to calculate the reinsured income benefit at the time of annuitization. Lapse refers to the full surrender of an annuity prior to annuitization of the policy. Credit risk refers to the ability of reinsurers to pay (see below). Annuity election rates refer to the proportion of annuitants who elect to receive their income benefit as an annuity.

CIGNA regularly evaluates the assumptions used in establishing these assets and liabilities and changes its estimates if actual experience or other evidence suggests that earlier assumptions should be revised. If actual experience differs from the assumptions and other considerations used in estimating these assets and liabilities, the resulting change could have a material adverse effect on CIGNA’s consolidated results of operations, and in certain situations, could have a material adverse effect on CIGNA’s financial condition.

During 2005, CIGNA completed its normal review of assumptions and recorded an after-tax charge of $9 million ($14 million pre-tax). This charge primarily reflects updates to the lapse assumption. See page 9 for the effects of hypothetical changes in assumptions for guaranteed minimum benefit contracts.

The following provides information about the assumptions used in calculating the assets and liabilities for guaranteed minimum income benefits:

• These liabilities represent estimates of the present value of net amounts expected to be paid, less the present value of net future premiums expected to be received. Included in net amounts expected to be paid is the excess of the expected value of the income benefits over the values of the annuitant’s accounts at the time of annuitization. The assets associated with these contracts represent receivables in connection with reinsurance that CIGNA has purchased from third parties (see below).

• The market return assumption is 8-12% varying by equity fund type; 6-9% varying by bond fund type; and 5-6% for money market funds.

• The volatility assumption is 14-24%, varying by equity fund type; 6-7%, varying by bond fund type; and 2-3% for money market funds.

• The discount rate is 5.75%.

• The projected interest rate used to calculate the reinsured income benefits at the time of annuitization varies by economic scenario, reflects interest rates as of the valuation date, and has a long-term mean rate of 5-6% and a standard deviation of 12-13%.

• The mortality assumption is 70% of the 1994 Group Annuity Mortality table, with 1% annual improvement beginning January 1, 2000.

• The lapse rate assumption is 3-12%, depending on policy duration.

• The annuity election rate assumption is that no more than 5% of the policies eligible to annuitize their variable annuity contracts will do so each year.

CIGNA is required to disclose the maximum potential undiscounted future payments for guarantees related to minimum income benefits using hypothetical adverse assumptions, defined as follows:

• No annuitants surrendered their accounts; and

• All annuitants lived to elect their benefit; and

• All annuitants elected to receive their benefit on the first available date (beginning in 2006 through 2014); and

• All underlying mutual fund investment values remained at the December 31, 2005 value of $3.3 billion, with no future returns.

The maximum potential undiscounted payments that CIGNA would make under those assumptions would aggregate to $1.3 billion before reinsurance recoveries. CIGNA believes the likelihood of such payment is remote and CIGNA expects the amount of actual payments to be significantly less than this hypothetical undiscounted aggregate amount. CIGNA has purchased reinsurance from third parties which covers 55% of the exposures on these contracts.

As of December 31, 2005, CIGNA had liabilities of $88 million related to these contracts and net amounts recoverable from reinsurers of $48 million. CIGNA had an additional liability of $49 million associated with the cost of reinsurance as of December 31, 2005. As of December 31, 2004, CIGNA had liabilities of $71 million related to these contracts and

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NOTESTOTHEFINANCIALSTATEMENTS

amounts recoverable from reinsurers of $39 million. CIGNA also had an additional liability of $41 million associated with the cost of reinsurance as of December 31, 2004.

See Note 10(G) to the Financial Statements for further information.

D. Regulatory and Industry Developments

Employee benefits regulation. The business of administering and insuring employee benefit programs, particularly health care programs, is heavily regulated by federal and state laws and administrative agencies, such as state departments of insurance and the federal Departments of Labor and Justice, as well as the courts. Regulation and judicial decisions have resulted in changes to industry and CIGNA’s business practices and will continue to do so in the future. In addition, CIGNA’s subsidiaries are routinely involved with various claims, lawsuits and regulatory audits and investigations that could result in financial liability, changes in business practices, or both. Health care regulation in its various forms could have an adverse effect on CIGNA’s health care operations if it inhibits CIGNA’s ability to respond to market demands or results in increased medical or administrative costs without improving the quality of care or services.

Other possible regulatory changes that could have an adverse effect on CIGNA’s employee benefits businesses include:

• additional mandated benefits or services that increase costs;

• legislation that would grant plan participants broader rights to sue their health plans;

• changes in ERISA regulations resulting in increased application of varying state laws to benefit plan administration, thus increasing administrative burdens and costs;

• additional restrictions on the use of prescription drug formularies;

• additional privacy legislation and regulations that interfere with the proper use of medical information for research, coordination of medical care and disease and disability management;

• additional variations among state laws mandating the time periods and administrative processes for payment of health care provider claims;

• legislation that would exempt independent physicians from antitrust laws; and

• changes in federal laws, such as amendments to income tax laws, which would affect the taxation of employer provided benefits, and pension legislation, which could increase pension cost.

The employee benefits industry remains under scrutiny by various state and federal government agencies and could be subject to government efforts to bring criminal actions in circumstances that could previously have given rise only to civil or administrative proceedings.

Tax benefits for corporate life insurance. Federal legislation in 1996 eliminated on a prospective basis the tax deductibility of policy loan interest for most leveraged corporate life insurance products, and an IRS initiative in 2001 encouraged policyholders to settle tax disputes regarding these products. As a result, some customers have surrendered their policies and management expects earnings associated with these products to continue to decline.

Insurance-related assessments. Many states maintain funds to pay for the operating expenses of insurance regulatory agencies and pay the obligations of insolvent insurance companies. Regulators finance these funds by imposing assessments against insurance companies operating in the state. In some states, insurance companies can recover a portion of these assessments through reduced premium taxes.

CIGNA’s insurance and HMO subsidiaries have recorded $20 million in liabilities and $10 million in assets for insolvency fund and other insurance-related assessments.

Concentration of risk. CIGNA’s products in its International segment include coverages for employees and individuals who may be exposed to acts of terrorism, the events of a war zone or natural disasters. These risks could result in a concentration of loss if a single adverse event affected many covered individuals and, in certain situations, could lead to losses that could be material to earnings for the International segment and to CIGNA’s consolidated results.

South Korea represents the single largest geographic market for CIGNA’s international businesses. In 2005, South Korea generated 27% of International’s revenues and 41% of its segment earnings. International’s business in South Korea would be vulnerable to adverse consumer credit conditions in that country. In addition, geopolitical and economic events in South Korea could have a significant impact on the International segment.

E. Litigation and Other Legal Matters

In 2004, a Florida federal court handling multi-district health care litigation against CIGNA and several health care industry competitors approved a settlement agreement between the physician class and CIGNA. A dispute with a representative of certain physicians over administration of the settlement with the physician class is likely to be resolved in mid 2006. In April 2005, the court approved a settlement between CIGNA and the remaining plaintiffs, a class of non-physician health care professionals.

In 2003, CIGNA recorded an after-tax charge of $37 million ($57 million pre-tax) to increase the reserve for this health care litigation. CIGNA had previously recognized an after-tax charge of $50 million ($77 million pre-tax) in 2002 for expected costs associated with the multi-district litigation. The reserve reflects insurance recoveries.

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Various regulators, including the New York and Connecticut Attorneys General and the Florida Insurance Department, have been investigating insurance broker compensation. Some regulators have brought suit against certain insurance brokers, including Universal Life Resources (ULR), alleging, among other things, that these brokers sought rigged bids from, and steered business to, insurers with whom they had contingent compensation arrangements. CIGNA and some of its subsidiaries are included in one such lawsuit seeking injunctive relief against these types of contingent compensation arrangements. CIGNA is also providing information about ULR in connection with an investigation by the U.S. Attorney’s Office for the Southern District of California. In addition, CIGNA is providing information about another broker in connection with an investigation by the U.S. Department of Labor. CIGNA is cooperating with the inquiries and investigations by regulators and the U.S. Attorney’s Office. Separately, several purported class action lawsuits have been filed against brokers and insurance companies, including CIGNA and certain of its subsidiaries, asserting that contingent commissions are unlawful. These suits are now in a multi-district litigation proceeding in federal court in New Jersey. CIGNA disagrees with the assertions against it in the lawsuits.

In 2004, the New York Attorney General commenced a lawsuit against Express Scripts, Inc. and two CIGNA insurance companies. Under an agreement with the CIGNA companies, Express Scripts is responsible for administering the prescription drug benefit program under New York State’s principal employee health plan, the Empire Plan. The CIGNA companies insured the prescription drug benefit program and held the contract with the New York State Department of Civil Service. The complaint primarily focuses on administration of the prescription drug benefit program.

A purported class action lawsuit and a shareholder derivative lawsuit against CIGNA and certain of its senior officers and directors allege securities law violations and breach of fiduciary duty. These suits originated in 2002.

Plaintiffs representing CIGNA Pension Plan participants who earned certain Plan benefits prior to 1998 filed a class action lawsuit against CIGNA and the CIGNA Pension Plan. The plaintiffs allege, among other things, that the Plan violated ERISA by impermissibly conditioning certain post-1997 benefit accruals on the amount of pre-1998 benefit accruals, that these conditions are not adequately disclosed to Plan participants, and that the Plan’s cash balance formula discriminates against older employees.

See “Unicover and other run-off reinsurance” on page 64 for a description of legal matters arising out of the run-off reinsurance operations.

CIGNA is routinely involved in numerous claims, lawsuits, regulatory audits, investigations and other legal matters arising, for the most part, in the ordinary course of the business of administering and insuring employee benefit programs. An increasing number of claims are being made for substantial non-economic, extra-contractual or punitive damages. The outcome of litigation and other legal matters is always uncertain, and outcomes that are not justified by the evidence can occur. CIGNA believes that it has valid defenses to the legal matters pending against it and is defending itself vigorously. Nevertheless, it is possible that resolution of one or more of the legal matters currently pending or threatened could result in losses material to CIGNA’s consolidated results of operations, liquidity or financial condition.

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NOTESTOTHEFINANCIALSTATEMENTS

Management’s Annual Report on Internal Control over Financial Reporting

Management of CIGNA Corporation (“the company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The company’s internal control system was designed to provide reasonable assurance to the company’s management and board of directors regarding the preparation and fair presentation of published financial statements. The company’s internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets and liabilities of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2005. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework. Based on Management’s assessment, we determined that the company’s internal control over financial reporting is effective as of December 31, 2005 based upon those criteria set forth by COSO.

Management’s assessment of the effectiveness of the company’s internal control over financial reporting, as of December 31, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors

and Shareholders of CIGNA Corporation

We have completed integrated audits of CIGNA Corporation’s 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005 and an audit of its 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements

In our opinion, the accompanying consolidated balance sheets and the related consolidated statement of income, comprehensive income and changes in shareholders’ equity and cash flows presents fairly, in all material respects, the financial position of CIGNA Corporation and its subsidiaries (“the Company”) at December 31, 2005 and December 31, 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that the Company maintained effective internal control over financial reporting as of December 31, 2005 based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control – Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

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

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

Philadelphia, Pennsylvania

February 22, 2006

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Quarterly Financial Data (unaudited)

The following unaudited quarterly financial data is presented on a consolidated basis for each of the years ended December 31, 2005 and 2004.

Quarterly financial results necessarily rely heavily on estimates. This and certain other factors, such as the seasonal nature of portions of the insurance business, suggest the need to exercise caution in drawing specific conclusions from quarterly consolidated results.

(In millions, except per share amounts)	Three Months Ended
	March 31			June 30			Sept. 30			Dec. 31
Consolidated Results
2005
Total revenues	$	4,345		$	4,107		$	4,022		$	4,210
Income from continuing operations before income taxes		665			437			383			308
Net income		436	(1)		720	(2)		259	(3)		210	(4)
Net income per share:
Basic		3.34			5.58			2.04			1.71
Diluted		3.28			5.48			2.00			1.67
2004
Total revenues	$	4,722		$	4,633		$	4,479		$	4,342
Income from continuing operations before income taxes		312			759			495			809
Income before cumulative effect of accounting change		207			504			308			558
Net income		68	(5)		504			308	(6)		558	(7)
Earnings per share from income before cumulative effect of accounting change:
Basic		1.48			3.63			2.28			4.22
Diluted		1.47			3.59			2.26			4.16
Stock and Dividend Data
2005
Price range of common stock — high	$	92.74		$	109.45		$	118.24		$	119.82
— low	$	78.11		$	85.64		$	102.82		$	105.10
Dividends declared per common share	$	.025		$	.025		$	.025		$	.025
2004
Price range of common stock — high	$	63.96		$	70.54		$	70.40		$	82.80
— low	$	52.90		$	58.82		$	58.93		$	58.15
Dividends declared per common share	$	.33		$	.025		$	.025		$	.025

⁽¹⁾ The first quarter of 2005 includes an after-tax gain of $169 million related to the accelerated recognition of a portion of the deferred gain on the sale of the retirement benefits business, an after-tax cost reduction charge of $33 million related to CIGNA’s first quarter 2005 program and an after-tax charge of $8 million for amounts associated with a modified coinsurance arrangement.

⁽²⁾ The second quarter of 2005 includes an after-tax gain of $29 million related to the accelerated recognition of a portion of the deferred gain on the sale of the retirement benefits business and an after-tax benefit of $430 million related to an IRS settlement. See Note 16 for additional information.

⁽³⁾ The third quarter of 2005 includes an after-tax gain of $2 million related to the accelerated recognition of a portion of the deferred gain on the sale of the retirement benefits business and an after-tax benefit of $7 million related to an IRS settlement.

⁽⁴⁾ The fourth quarter of 2005 reflects an after-tax gain of $4 million related to the accelerated recognition of a portion of the deferred gain on the sale of the retirement benefits business.

⁽⁵⁾ The first quarter of 2004 includes an after-tax restructuring charge of $49 million related to CIGNA’s operational effectiveness review and an after-tax charge of $11 million related to the accounting for SOP 03-1. See Note 2 to the Financial Statements for additional information.

⁽⁶⁾ The third quarter of 2004 includes an after-tax gain of $79 million related to the accelerated recognition of a portion of the deferred gain on the sale of the retirement benefits business and an after-tax charge of $9 million related to derivative accounting associated with the modified coinsurance arrangements resulting from the sale of the retirement benefits business.

⁽⁷⁾ The fourth quarter of 2004 includes an after-tax gain of $141 million related to the accelerated recognition of a portion of the deferred gain on the sale of the retirement benefits business, an after-tax charge of $16 million for amounts associated with a modified coinsurance arrangement, an after-tax benefit of $28 million for a federal tax refund and an after-tax gain of $12 million on the sale of a significant portion of CIGNA’s investment advisory businesses.

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Supplementary Financial Information

(In millions)
For the years ended December 31,	2005			2004			2003
Revenues from Continuing Operations
Health Care
Premiums and fees:
Commercial HMO	$	2,646		$	3,191		$	4,060
Experience-rated medical		2,836			2,937			3,216
Dental		899			888			944
Medicare and Medicaid		286			286			450
Other Medical		1,389			1,177			895
Life and other non-medical		399			496			638
Fees		1,722			1,893			2,081
Total premiums and fees		10,177			10,868			12,284
Net investment income		275			283			283
Other revenues		1,091			1,027			929
Realized investment gains		1			22			68
Total		11,544			12,200			13,564
Disability and Life
Premiums and fees		2,065			1,923			1,807
Net investment income		264			253			250
Other revenues		198			202			197
Realized investment gains (losses)		(3	)		28			59
Total		2,524			2,406			2,313
International
Premiums and fees		1,243			1,026			855
Net investment income		71			58			49
Other revenues		(4	)		5			11
Realized investment gains		—			2			7
Total		1,310			1,091			922
Run-off Retirement
Premiums and fees		2			215			271
Net investment income		144			467			1,413
Other revenues		348			562			(126	)
Realized investment gains		7			448			49
Total		501			1,692			1,607
Run-off Reinsurance
Premiums and fees		92			80			84
Net investment income		99			92			82
Other revenues		(48	)		(162	)		(551	)
Realized investment gains (losses)		(3	)		1			21
Total		140			11			(364	)
Other Operations
Premiums and fees		116			124			159
Net investment income		465			475			517
Other revenues		100			173			216
Realized investment gains (losses)		(9	)		22			(53	)
Total		672			794			839
Corporate
Net investment income		41			15			—
Other revenues and eliminations		(48	)		(33	)		(73	)
Total		(7	)		(18	)		(73	)
Total Consolidated Revenues from Continuing Operations
Premiums and fees		13,695			14,236			15,460
Net investment income		1,359			1,643			2,594
Other revenues		1,637			1,774			603
Realized investment gains (losses)		(7	)		523			151
Total	$	16,684		$	18,176		$	18,808

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(In millions)
For the years ended December 31,	2005			2004			2003
Segment Earnings (Loss)(1)
Health Care	$	688		$	763		$	429
Disability and Life		227			182			155
International		109			76			55
Run-off Retirement		209			282			222
Run-off Reinsurance		(64	)		(115	)		(359	)
Other Operations		130			142			111
Corporate		(12	)		(114	)		(127	)
Total	$	1,287		$	1,216		$	486
Income (Loss) from Continuing Operations
Health Care	$	689		$	778		$	473
Disability and Life		223			202			194
International		109			77			60
Run-off Retirement		214			578			254
Run-off Reinsurance		(66	)		(110	)		(346	)
Other Operations		119			166			76
Corporate		(12	)		(114	)		(127	)
Total	$	1,276		$	1,577		$	584
Segment Statistics
Health Care
Estimated covered lives (in thousands):
Guaranteed cost:
Commercial HMO		813			900			1,332
Medicare and Medicaid		32			33			42
Other		214			56			74
Total guaranteed cost		1,059			989			1,448
Experience-rated		1,129			1,257			1,420
Service		6,902			7,455			8,667
Total medical membership		9,090			9,701			11,535
Dental(2)		10,516			10,747			12,149
Behavioral care(2)		15,642			14,334			14,189
Pharmacy(2)		7,345			7,429			8,993

⁽¹⁾ Segment earnings (loss) is defined as income (loss) from continuing operations excluding after-tax realized investment gains and losses.

⁽²⁾ Reflects members enrolled in CIGNA’s dental, behavioral care or managed pharmacy programs, which provide access to services through a nationwide network. These members may also be medical members, or they may have stand-alone dental, behavioral care or pharmacy coverage.

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EX-21

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

Listed below are subsidiaries of CIGNA Corporation as of December 31, 2005 with their jurisdictions of organization shown in parentheses. Those subsidiaries not listed would not, in the aggregate, constitute a “significant subsidiary” of CIGNA Corporation, as that term is defined in Rule 1-02(w) of Regulation S-X.

CIGNA Holdings, Inc. (Delaware)
I.	Connecticut General Corporation (Connecticut)
	A.	Arbor Reinsurance Company Limited (Bermuda)
	B.	CIGNA Dental Health, Inc. (Florida)
		(1)	CIGNA Dental Health of California, Inc. (California)
		(2)	CIGNA Dental Health of Colorado, Inc. (Colorado)
		(3)	CIGNA Dental Health of Delaware, Inc. (Delaware)
		(4)	CIGNA Dental Health of Florida, Inc. (Florida)
		(5)	CIGNA Dental Health of Illinois, Inc. (Illinois)
		(6)	CIGNA Dental Health of Kansas, Inc. (Kansas)
		(7)	CIGNA Dental Health of Kentucky, Inc. (Kentucky)
		(8)	CIGNA Dental Health of Maryland, Inc. (Delaware)
		(9)	CIGNA Dental Health of Missouri, Inc. (Missouri)
		(10)	CIGNA Dental Health of New Jersey, Inc. (New Jersey)
		(11)	CIGNA Dental Health of New Mexico, Inc. (New Mexico)
		(12)	CIGNA Dental Health of North Carolina, Inc. (North Carolina)
		(13)	CIGNA Dental Health of Ohio, Inc. (Ohio)
		(14)	CIGNA Dental Health of Pennsylvania, Inc. (Pennsylvania)
		(15)	CIGNA Dental Health of Texas, Inc. (Texas)
		(16)	CIGNA Dental Health of Virginia, Inc. (Virginia)
		(17)	CIGNA Dental Health Plan of Arizona, Inc. (Arizona)
		(18)	CIGNA Dental Merger Corporation (Maryland)
	C.	CIGNA Health Corporation (Delaware)
		(1)	Choicelinx Corporation (Delaware)
		(2)	Healthsource, Inc. (New Hampshire)
			(a)	CIGNA HealthCare of Arizona, Inc. (Arizona)
			(b)	CIGNA HealthCare of California, Inc. (California)
			(c)	CIGNA HealthCare of Colorado, Inc. (Colorado)
			(d)	CIGNA HealthCare of Connecticut, Inc. (Connecticut)
			(e)	CIGNA HealthCare of Delaware, Inc. (Delaware)
			(f)	CIGNA HealthCare of Florida, Inc. (Florida)
			(g)	CIGNA HealthCare of Georgia, Inc. (Georgia)
			(h)	CIGNA HealthCare of Illinois, Inc. (Delaware) (99.60% with balance owned by non-affiliate)
			(i)	CIGNA HealthCare of Indiana, Inc. (Indiana)
			(j)	CIGNA HealthCare of Maine, Inc. (Maine)
			(k)	CIGNA HealthCare of Massachusetts, Inc. (Massachusetts)
			(l)	CIGNA HealthCare Mid-Atlantic, Inc. (Maryland)
			(m)	CIGNA HealthCare of New Hampshire, Inc. (New Hampshire)
			(n)	CIGNA HealthCare of New Jersey, Inc. (New Jersey)
			(o)	CIGNA HealthCare of New York, Inc. (New York)
			(p)	CIGNA HealthCare of North Carolina, Inc. (North Carolina)
			(q)	CIGNA HealthCare of Ohio, Inc. (Ohio)
			(r)	CIGNA HealthCare of Pennsylvania, Inc. (Pennsylvania)
			(s)	CIGNA HealthCare of South Carolina, Inc. (South Carolina)
			(t)	CIGNA HealthCare of St. Louis, Inc. (Missouri)
			(u)	CIGNA HealthCare of Tennessee, Inc. (Tennessee)
			(v)	CIGNA HealthCare of Texas, Inc. (Texas)

			(w)	CIGNA HealthCare of Utah, Inc. (Utah)
			(x)	CIGNA HealthCare of Virginia, Inc. (Virginia)
			(y)	CIGNA Insurance Group, Inc. (New Hampshire)
			(z)	CIGNA Insurance Services Company (South Carolina)
			(aa)	Temple Insurance Company Limited (Bermuda)
		(3)	Managed Care Consultants, Inc. (Nevada)
	D.	CIGNA Behavioral Health, Inc. (Minnesota)
	E.	CIGNA Life Insurance Company of Canada (Canada)
	F.	CIGNA Life Insurance Company of New York (New York)
	G.	Connecticut General Life Insurance Company (Connecticut)
		(1)	Capstone Government Solutions, LLC (Delaware) (50% with balance owned by non-affiliate)
		(2)	CIGNA Government Services, LLC (Delaware)
		(3)	CIGNA Health Support, LLC (Delaware)
		(4)	Tel-Drug of Pennsylvania, LLC (Pennsylvania)
	H.	International Rehabilitation Associates, Inc. d/b/a Intracorp (Delaware)
	I.	Life Insurance Company of North America (Pennsylvania)
		(1)	CIGNA & CMC Life Insurance Company Limited (China) (50% with balance owned by a non-affiliate)
		(2)	LINA Life Insurance Company of Korea (Korea)
		(3)	Linatex, Inc. (Delaware)
	J.	Tel-Drug, Inc. (South Dakota)
II.	CIGNA Global Holdings, Inc. (Delaware)
	A.	CIGNA Brazil Holdings, Inc. (Delaware)
		(1)	CIGNA Brasil Participacoes Ltda. (Brazil) (99.99% with balance owned by affiliate)
	B.	CIGNA International Marketing (Thailand) Limited (Thailand) (99.98% with balance owned by affiliates)
	C.	CIGNA Global Reinsurance Company, Ltd. (Bermuda)
		(1)	CIGNA Holdings Overseas, Inc. (Delaware)
			(a)	CIGNA Europe Insurance Company S.A.-N.V. (Belgium) (99.99% with balance owned by affiliate)
			(b)	CIGNA European Services (UK) Limited (United Kingdom)
			(c)	CIGNA International Marketing Australia Limited (Australia)
			(d)	CIGNA Life Insurance Company of Europe S.A.- N.V. (Belgium) (99.99% with balance owned by affiliate)
			(e)	Empresa Guatemalteca CIGNA de Seguros, Sociedad Anonima (Guatemala) (97.37 % with balance owned by non-affiliates)
			(f)	CIGNA Seguradora S.A. (Brazil) (74.39% with balance owned by affiliate)
			(g)	Inversiones CIGNA Limitada (Chile) (99.55% with balance owned by affiliate)
				(i)	CIGNA Asistencia Administrativa Limitada (Chile) (98.09% with balance owned by affiliate)
				(ii)	CIGNA Compania de Seguros de Vida (Chile) S.A. (Chile) (98.64% with balance owned by non-affiliates)
			(h)	CIGNA International Marketing (Japan)
			(i)	CIGNA Apac Holdings Limited (New Zealand)
				(i)	CIGNA Life Insurance New Zealand Limited (New Zealand)
				(ii)	CIGNA Taiwan Life Insurance Company Limited (New Zealand)
			(j)	RHP Thailand Limited (Thailand) (25% directly owned)
		(2)	CIGNA Worldwide Insurance Company (Delaware)
			(a)	PT. Asuransi CIGNA (Indonesia) (80% with balance owned by non-affiliate)
	D.	CIGNA International Corporation (Delaware)
	E.	CIGNA International Services, Inc. (Delaware)
	F.	CIGNA Stu S.A. (Poland) (7.03% with balanced owned by non-affiliates)

III.	CIGNA Investment Group, Inc. (Delaware)
	A.	CIGNA International Finance Inc. (Delaware)
		(1)	CIGNA International Investment Advisors, Ltd. (Delaware)
			(a)	CIGNA Fund Managers Limited (Bermuda)
			(b)	CIGNA International Investment Advisors Limitada (Chile)
	B.	CIGNA Investments, Inc. (Delaware)
	C.	CIGNA Investment Advisors, Inc. (Delaware)
IV.	CIGNA Intellectual Property, Inc. (Delaware)

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-41011) and Form S-8 (No. 33-44371, No. 33-51791, No. 33-60053, No. 333-22391, No. 333-31903, No. 333-64207, No. 333-90785, No. 333-107839 and No. 333-129395) of CIGNA Corporation of our report dated February 22, 2006 relating to the financial statements, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 22, 2006 relating to the financial statement schedules, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 23, 2006

EX-24.1

Exhibit 24.1

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and CHRISTINE A. REUTHER, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i)   CIGNA’s Annual Report on Form 10-K and all amendments thereto (collectively, “CIGNA’s Form 10-K”);

(ii)   any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207, 333-90785, 333-107839 and 333-129395);

(iii)   all amendments to, or any new registration statement to replace, CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2007.

IN WITNESS WHEREOF, the undersigned has executed this document as of  the 22^nd day of February, 2006.

/s/ Robert H. Campbell

Robert H. Campbell

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director and officer of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and CHRISTINE A. REUTHER, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i)   CIGNA’s Annual Report on Form 10-K and all amendments thereto (collectively, “CIGNA’s Form 10-K”);

(ii)   any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207, 333-90785, 333-107839 and 333-129395);

(iii)   all amendments to, or any new registration statement to replace, CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2007.

IN WITNESS WHEREOF, the undersigned has executed this document as of the 22^nd day of February, 2006.

 /s/ H. Edward Hanway

  H. Edward Hanway

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and CHRISTINE A. REUTHER, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i)   CIGNA’s Annual Report on Form 10-K and all amendments thereto (collectively, “CIGNA’s Form 10-K”);

(ii)   any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207, 333-90785, 333-107839 and 333-129395);

(iii)   all amendments to, or any new registration statement to replace, CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2007.

IN WITNESS WHEREOF, the undersigned has executed this document as of the 22^nd day of February, 2006.

/s/ Isaiah Harris, Jr. 

Isaiah Harris, Jr.  

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and CHRISTINE A. REUTHER, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i)   CIGNA’s Annual Report on Form 10-K and all amendments thereto (collectively, “CIGNA’s Form 10-K”);

(ii)   any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207, 333-90785, 333-107839 and 333-129395);

(iii)   all amendments to, or any new registration statement to replace, CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as her own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2007.

IN WITNESS WHEREOF, the undersigned has executed this document as of the 22^nd day of February, 2006.

/s/ Jane E. Henney, M.D. 

Jane E. Henney, M.D.

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and CHRISTINE A. REUTHER, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i)   CIGNA’s Annual Report on Form 10-K and all amendments thereto (collectively, “CIGNA’s Form 10-K”);

(ii)   any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207, 333-90785, 333-107839 and 333-129395);

(iii)   all amendments to, or any new registration statement to replace, CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2007.

IN WITNESS WHEREOF, the undersigned has executed this document as of  the 22^nd day of February, 2006.

 /s/ Peter N. Larson

Peter N. Larson 

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and CHRISTINE A. REUTHER, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i)   CIGNA’s Annual Report on Form 10-K and all amendments thereto (collectively, “CIGNA’s Form 10-K”);

(ii)   any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207, 333-90785, 333-107839 and 333-129395);

(iii)   all amendments to, or any new registration statement to replace, CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2007.

IN WITNESS WHEREOF, the undersigned has executed this document as of the 22^nd day of February, 2006.

 /s/ Roman Martinez IV

 Roman Martinez IV

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and CHRISTINE A. REUTHER, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i)   CIGNA’s Annual Report on Form 10-K and all amendments thereto (collectively, “CIGNA’s Form 10-K”);

(ii)   any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207, 333-90785, 333-107839 and 333-129395);

(iii)   all amendments to, or any new registration statement to replace, CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on April 26, 2006.

IN WITNESS WHEREOF, the undersigned has executed this document as of the 22^ndday of February, 2006.

 /s/ Louis W. Sullivan, M.D.

 Louis W. Sullivan, M.D.

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and CHRISTINE A. REUTHER, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i)   CIGNA’s Annual Report on Form 10-K and all amendments thereto (collectively, “CIGNA’s Form 10-K”);

(ii)   any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207, 333-90785, 333-107839 and 333-129395);

(iii)   all amendments to, or any new registration statement to replace, CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2007.

IN WITNESS WHEREOF, the undersigned has executed this document as of the 22^nd day of February, 2006.

 /s/ Harold A. Wagner

 Harold A. Wagner

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and CHRISTINE A. REUTHER, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i)   CIGNA’s Annual Report on Form 10-K and all amendments thereto (collectively, “CIGNA’s Form 10-K”);

(ii)   any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207, 333-90785, 333-107839 and 333-129395);

(iii)   all amendments to, or any new registration statement to replace, CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as her own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2007.

IN WITNESS WHEREOF, the undersigned has executed this document as of the 22^nd day of February, 2006.

 /s/ Carol Cox Wait

 Carol Cox Wait

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and CHRISTINE A. REUTHER, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i)   CIGNA’s Annual Report on Form 10-K and all amendments thereto (collectively, “CIGNA’s Form 10-K”);

(ii)   any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207, 333-90785, 333-107839 and 333-129395);

(iii)   all amendments to, or any new registration statement to replace, CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as her own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2007.

IN WITNESS WHEREOF, the undersigned has executed this document as of the 22^nd day of February, 2006.

 /s/ Donna F. Zarcone

 Donna F. Zarcone

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and CHRISTINE A. REUTHER, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i)   CIGNA’s Annual Report on Form 10-K and all amendments thereto (collectively, “CIGNA’s Form 10-K”);

(ii)   any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207, 333-90785, 333-107839 and 333-129395);

(iii)   all amendments to, or any new registration statement to replace, CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2007.

IN WITNESS WHEREOF, the undersigned has executed this document as of the 22^nd day of February, 2006.

 /s/ William D. Zollars

 William D. Zollars

EX-24.2

Exhibit 24.2

Certified to be a true and correct copy of the resolutions adopted by the Board of Directors of CIGNA Corporation at a meeting held on February 22, 2006, a quorum being present, and such resolutions are still in full force and effect as of this date of certification, not having been amended, modified or rescinded since the date of their adoption.

RESOLVED, That the Officers of the Corporation, and

each of them, are hereby authorized to sign the Form 10-K in

the name and on behalf of and as attorneys for the Corporation

and each of its Directors and Officers.

RESOLVED, That each Officer and Director of the

Corporation who may be required to execute (whether on behalf

of the Corporation or as an Officer or Director thereof) the Form

10-K, is hereby authorized to execute and deliver a power of

attorney appointing such person or persons named therein as

true and lawful attorneys and agents to execute in the name,

place and stead (in any such capacity) of any such Officer or

Director said Form 10-K and to file any such power of attorney

together with the Form 10-K with the Securities and Exchange

Commission.

Date:February 22, 2006	/s/ Carol J. Ward
	Carol J. Ward

EX-31.1

Exhibit 31.1

CERTIFICATION

I, H. EDWARD HANWAY, certify that:

1.	I have reviewed this Annual Report on Form 10-Kof CIGNA Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2006	/s/ H. Edward Hanway
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, MICHAEL W. BELL, certify that:

1.	I have reviewed this Annual Report on Form 10-K of CIGNA Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2006	/s/ Michael W. Bell
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer of

CIGNA Corporation pursuant to 18 U.S.C. Section 1350

I certify that, to the best of my knowledge and belief, the Annual Report on Form 10-K of CIGNA Corporation for the fiscal period ending December 31, 2005 (the “Report”):

(1)	complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of CIGNA Corporation.

/s/ H. Edward Hanway

H. Edward Hanway

Chief Executive Officer

February 23, 2006

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer of

CIGNA Corporation pursuant to 18 U.S.C. Section 1350

I certify that, to the best of my knowledge and belief, the Annual Report on Form 10-K of CIGNA Corporation for the fiscal period ending December 31, 2005 (the “Report”):

(1)	complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of CIGNA Corporation.

/s/ Michael W. Bell

Michael W. Bell

Chief Financial Officer

February 23, 2006

COVER

Pauline A. Candaux

Vice President & Chief Counsel

Corporate & Financial Law

[CIGNA Logo]

Routing TL48C

Two Liberty Place

Philadelphia PA 19192

Telephone 215-761-6242

Facsimile 215-761-8648

pauline.candaux@cigna.com

February 23, 2006

VIA EDGAR

Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, DC 20549-1004

Attention: Filing Desk Stop 1-4

Re:	CIGNA Corporation
	Annual Report on Form 10-K
	File Number 1-8323

Dear Sir or Madam:

On behalf of CIGNA Corporation (the “Company”), I submit for filing pursuant to Section 13 of the Securities Exchange Act of 1934, the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

In accordance with General Instruction D(3) to Form 10-K, the Company notes that the Financial Statements in the Report do not reflect changes in any accounting principles or practices, or in the method of applying any such principles or practices except as disclosed in Notes 2(A) and 2(B) to the financial statements (see Exhibit 13).

If you have any questions concerning this filing, kindly telephone me.

Very truly yours,

/s/ Pauline A. Candaux