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, 2006
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
Purchase Rights

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, 2006, was approximately $10.5 billion.

As of January 31, 2007, 97,472,470 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, 2006. Part III of this Form 10-K incorporates by reference information from the registrant’s proxy statement to be dated on or about March 22, 2007.

TABLE OF CONTENTS

Page

Item 1.	Business
	A.	Description of Business	322
	B.	Financial Information about Industry Segments	3
	C.	Health Care	4
	D.	Disability & Life	13
	E.	International	15
	F.	Other Operations	18
	G.	Investments and Investment Income	19
	H.	Run-off Retirement	22
	I.	Run-off Reinsurance	23
	J.	Regulation	25
	K.	Ratings	28
	L.	Miscellaneous	30
Item 1A.	Risk Factors		31
Item 1B.	Unresolved Staff Comments		37
Item 2.	Properties		37
Item 3.	Legal Proceedings		37
Item 4.	Submission of Matters to a Vote of Security Holders		39
Executive Officers of the Registrant			39
PARTII
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities		40
Item 6.	Selected Financial Data		41
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of
	Operations		41
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		41
Item 8.	Financial Statements and Supplementary Data		41
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial
	Disclosure		41
Item 9A.	Controls and Procedures		41
Item 9B.	Other Information		41
	It
PART III
Item 10.	Directors and Executive Officers of the Registrant		41
	A.       Directors of the Registrant		41
	B.        Executive Officers of the Registrant		42
	C.        Code of Ethics and Other Corporate Governance Disclosures		42
Item 11.	Executive Compensation		42
Item 12.	Security Ownership of Certain Beneficial Owners and Management and
	Related Stockholder Matters		42
Item 13.	Certain Relationships and Related Transactions		42
Item 14.	Principal Accounting Fees and Services		42
PART IV
Item 15.	Exhibits and Financial Statement Schedules		42
Signatures			43
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 $4.3 billion and assets of $42.4 billion as of December 31, 2006, and revenues of $16.5 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, the majority of which are offered through the workplace, including health care products and services, 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 Form 10-K.

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:

•   Health Care

•  Disability and Life

•   International

•  Other Operations

•   Run-off Retirement

•  Run-off Reinsurance

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 on page 42 of this Form 10-K for additional available information.

B. Financial Information about Industry Segments

The financial information included 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 2006 presentation. Industry rankings and percentages set forth below are for the year ended December 31, 2005, 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 2006 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 may be integrated to support consumer-focused health care programs. These operations also provide disability and life insurance products which were historically sold in connection with certain experience-rated medical products. These products and services are provided and administered 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 role of the health care consumer. Engaging consumers more closely in health care decisions can result in improved health care outcomes and remove unnecessary costs from the system. Consumerism represents a transition from a cost-based business model to a value-based model. Using this model, CIGNA seeks to provide actionable information about provider quality and cost, customer support tools and services, and health advocacy support, to assist consumers in making more informed choices regarding their health care and in achieving better health outcomes.

CIGNA has developed products, educational resources and customer support tools for consumers and capabilities to provide information to employers about the health needs of their plan participants. CIGNA believes that its capabilities in consumerism, health advocacy and providing useful information to consumers, employers, and providers positions the Company to meet the emerging market need.

CIGNA continually evaluates potential 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 2006 CIGNA:

•   acquired the voluntary health insurance business of Star-HRG^SM;

•   transitioned business from a health care industry competitor in the Arizona market;

•  entered into strategic alliances with several regional managed care organizations including Tufts Health Plan, HealthPartners, Inc., Health Alliance Plan, and MVP Health Plan;

•  acquired vielife Holdings, a U.K. based provider of integrated online health management and coaching programs;

•   negotiated to acquire Mid-South Administrative Group, LLC, a Memphis, Tennessee-based company that designs and administers self-funded health care benefits (and acquired the company on January 1, 2007); and

•   entered into an agreement with the University of Michigan in order to access certain intellectual property related to identification of health risks and employer worksite health and wellness programs.

Products and Services

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, and governmental entities. Products are marketed in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands and Canada.

Medical

CIGNA provides a wide array of products and services to meet the needs of employers and other sponsors of 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^® solutions, which offer a choice of benefit, participating provider network, funding, medical management, consumerism and health advocacy options for employers and consumers. Through its CareAllies^SM brand, CIGNA provides medical management, disease

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management, and health advocacy services to large plan sponsors that allow their employees to choose from among multiple health care vendors. CareAllies^SM offers a consistent set of services to address the clinical and administrative inconsistencies that are inherent in the multi-vendor approach.

To improve health outcomes and reduce unnecessary costs, it is CIGNA's goal to provide customers who purchase more than one product (including any combination of medical, dental, behavioral health, pharmacy and medical care management features) with: (1) a holistic and integrated approach toward 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.

As part of its commitment to help members anticipate and manage their health care costs and to address provider debt concerns, CIGNA will pilot a new payment process in limited locations in 2007. The process is designed to allow members and providers to obtain a real-time treatment cost estimate reflecting the member’s actual co-pays and deductibles, and facilitate payment to providers from sources such as the member’s health savings account or line of credit.

CIGNA strengthened its presence in the voluntary benefits marketplace with the acquisition of the Star HRG^SM voluntary health insurance business and the creation of the Fundamental Care^SM product offering for companies with 51 or more eligible employees. This product is designed to be more affordable than traditional major medical coverage. Fundamental Care^SM meets the need for a voluntary medical product for the working uninsured that provides higher coverage levels than limited benefit plans.

CIGNA is also developing technology 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: (1) frequency and type of health care services provided; (2) level of employee engagement in health care decisions; (3) effectiveness of existing incentives in meeting employee population objectives; and (4) 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 arrangement (“HRA”) and health savings account (“HSA”) options. 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 investment options. Funds in the HSA can be used to pay the deductible and for other eligible tax-deductible medical expenses.

In 2006, CIGNA enhanced its portfolio of offerings to provide more flexible versions of the standard HRA. CIGNA introduced the “Healthy Rewards^® HRA,” which facilitates the deposit of financial incentives to reward healthy activities, and the “Healthy Futures HRA,” a retirement HRA. Additionally, CIGNA expanded the availability of its HRA plans to businesses with 51-200 employees in eight additional states, so that these plans are now available to small businesses in a total of 30 states. Working with JPMorgan Chase Bank, mutual fund investment options are made available to CIGNA's HSA accountholders as a means of investing HSA funds.

HMOs. HMOs are required by law to provide coverage for all basic health services. They use various tools to facilitate the appropriate use 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 who is 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

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participating specialists or facilities. CIGNA also offers an open access HMO product that allows members to obtain covered services 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 using networks of independent physicians, hospitals and other health care providers that have directly or indirectly contracted with the HMO.

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

Network and POS 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” (“POS”) 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.

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. As part of 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.

PPO Medical Products. CIGNA also offers exclusive provider organization (“EPO”) and PPO plans. EPO and PPO plans are similar to HMO and POS plans, respectively, except the network of CIGNA participating providers is national, rather than defined by geographical areas and is larger than the HMO and POS participating provider network. An EPO plan does not generally provide for out-of-network coverage for non-emergent care. For PPO plans, the participant’s coinsurance obligation is greater for Out-of-Network services than it is for In-Network services.

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.

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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, dental preferred provider organization (“DPPO”), dental exclusive provider organization (“DEPO”) 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 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. Members typically choose a primary care dentist from CIGNA's provider network. Members are generally required to obtain referrals from their primary care general dentist to receive covered non-emergency services from participating specialists.

CIGNA also offers DPPO products similar to the medical PPO products described above. As of December 31, 2006, CIGNA’s national DPPO network had approximately 46,800 (42,400 as of December 31, 2005) participating dentists with approximately 87,600 (70,200 as of December 31, 2005) contracted access points.

In addition, CIGNA offers DEPO products that generally offer in-network only benefit coverage. DEPO plans do not require the selection of a primary care general dentist and do not require referrals to in-network specialists.

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

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, which gives 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, 2006, CIGNA's behavioral care national network had approximately 55,200 access points to independent psychiatrists, psychologists and clinical social workers and approximately 5,000 facilities and clinics that are paid on a contracted fee-for-service basis. As of December 31, 2005, CIGNA's behavioral care national network had approximately 53,700 access points to 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 to its insured and self-funded customers prescription drug plans both in conjunction with its medical products described above and on a stand alone basis. CIGNA has a nationwide network of approximately 57,400 contracted pharmacies that it uses in connection

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with its HMO, Network, POS, PPO and Choice Fund products. In addition, CIGNA provides managed pharmacy benefit programs in connection with its HMO and POS products as wells as Pharmacy Outcome Improvement programs that take a holistic approach to helping improve outcomes for members and managing medical costs for customers.

CIGNA also offers cost-effective mail order, telephone and on-line pharmaceutical fulfillment services through its CIGNA Tel-Drug^® operation. In 2006, CIGNA launched new preventive prescription drug plan options to promote medication compliance by providing a higher level of benefits coverage to members enrolled in high-deductible plans who need certain medications to prevent illness or to address specified chronic health care conditions.In addition, CIGNA has made available on-line pharmacy decision support tools including:

•   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 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 and track out-of-pocket expenses.

In 2005, CIGNA introduced CIGNATURE Rx ^SM, its Medicare Part D prescription drug program, which provides a number of plan options as well as service and information support. CIGNATURE Rx ^SM is provided in alliance with NationsHealth, Inc., and combines CIGNA's pharmacy product capabilities with NationsHealth’s service and distribution capabilities. CIGNATURE Rx ^SM 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 2,500 clinical professionals;

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

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

•   disease management programs, including CIGNA Well Aware for Better Health^®, which focuses on chronic conditions such as asthma, diabetes, heart disease, low back pain, depression, weight complications, chronic obstructive pulmonary disease, and other targeted conditions.

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

•   myCIGNA.com, CIGNA’s consumer Internet portal. The portal is personalized with each member’s CIGNA medical, dental and pharmacy plan information;

•   myCignaPlans.com, a website which allows prospective members to compare plan coverage and pricing options, before enrolling, based on a variety of factors. The application gives consumers information on the total health care cost to them and their employer;

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

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•  Health Risk Assessment, an online interactive tool through which consumers can identify potential health risks and monitor their health status.

Quality

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

Participating Provider Network.

CIGNA has an extensive national network of participating health care providers, which as of December 31, 2006 consisted of approximately 5,000 hospitals and approximately 518,600 providers as well as other facilities, pharmacies and vendors of health care services and supplies. As of December 31, 2005, CIGNA's national network of participating health care providers consisted of approximately 4,800 hospitals and approximately 500,700 providers.

In most instances, a CIGNA subsidiary contracts directly with the participating provider to provide covered services to members at agreed-upon rates of reimbursement. In some instances, however, CIGNA companies contract with third parties for access to their provider networks. In addition, CIGNA has entered into strategic alliances with several regional managed care organizations (Tufts Health Plan, HealthPartners, Inc., Health Alliance Plan, and MVP Health Plan) to gain access to their market leading provider networks and discounts.

CIGNA Care Network^®. CIGNA Care Network® is a benefit design option available for CIGNA plans in 62 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 or co-insurance when they receive care from a specialist designated as a CIGNA Care Network^® provider. CIGNA participating specialists are evaluated annually for the CIGNA Care Network^® designation.

Provider Credentialing. CIGNA credentials physicians, hospitals and other health care providers in its participating provider networks using quality criteria which meets or exceeds the standards of external accreditation or state regulatory agencies, or both. Typically, most providers 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, 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, 2006, 96% of CIGNA’s U.S. plan locations are NCQA accredited and, as of January, 2007, 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.

Markets and Distribution

CIGNA the following targeted market segments for its products:

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

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•  regional accounts, which are generally defined as multi-site employers with more than 50 but fewer than 5,000 employees;

•  small business and individual, which includes employers with fewer than 50 employees and individuals;

•   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;

•   seniors, which focuses on the health care needs of individuals 55 years and older; and

•   emerging, which includes the voluntary segment enhanced through the acquisition of Star HRG ^SM.

To date, the national and regional account markets have comprised a significant amount of CIGNA's Health Care business. CIGNA intends to grow its business in the small business, individual, government, Taft-Hartley, seniors and emerging markets.

CIGNA employs group sales representatives to distribute the products and services of the markets listed above 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, 2006, the field sales force for the products and services of this segment consisted of approximately 800 sales representatives in 67 field locations.

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 that exceed 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 if claims and expenses exceed premiums, but has the potential to recover these deficits from margins in future years if coverage is renewed. For additional discussion, see “Pricing, Reserves and Reinsurance” below.

Under ASO funding arrangements, the employer or other plan sponsor self-funds, or assumes the risk for, all of its claims and assumes 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: quality management, 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, for specific individuals, the entire group in aggregate, or both.

Minimum premium funding arrangements combine insurance protection with an element of self-funding. The policyholder is responsible for funding all claims 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 from margins in future years if the policy is renewed. Accordingly, minimum premium funding arrangements have a risk profile similar to retrospectively experience-rated insurance 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

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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.

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, 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 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 policy 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. 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, 2006, approximately $1.1 billion, or 39% of the reserves of CIGNA's Health Care operations 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, $250 million relates to amounts recoverable from certain ASO customers and from minimum premium policyholders, and is offset by a receivable. The remaining reserves related primarily to liabilities that are 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 2006, the rates of interest credited ranged from 2.5% to 4.4%, with a weighted average rate of 3.4%.

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.

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

Competition

CIGNA's health care businesses are subject to intense competition, and industry consolidation has created an even more 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 trend.

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, who may seek competitive quotations prior to renewal.

The principal competitive factors 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 28. 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 health care 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. 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. Management believes that it has the capabilities and appropriate strategy to allow it to compete against both traditional and new competitors.

Financial information regarding premiums and fees is presented on page 19 in the MD&A section, included in CIGNA's 2006 Annual Report, which is incorporated herein by reference. Other financial information about the Health Care segment is presented elsewhere in the MD&A section and Note 19 to CIGNA's 2006 Financial Statements included in its 2006 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-term 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,
	2006		2005		2004
	(In millions)
Life	$	1,050	$	1,108	$	1,041
Disability		798		677		617
Other		260		280		265
Total Premiums and Fees	$	2,108	$	2,065	$	1,923

Life Insurance

Group life insurance products include group term life and group universal life. CIGNA no longer markets group variable universal life insurance, but continues to administer the product 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 5,700 group life insurance policies covering approximately 5.8 million lives were outstanding as of December 31, 2006.

Disability Insurance

CIGNA markets group long-term and short-term disability insurance products and services in all states and statutorily required disability insurance plans in certain states. These products and services 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. Group disability coverage is typically employer-paid, but may also be employee-paid or a combination of employer and employee-paid.

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. CIGNA believes this integration provides customers with increased efficiency and effectiveness in disability claims management. CIGNA may receive fees for providing integration services to clients.

Other, Including Voluntary

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.

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CIGNA enhanced its voluntary benefits offering in September 2006. Voluntary benefits are principally paid by the employee and are offered at the employers’ worksite. CIGNA plans provide, among other services, flexible enrollment options, list billing, medical underwriting, and individual record keeping. CIGNA designed this voluntary platform to offer employers a complete and simple way to manage their benefits, including personalized enrollment communication and full program administration.

Distribution

CIGNA employs group sales representatives to distribute the products and services of this segment through insurance brokers and consultants. As of December 31, 2006, the field sales force for the products and services of this segment consisted of approximately 200 sales representatives in 27 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 for two to three years, but contracts may be subject to termination.

Premium rates reflect assumptions about future claims, expenses, credit risk, investment returns 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 4.75% for claims that were incurred in 2006 and 5.00% for claims that were incurred in 2005. 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. Effectiveness of return to work programs as well as adequate return on invested assets impact the profitability of disability insurance products. For life insurance products, the degree to which future experience deviates from mortality, morbidity and expense assumptions affects profitability.

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

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, the 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, the 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 28.

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.

As of December 31, 2006, CIGNA is one of the top five providers of group disability, life and accident insurance, based on premiums.

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E.International

CIGNA’s international operations offer life, accident and supplemental health insurance products and international health care products and services. These products and services are provided by subsidiaries of CIGNA Corporation, including foreign operating entities.

The following table sets forth the two principal lines of business of CIGNA International and their related net earned premiums and fees.

	Year Ended December 31,
	2006		2005		2004
	(In millions)
Life, Accident and Supplemental Health Insurance	$	824	$	677	$	545
International Health Care Benefits		702		566		481
Total Premiums and Fees	$	1,526	$	1,243	$	1,026

Principal Products and Markets

Life, Accident and Supplemental Health Insurance

CIGNA International’s life, accident and supplemental health insurance products generally provide simple, affordable coverage of risks for the health and financial security of individuals. These products are marketed primarily through distribution partners with whom the individual has an affinity relationship. Supplemental health products provide a specified payment for a variety of health risks and include personal accident, accidental death, critical illness, hospitalization, cancer and other dread disease coverages. CIGNA International’s life, accident and supplemental health insurance operations are located in South Korea, Taiwan, Hong Kong, New Zealand, Indonesia, People’s Republic of China, Thailand, the European Union, and Chile. In the third quarter of 2006, CIGNA entered into negotiations to sell its Brazilian life insurance business which is in run-off. The sale is expected to close in 2007.

International Health Care Benefits

CIGNA International’s health care operations primarily consist of an array of products and services to meet the needs of multinational companies and their expatriate employees and dependents. These expatriate benefits include medical, dental, vision, life, accidental death and dismemberment and disability products, as well as primary medical and dental benefits for international business travelers and expatriates. The customers of CIGNA International’s expatriate benefits business are multinational companies headquartered in the United States, Canada, Europe and the Middle East. The expatriate benefits products and services are offered through guaranteed cost, experience-rated, administrative services only, and minimum premium funding arrangements. For definitions of guaranteed cost, experience-rated, and administrative services only funding arrangements, see “Funding Arrangements” in Section C on page 10.

CIGNA International’s health care operations also include medical and some life insurance products, which are provided through group benefits programs in the UK, Spain, Chile and Guatemala. These products are primarily medical indemnity insurance coverage, with some offerings having managed care or administrative service aspects. These products generally provide an alternative or supplement to government programs.

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Distribution

CIGNA International’s life, accident and supplemental health insurance products are distributed primarily through direct marketing channels, such as outbound telemarketing, in-branch bancassurance, and direct response television. Marketing campaigns are conducted through these channels under a variety of arrangements with affinity partners. These affinity partners include banks, credit card companies and other financial institutions.

CIGNA International’s health care products are distributed through independent brokers and consultants as well as CIGNA International’s own sales personnel.

Pricing, Reserves and Reinsurance

Premiums for CIGNA International’s life, accident and supplemental health insurance products are based on assumptions about mortality, morbidity, persistency, expenses and target profit margins, as well as interest rates. 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, asset management and surrender charges assessed against the contractholder’s fund balance. Mortality charges on variable universal life may be adjusted prospectively to reflect expected mortality experience.

Premiums and fees for CIGNA International’s health care products reflect assumptions about future claims, expenses, investment returns, 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 International 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 insurance products CIGNA International establishes policy reserves which reflect the present value of expected future obligations less the present value of expected future premiums. CIGNA International defers acquisition costs incurred in the sales of long-duration life, accident and supplemental health products. These costs are amortized in proportion to premium revenue recognized, except that those incurred in relation to sales of variable universal life products are amortized in proportion to expected gross profits.

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

Competition

Competitive factors in CIGNA International’s life, accident and supplemental health operations include product innovation and differentiation, efficient management of the direct marketing process, commission levels paid to distribution partners, and quality of claims and policyholder services.

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

For the life, accident and supplemental health insurance line of business, locally based competitors are primarily indigenous insurance companies, including insurance subsidiaries of banks. However, insurance company competitors in this segment primarily focus on traditional product distribution, with direct marketing being a secondary objective.

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For the expatriate benefits business, CIGNA International’s primary competitors include U.S.-based and European health insurance companies with global expatriate benefits operations. For the health care operations in the UK, Spain, Chile and Guatemala, the primary competitors are regional and local insurers.

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

CIGNA International conducts some of its international health care benefits operations and all of its life, accident and supplemental health insurance operations through foreign operating entities which maintain assets and liabilities in local currencies. This 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 2006 Financial Statements included in CIGNA's 2006 Annual Report.

CIGNA International’s health care benefits products and life, accident and supplemental health insurance products include coverage for employees and individuals who may be exposed to acts of terrorism, the events of a war zone or natural disasters.

South Korea represents the single largest geographic market for CIGNA International’s businesses. In 2006, South Korea generated 29% of CIGNA International’s revenues and 41% of its segment earnings. CIGNA 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 CIGNA International as well as on CIGNA's consolidated results.

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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); and

•  settlement annuity business.

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 2006 ranged from 3.19% to 5.30%, with a weighted average rate of 4.40%, compared with a range from 2.33% to 5.44% and a weighted average of 4.61% for 2005.

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 have been made since 2004. 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.

Assets Under Management

CIGNA’s Invested Assets under management at December 31, 2006 totaled $18.3 billion.

As of December 31, 2006, CIGNA's separate account funds consisted of:

•  $4.6 billion in separate account assets that are managed by the buyer of the retirement benefits business pursuant to modified coinsurance arrangements; and

•   $4.0 billion in funds which support certain corporate owned life insurance, health care and disability and life products.

CIGNA also managed, as of December 31, 2006, $96 million in customer assets for which the customer retains title. These customer assets, together with 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.

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, 2006 the Domestic Employee Benefits portfolios had $16.9 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, 2006, excluding liabilities of businesses sold through use of reinsurance, were associated with the following products: fully guaranteed annuity, 20%; interest-sensitive life insurance, 31%; and other life and health, 49%. These products, and the investment assets supporting them, are described below.

Fully guaranteed products primarily include 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, 2006, the duration of assets that supported these liabilities was approximately 13 years.

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.

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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 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.

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. In connection with CIGNA's investment strategy to enhance investment yields by selling senior participations of mortgage loans, as of December 31, 2006 mortgage loans includes $124 million of mortgage loans originated with the intent to sell. These mortgage loans held for sale are carried at the lower of cost or market with any resulting valuation allowance reported in realized investment gains and losses.

For the International portfolios, CIGNA invests primarily in publicly traded fixed maturites, short term investments and time deposits denominated in the currency of the relevant liabilities and surplus.

Fixed Maturities

As of December 31, 2006, fixed maturity investments constituted 64% 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 2006 Annual Report.

Mortgages and Real Estate

Mortgage loan investments constituted 24% of the Domestic Employee Benefits portfolios as of December 31, 2006. 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 primarily 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 $9 million of foreclosed properties in 2006. Real estate investments were not a significant portion of CIGNA’s Domestic Employee Benefits portfolios as of December 31, 2006, although CIGNA realized gains of $252 million from sales of equity real estate investments in 2006.

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 may invest in indexed credit default swaps or other credit derivatives from

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time to time. For information about CIGNA’s use of derivative financial instruments, see Notes 2(B) and 10(F) to CIGNA’s 2006 FinancialStatements included in its 2006 Annual Report.

See “Investment Assets” in the MD&A section of, and Notes 2, 10, and 11 to the Financial Statements included in CIGNA’s 2006 Annual Report for additional information about CIGNA’s investments.

Other Investments

In addition to the Domestic Employee Benefits portfolios, CIGNA has a portfolio that primarily includes the investments of the International segment.

The investment portfolios under management in the International segment contain assets backing the liabilities and surplus of subsidiaries operating in the countries and territories where CIGNA International has business presence. Collectively, these are referred to as the “International portfolios.” As of December 31, 2006 the International portfolios had $1.4 billion in Invested Assets. The International portfolios are primarily managed by external managers with whom CIGNA's subsidiaries contract.

The characteristics of these assets are generally managed to reflect the underlying characteristics of related insurance and contractholder liabilities, as well as regulatory and tax considerations in the countries where CIGNA's subsidiaries operate. Assets are generally invested in the currency of related liabilities, typically the currency in which the subsidiaries operate. CIGNA's investment policy allows the investment of subsidiary assets in U.S. dollars to the extent permitted by regulation. CIGNA's international invested assets as of December 31, 2006 were held in support of statutory surplus and liabilities associated with the following types of insurance products:

Accident and health insurance consists of various individual group and individual life, accident and health products. The duration of related liabilities is typically less than one year. Investment assets supporting surplus and accident and health liabilities are structured to emphasize investment income, and the necessary liquidity is provided through cash flow, short term and fixed maturity investments.

Interest sensitive products primarily consist of “return of premium” products in which the nominal amount of premiums paid for a multi-year accident and health policy are paid back to the policyholder at the end of the contract period. Invested assets supporting these products are fixed income investments that generally match the aggregate duration of the investment portfolio with that of the related benefit cash flows.

Unit linked investment products are insurance contracts in which a portion of the policyholder’s premium is used to purchase shares in investment funds for which the policyholder bears the investment risk and return.

Fully guaranteed products primarily include single premium immediate annuities. Because these products have defined payment obligations to policyholders, the amount and timing of future benefit cash flows can be reasonably estimated. Funds supporting these products are invested in fixed income investments that to the extent possible match the cash flows of the investment portfolio with the benefit cash flows.

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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 2006 Financial Statements included in its 2006 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.

Since the sale in 2004, the buyer of the retirement business has entered into agreements with most 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.

Single Premium Annuity Business

The single premium annuity business consists primarily of single premium annuities that were supported by CIGNA's general account. Initially, this business was reinsured on a modified coinsurance basis for the first two years following the sale.

Effective April 1, 2006, the buyer converted this modified coinsurance arrangement to an indemnity reinsurance structure and took ownership of the assets. CIGNA transferred invested assets to the buyer and recorded a reinsurance recoverable of approximately $1.6 billion, which corresponds to the liabilities for the single premium annuity business held by CIGNA as of March 31, 2006.

Ceded Business Trust

The buyer deposited assets associated with the reinsurance of general account contracts into a trust (the "Ceded Business Trust") and assets associated with the single premium annuity business into a second trust (the “Guaranteed Cost Trust”), which both provide security to CIGNA for the related reinsurance recoverables. The buyer is permitted to withdraw assets from the Ceded Business Trust or the Guaranteed Cost Trust equal to the reduction in CIGNA's reserves whenever a reduction occurs. For example, reductions will occur when the buyer enters into additional novation agreements and directly assumes liability to the insured party. As of December 31, 2006, assets totaling $3.9 billion remained in the combined Ceded Business Trust and Guaranteed Cost Trust.

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I.Run-off Reinsurance

Principal Products and Markets

Until June 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 annuity 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 and other relevant factors.

CIGNA's reserves for reinsurance risks assumed by CIGNA and for amounts recoverable from its retrocessionaires are considered appropriate as of December 31, 2006 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. CIGNA bears the risk of loss if its payment obligations to cedents increase or if its retrocessionaires are unable to meet, or successfully challenge, their reinsurance obligations to CIGNA.

Guaranteed Minimum Death Benefit Contracts

CIGNA’s reinsurance operations reinsured guaranteed minimum death benefits 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.

For additional information about guaranteed minimum death benefit contracts, see “Other Matters” under “Run-off Reinsurance” in the MD&A section of, and Note 7 to CIGNA's 2006 Financial Statements included in its 2006 Annual Report.

Guaranteed Minimum Income Benefit Contracts

CIGNA’s reinsurance operations also reinsured minimum income benefits under certain variable annuities issued by other insurance companies. 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 purchased retrocessional reinsurance which covers 55% of the exposures on these contracts.

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 2006 Financial Statements included in its 2006 Annual Report.

Workers Compensation and Personal Accident

CIGNA reinsured workers compensation and other personal accident business in the United States and in the London market. This included participation in a workers compensation reinsurance pool formerly managed by Unicover Managers, Inc. CIGNA purchased extensive retrocessional reinsurance for the Unicover contracts (through the pool) and also purchased retrocessional coverage for its other workers compensation and personal accident assumed risks. Although CIGNA is involved in certain retrocessional enforcement arbitrations, most of the disputes concerning retrocessional contracts have been resolved. For more information regarding these disputes, see “Legal Proceedings” in Item 3 on pages 37 and 38.

CIGNA's payment obligations under these workers compensation and personal accident contracts are based on ceding companies’ claim payments relating to accidents and injuries.

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These claim payments can in some cases extend many years into the future, and the amount ofthe ceding companies’ ultimate claims, and therefore the amount of CIGNA's ultimate payment obligations and ultimate collections from its retrocessionaires, may not be known with certainty for some time. For more information see “Run-off Reinsurance” in the MD&A section of, and Note 8 to CIGNA's 2006 Financial Statements included in, CIGNA’s 2006 Annual Report.

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J.Regulation

CIGNA and its subsidiaries are subject to federal, state and international regulations and CIGNA has established policies and procedures to comply with applicable requirements.

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

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

•   premium rates;

•   the content of agreements with participating providers of covered services;

•   producer appointment and compensation;

•   claims processing and appeals;

•   solvency requirements;

•  underwriting practices;

•  reinsurance arrangements;

•   advertising practices;

•   unfair trade and claim practices;

•   delegation of administrative functions;

•   risk sharing arrangements with providers;

•   use and disclosure of individuals’ identifiable information; and

•   operation of consumer-driven plans (including health savings accounts, health reimbursement accounts and flexible spending accounts).

CIGNA also complies with regulations in international jurisdictions where foreign insurers are, in many countries, faced with greater restrictions than their 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.

Other types of regulatory oversight are described below.

Financial Reporting

Regulators closely monitor the financial condition of licensed insurance companies and HMOs. States regulate the form and content of statutory financial statements and the type and concentration of permitted investments. CIGNA's insurance and HMO subsidiaries are required to file periodic financial reports with regulators in most of the jurisdictions in which they do business, and their operations and accounts are subject to examination by such agencies at regular intervals.

Guaranty Associations, Indemnity Funds, Risk Pools and Administrative Funds

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

Several states also require HMOs to participate in guaranty funds, special risk pools and administrative funds. For additional information about guaranty fund and other assessments, see Note 20 to CIGNA’s 2006 Financial Statements included in its 2006 Annual Report.

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

Solvency and Capital Requirements

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

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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. During 2006, CIGNA’s HMOs and life and health insurance subsidiaries, as well as non-U.S. insurance subsidiaries, were compliant with applicable RBC and non-U.S. surplus rules. The NAIC is considering changing statutory reserving rules for variable annuities. Any changes would apply to CIGNA's reinsurance contracts covering guaranteed minimum death benefits and guaranteed minimum income benefits, and would impact CIGNA's overall surplus level.

Holding Company Laws

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

Oversight of Marketing, Advertising and Broker Compensation

State and/or federal regulatory scrutiny of life and health insurance company and HMO marketing and advertising practices, including the adequacy of disclosure regarding products and their administration, may result in increased regulation. Products offering limited benefits, such as those issued in connection with the Star-HRG business acquired in 2006, may attract increased regulatory scrutiny. States have responded to concerns about the marketing, advertising and administration of insurance and HMO products and administrative practices by increasing the number and frequency of market conduct examinations and imposing larger penalties for violations of applicable laws and regulations.

In recent years, perceived abuses in broker compensation practices have been the focus of greatly heightened regulatory scrutiny. 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 general governmental inquiries relating to CIGNA companies, see “Legal Proceedings” in Item 3 on pages 37 and 38.

Claim Administration, Utilization Review and Related Services

CIGNA subsidiaries contract for the provision of claim administration, utilization management and other related services with respect to the administration of self-insured benefit plans. These CIGNA subsidiaries are subject to state licensing requirements and regulation.

Employment Retirement Income Security Act

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

Federal Regulations

Medicare Regulations. Several CIGNA subsidiaries engage in businesses that are subject to federal Medicare regulations such as:

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

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

•   contractual arrangements with the federal government to provide disease management services to chronically ill Medicare beneficiaries in the state of Georgia; and

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

Federal Audits

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 provision by CIGNA of the relevant services under audit). These risks may include reimbursement claims as well as potential fines and penalties. For example, the federal government requires Medicare and Medicaid providers to file detailed cost reports for health care services provided. These reports may be audited in

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subsequent years. CIGNA HMOs that contract to provide community-rated coverage to participants in the federal Employees Health Benefit Plan 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 4 for additional information about CIGNA’s participation in government health-related programs.

Privacy and Information Disclosure and Portability Regulations

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) imposes requirements for guaranteed issuance (for groups with 50 or fewer lives), electronic data security standards, and renewal and portability, on health care insurers and HMOs. In addition, HIPAA regulations require the assignment of a unique national identifier for providers by May, 2007. The federal government and states (as well as an increasing number of non-U.S. jurisdictions) impose requirements regarding the use and disclosure of identifiable information about individuals and, in an effort to deal with the growing threat of identity theft, the handling of privacy and security incidents.

Antitrust Regulations

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

Anti-Money Laundering Regulations

Certain CIGNA lines of business are subject to United States Department of the Treasury anti-money laundering regulations. Those lines of business have implemented anti-money laundering policies designed to insure their affected products comply with the regulations.

Investment-Related Regulations

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

Legislative and Regulatory Developments

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. In the growing area of consumer-driven plans, health savings accounts and health reimbursement accounts are also regulated by the United States Department of the Treasury and the Internal Revenue Service. See “Regulatory and Industry Developments” in the MD&A section of CIGNA’s 2006 Annual Report for additional information.

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, other proposed federal measures that may significantly affect CIGNA’s operations include calls for universal health care coverage, market reforms achieved through state and federal legislation, modifications of the Medicare program, and employee benefit regulation including modification to the tax treatment of employee benefits.

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

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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 26, 2007, the insurance financial strength ratings for CG Life were as follows:

	CG Life
	Insurance Ratings(1)
A.M. Best	A
	(“Excellent,”
	3rd of 16)
Moody’s	A2
	(“Good,”
	6th 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 3rd highest rating awarded in its scale of 16).

As of February 26, 2007, the insurance financial strength rating for Life Insurance Company of North America assigned by A.M. Best was A (“Excellent,” 3^rd of 16), and by Moody’s was A2 (“Good,” 6^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 26, 2007, the debt ratings assigned by the following agencies were as follows:

Debt Ratings⁽¹⁾

CIGNA CORPORATION

		Commercial
	Senior Debt	Paper
Moody’s	Baa2	P2
	(“Adequate,”	(“Strong,”
	9th of 21)	2nd of 4)
S&P	BBB	A2
	(“Adequate,”	(“Good,”
	9thof 22)	3rd of 7)
Fitch	BBB	F2
	(“Good,” 9th of 24)	(“Moderately Strong,” 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 2006, A.M. Best upgraded the financial strength ratings of certain CIGNA subsidiaries to “A” from “A-“ and revised the outlook to “Stable” from “Positive.” In February 2007, Moody's upgraded CIGNA Coproration's senior debt rating to “Baa2” from “Baa3” and upgraded the financial strength ratings of CG Life and LINA to “A2” from “A3.” At the same time, Moody's upgraded the commercial paper rating to “P2” from “P3” and changed the outlook to stable from positive. 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 2006. 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 27,100, 28,000, and 28,600 employees as of December 31, 2006, 2005 and 2004, 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; growing its individual and small business market and emerging market and further penetration of the specialty markets; 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 provider contracts;

·   CIGNA's ability to develop and introduce new products or programs, because of the inherent risks and uncertainties associated with product development, particularly in response to government regulation or the increased focus on consumer directed products;

·   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 for 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 or security 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 were 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.

If CIGNA were unable to maintain the security of any sensitive data residing on the Company’s systems whether due to our own actions or those of any vendors, our reputation would be adversely affected and we could be exposed to litigation or other actions, fines or penalties, any of which could adversely affect our business or financial condition.

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 levels will 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.

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.

For instance, in 2006, CIGNA entered into an agreement with IBM to operate significant portions of its information technology infrastructure, including the provision of services relating to its call center application, enterprise content management, risk-based capital analytical infrastructure and voice and data communications and network in addition to the software applications and human resource operations support IBM had previously provided pursuant to several smaller contracts. The 2006 contract with IBM includes several service level agreements, or SLAs, related to issues such as performance and job disruption with significant financial penalties if theseSLAs are not met. However, the Company may not be adequately indemnified against all possible losses through the terms and conditions of the agreement. In addition, some of CIGNA’s termination rights are contingent upon payment of a fee, which may be significant. If CIGNA's relationship with IBM is terminated, the Company may experience disruption of service to customers, which could affect CIGNA's business, financial condition, and results of operations.

These arrangements with key vendors 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. 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. Certain legislative authorities have in recent periods discussed or proposed legislation that would restrict outsourcing and, if enacted, could materially increase CIGNA’s costs. 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, 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

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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 26, 2007, 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,”
	3rd of 16)
Moody’s	A2
	(“Good,”
	6th 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 3rd highest 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 28.

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’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 23 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 are based on assumptions regarding lapse, partial surrender, mortality, interest rates, volatility, reinsurance recoverables, 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.

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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.

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 37 and 38, and Note 20 to CIGNA’s 2006 Financial Statements included in its 2006 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, take other actions such as changing our reserve levels with respect to certain reinsurance contracts, and increase CIGNA’s liability in federal and state courts for coverage determinations, contract interpretation and other actions.

CIGNA must comply with the various regulations applicable to its business. If CIGNA fails to comply, the Company’s business could be adversely affected. In addition, 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.

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For further information on regulatory matters relating to CIGNA, see “Regulation” in Section J on page 25 and “Legal Proceedings” in Item 3 on pages 37 and 38, as well as “Regulatory and Industry Developments” in the MD&A section of CIGNA’s 2006 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 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.

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, bio-terrorist activity, natural disasters or other extreme events 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, bio-terrorist or other attack, or catastrophic natural disaster were to occur, CIGNA’s covered medical and disability expenses, pharmacy costs and mortalityexperience 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’s business and financial condition could also be adversely affected if the Company does not maintain adequate procedures to ensure disaster recovery and business continuity for its facilities and operations in the event of a natural disaster.

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

35

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.

CIGNA faces risks relating to its ability to effectively deploy its capital.

CIGNA’s operations have generated significant capital in recent periods and the Company has significant ability to raise additional capital. In deploying its capital to fund its investments in operations, share repurchases, potential acquisitions or other capital uses, CIGNA's financial results could be adversely affected if it does not appropriately balance its risks and opportunities.

CIGNA is subject to potential changes in the political environment which affects public policy and can adversely affect the markets for our products.

While it is not possible to predict when and whether fundamental policy changes would occur, these could include policy changes on the local, state and federal level that could fundamentally change the dynamics of CIGNA’s industry, such as a much larger role of the government in the health care arena. Changes in public policy could materially affect CIGNA's profitability, its ability to retain or grow business, or in the event of extreme circumstances, its financial condition.

36

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

CIGNA's headquarters, along with CIGNA Group Insurance, CIGNA International, portions of CIGNA HealthCare and CIGNA's staff support operations, are located in approximately 450,000 square feet of leased office space 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 2H and 18 to CIGNA's 2006 Financial Statements included in its 2006 Annual Report. This paragraph does not include information on investment properties.

Item 3. LEGAL PROCEEDINGS

In re Managed Care Litigation

On April 7, 2000, several pending actions were consolidated in the United States District Court for the Southern District of Florida in a multi-district litigation proceeding captioned In re Managed Care Litigation. The consolidated cases include Shane v. Humana, Inc., et al. (CIGNA subsidiaries added as defendants in August 2000), Mangieri v. CIGNA Corporation (filed December 7, 1999 in the United States District Court for the Northern District of Alabama), Kaiser and Corrigan v. CIGNA Corporation, et al. (class of health care providers certified on March 29, 2001) and Amer. Dental Ass’n v. CIGNA Corp. et. al. (a putative class of dental providers).

In 2004, the Court approved a settlement agreement between the physician class and CIGNA. A dispute over disallowed claims under the settlement submitted by a representative of certain class member physicians is proceeding to arbitration. Separately, in April 2005, the Court approved a settlement between CIGNA and a class of non-physician health care providers. Only the Amer. Dental Ass’n case remains unresolved. CIGNA's motion to dismiss the case is pending.

In the fourth quarter 2006, pursuant to a settlement, CIGNA received a favorable $22 million pre-tax ($14 million after tax) insurance recovery related to this litigation. There are two additional proceedings seeking to recover insurance proceeds on account of this litigation. The total insurance recovery that is being sought in the two proceedings is $20 million.

Broker Compensation

Beginning in 2004, CIGNA, other insurance companies and certain insurance brokers received subpoenas and inquiries from various regulators, including the New York and Connecticut Attorneys General and the Florida Office of Insurance Regulation relating to their investigations of insurance broker compensation. CIGNA received a subpoena from the U.S. Attorney’s Office for the Southern District of California in October 2005 and the San Diego District Attorney in March 2006 and is providing information to them about broker, Universal Life Resources (ULR). In addition, 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.

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. The trial is expected to begin on August 31, 2007.

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 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.

In re CIGNA Corp. Securities Litigation

In late 2002, several purported class action lawsuits were filed against CIGNA and certain of its

37

officers by individuals seeking to represent a class of purchasers of CIGNA securities from May 2, 2001 to October 24, 2002. The complaints alleged, 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. 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.

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.

In December 2006, the parties agreed to settle In re CIGNA Corp. Securities Litigation and the Hobbs and Scott cases. The In re CIGNA Corp. Securities Litigation settlement, which specifies $93 million to be paid to the plaintiffs, was preliminarily approved by the court on January 25, 2007. A final fairness hearing before the court is expected to be held on April 27, 2007, with final approval expected shortly thereafter. Additionally, the settlement is also dependent upon a certain level of class participation. Also, CIGNA and its directors have reached a separate settlement with the plaintiffs in the Hobbs and Scott cases. Under the settlement, CIGNA's insurers will deposit and apportion, on behalf of the individual defendants, $6 million of the aforementioned $93 million class action settlement, and have agreed to make a payment of not more than $720,000 for the plaintiff’s attorney’s fees, subject to court approval. On January 25, 2007, the court preliminarily approved the settlement and set a hearing date on final approval on April 27, 2007, with final approval expected shortly thereafter.

Amara Cash Balance Pension Plan 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 affected by the 1998 conversion to a cash balance formula. The plaintiffs allege, various ERISA violations including, among other things, that the Plan’s cash balance formula discriminates against older employees; the conversion resulted in a wear away period (during which the pre-conversion accrued benefit exceeded the post-conversion benefit); and these conditions are not adequately disclosed in the Plan. The plaintiffs were granted class certification on December 20, 2002, and seek equitable relief. A non-jury trial began on September 11-15, 2006. Due to the court’s schedule, the proceedings were adjourned and then the trial was completed on January 25, 2007. The judge has ordered the parties to submit post-trial briefs in advance of closing arguments to be held on June 4, 2007.

Run-off Reinsurance Litigation

In connection with CIGNA's run-off reinsurance operations, described on page 23, CIGNA purchased extensive retrocessional reinsurance for its Unicover contracts and also for some other segments of its non-Unicover business. CIGNA is appealing in court an adverse award in a retrocessional enforcement arbitration. That appeal, captioned CIGNA EUROPE INSURANCE COMPANY SA-NV v. John Hancock Life Insurance Company, is pending in the High Court of Justice, Queen’s Bench Division, Commercial Court, and a hearing is scheduled for March 13-14, 2007. In addition CIGNA recently commenced another retrocessional enforcement arbitration.

CIGNA is routinely involved in numerous claims, lawsuits, regulatory and IRS audits, investigations and other legal matters arising, for the most part, in the ordinary course of 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.

38

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, 43, 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, 41, 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.

H. EDWARD HANWAY, 55, Chairman of CIGNA since December 2000; Chief Executive Officer of CIGNA since January 2000; and President and a Director of CIGNA since January 1999.

PAUL E. HARTLEY, 50, 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, 48, 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.

CAROL ANN PETREN, 54, Executive Vice President, General Counsel and Public Affairs of CIGNA beginning May 2006; Senior Vice President and Deputy General Counsel of MCI from January 2003 until March 2006; and Deputy General Counsel of Sears, Roebuck and Company from January 2001 until January 2003.

KAREN S. ROHAN, 44, 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.

SCOTT A. STORRER, 39, 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.

39

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 2006 Annual Report is incorporated by reference, as is the information from Note 15 to CIGNA’s 2006 Financial Statements, the number of shareholders of record as of December 31, 2006 under the caption “Highlights” and the information presented under the caption "Performance Graph" in CIGNA’s 2006 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, 2006:

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, 2006	1,802,351	$118.43	1,801,900	$820,616,299
November 1-30, 2006	1,309,007	$121.92	1,308,500	$661,084,332
December 1-31, 2006	1,353,950	$129.85	1,353,800	$485,287,708
Total	4,465,308	$122.92	4,464,200	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 451 shares in October, 507 shares in November and 150 shares in 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 $485 million as of December 31, 2006. CIGNA has, and may continue from time to time, to effect open market purchases through 10b5-1 plans, which allows a company to repurchase its shares at times when it otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods.

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

40

Item 6.SELECTED FINANCIAL DATA

The five-year financial information under the caption “Highlights” in CIGNA’s 2006 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 2006 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 2006 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 2006 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 conducted under the supervision and with the participation of CIGNA's management, CIGNA’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, CIGNA’s disclosure controls and procedures are effective to ensure that information required to be disclosed by CIGNA in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

B.Internal Control Over Financial Reporting

Management's 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 2006 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 2006 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.

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 2010,” “Directors Who Will Continue in Office,” “Board of Directors and Committee Meetings, Membership, Attendance and Independence” (as it relates to Audit Committee disclosure), and “Section 16(a) Beneficial Ownership Reporting Compliance” in CIGNA’s proxy statement to be dated on or about March 22, 2007 is incorporated by reference.

41

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 found on the “About Us” page 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 “Director Compensation,” “Report of the People Resources Committee,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis” and “Executive Compensation” in CIGNA’s proxy statement to be dated on or about March 22, 2007 is incorporated by reference.

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

The information under the captions “Equity Compensation Plans,” “Stock held by Directors, Nominees and Executive Officers” and “Largest Security Holders” in CIGNA's proxy statement to be dated on or about March 22, 2007 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 22, 2007 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 22, 2007 is incorporated by reference.

PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) The following financial statements have been incorporated by reference from CIGNA’s 2006 Annual Report:

Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004.

Consolidated Balance Sheets as of December 31, 2006 and 2005.

Consolidated Statements of Comprehensive Income and Changes in Shareholders’ Equity for the years ended December 31, 2006, 2005 and 2004.

Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004.

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.

42

SIGNATURES

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

Date: February 28, 2007

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.

Signature	Title
/s/ H. Edward Hanway
H. Edward Hanway	Chairman, Chief Executive Officer and Director (Principal Executive Officer)
/s/ Annmarie T. Hagan
Annmarie T. Hagan	Vice President and Chief Accounting Officer (Principal Accounting Officer)
/s/ Robert H. Campbell
Robert H. Campbell	Director
/s/ Isaiah Harris, Jr.
Isaiah Harris, Jr.	Director
/s/ Jane E. Henney, M.D.
Jane E. Henney, M.D.	Director
/s/ Peter N. Larson
Peter N. Larson	Director

43

/s/ Roman Martinez IV
Roman Martinez IV	Director
/s/ Harold A. Wagner
Harold A. Wagner	Director
/s/ Carol Cox Wait
Carol Cox Wait	Director
/s/ Donna F. Zarcone
Donna F. Zarcone	Director
/s/ William D. Zollars
William D. Zollars	Director

44

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, 2006	FS- 3
	II	Condensed Financial Information of CIGNA Corporation
		(Registrant)	FS- 4
	III	Supplementary Insurance Information	FS- 10
	IV	Reinsurance	FS- 12
	V	Valuation and Qualifying Accounts and Reserves	FS- 13

Schedules other than those listed above are omitted because they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto, which are incorporated by reference from CIGNA's 2006 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 28, 2007 appearing in the 2006 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 28, 2007

FS-2

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE I

SUMMARY OF INVESTMENTS — OTHER THAN INVESTMENTS IN RELATED PARTIES

DECEMBER 31, 2006

(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	$	356	$	597	$	597
States, municipalities and political subdivisions		2,360		2,488		2,488
Foreign governments		853		918		918
Public utilities		782		812		812
All other corporate bonds		6,307		6,556		6,556
Asset-backed securities:
United States government agencies,
mortgage-backed		2		3		3
Other mortgage-backed		217		222		222
Other asset-backed		452		515		515
Redeemable preferred stocks		44		44		44
Total fixed maturities		11,373		12,155		12,155
Equity securities:
Common stocks:
Industrial, miscellaneous and all other		9		24		24
Public utilities		--		--		--
Non-redeemable preferred stocks		103		107		107
Total equity securities		112		131		131
Mortgage loans on real estate		3,988				3,988
Policy loans		1,405				1,405
Real estate investments		117				117
Other long-term investments		418				418
Short-term investments		89				89
Total investments	$	17,502			$	18,303

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,
	2006			2005			2004
Other revenues	$	2		$	7		$	6
Total revenues		2			7			6
Operating expenses:
Interest		101			105			107
Intercompany interest		277			162			73
Other		90			71			138
Total operating expenses		468			338			318
Loss before income taxes		(466	)		(331	)		(312	)
Income tax benefit		(166	)		(126	)		(138	)
Loss of parent company		(300	)		(205	)		(174	)
Equity in income of subsidiaries from continuing operations		1,459			1,481			1,751
Income from continuing operations		1,159			1,276			1,577
Income (Loss) from discontinued operations, net of taxes		(4	)		349			--
Income before Cumulative Effect of Accounting Change		1,155			1,625			1,577
Cumulative Effect of Accounting Change, net of taxes		--			--			(139	)
Net income	$	1,155		$	1,625		$	1,438

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,
				2006						2005
Assets:
Cash and cash equivalents				$	13					$	1
Investments in subsidiaries					11,932						12,204
Other assets					538						510
Total assets				$	12,483					$	12,715
Liabilities:
Intercompany				$	5,498					$	4,711
Current portion of long-term debt					376						100
Long-term debt					1,198						1,324
Other liabilities					1,081						1,220
Total liabilities					8,153						7,355
Shareholders' Equity:
Common stock (shares issued, 160; 160)					40						40
Additional paid-in capital					2,451						2,385
Net unrealized appreciation — fixed maturities	$	187					$	195
Net unrealized appreciation — equity securities		22						24
Net unrealized depreciation — derivatives		(15	)					(14	)
Net translation of foreign currencies		33						2
Postretirement benefits liability adjustment		(396	)					-
Minimum pension liability adjustment		-						(716	)
Accumulated other comprehensive loss					(169	)					(509	)
Retained earnings					6,177						5,162
Less treasury stock, at cost					(4,169	)					(1,718	)
Total shareholders' equity					4,330						5,360
Total liabilities and shareholders' equity				$	12,483					$	12,715

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,
	2006			2005			2004
Cash Flows from Operating Activities:
Net Income	$	1,155		$	1,625		$	1,438
Adjustments to reconcile net income    to net cash provided by operating activities:
Equity in income of subsidiaries		(1,459	)		(1,481	)		(1,751	)
(Income) loss from discontinued operations		4			(349	)		--
Cumulative effect of accounting change, net of taxes		--			--			139
Dividends received from subsidiaries		1,745			1,306			499
Other liabilities		347			(290	)		106
Cash provided by operating activities of discontinued operations		--			222			--
Other, net		(172	)		(68	)		(10	)
Net cash provided by operating activities		1,620			965			421
Cash Flows from Investing Activities:
Other, net		(15	)		(9	)		5
Net cash provided by (used in) investing activities		(15	)		(9	)		5
Cash Flows from Financing Activities:
Net change in intercompany debt		787			327			364
Net proceeds on issuance of long-term debt		246			--			--
Repayment of long-term debt		(100	)		--			(76	)
Issuance of common stock		251			346			64
Common dividends paid		(12	)		(13	)		(100	)
Repurchase of common stock		(2,765	)		(1,618	)		(676	)
Net cash used in financing activities		(1,593	)		(958	)		(424	)
Net increase (decrease) in cash and cash equivalents		12			(2	)		2
Cash and cash equivalents, beginning of year		1			3			1
Cash and cash equivalents, end of year	$	13		$	1		$	3

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)	2006		2005
Short-term:
Current maturities of long-term debt	$	376	$	100
Total short-term debt	$	376	$	100
Long-term:
Uncollateralized debt:
7.4% Notes due 2007	$	-	$	291
8 ¼% Notes due 2007		-		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
6.15% Notes due 2036		250		-
Total long-term debt	$	1,198	$	1,324

In May 2006, CIGNA entered into a five year revolving credit and letter of credit agreement for $1.75 billion which replaced its previous credit agreement. Of this amount, up to $1.25 billion may be used for letters of credit. CIGNA entered into the agreement for general corporate purposes, including support for the issuance of commercial paper and to obtain statutory reserve credit for certain reinsurance arrangements. There were no amounts outstanding under the credit facility nor any letters of credit issued as of December 31, 2006.

In August 2006, CIGNA filed a universal shelf registration statement on Form S-3ASR with the Securities and Exchange Commission (SEC) to take advantage of its status as a “well known seasoned issuer” under the Securities Offering Reform Act. CIGNA may issue debt, equity or other securities from time to time, with amount, price and terms to be determined at the time of sale.

In November 2006, CIGNA issued $250 million of 6.150% Senior Notes under this registration statement. The Notes bear interest at the rate of 6.150% per year, which is payable on May 15 and November 15 of each year, beginning May 15, 2007. The Notes will mature on November 15, 2036. CIGNA may redeem the Notes at any time, and from time to time, in whole or in part, at a specified redemption price.

As of December 31, 2006 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.

FS-7

Maturities of long-term debt are as follows (in millions): $376 in 2007, none in 2008, 2009 and 2010, and the remainder in years after 2011.

Interest paid on short- and long-term debt amounted to $101 million, $104 million and $109 million for 2006, 2005 and 2004, respectively.

Note 3—Intercompany liabilities consist primarily of loans payable to CIGNA Holdings, Inc. of $5.6 billion and $4.8 billion as of December 31, 2006 and 2005, respectively. Interest was accrued at an average monthly rate of 5.27% for 2006 and 3.62% for 2005.

Note 4—As of December 31, 2006, 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 $78 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, 2006 approximately $75 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, 2006 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, 2006, the reserve was $389 million.

Through December 31, 2006, 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

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FS-9

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, 2006:
Health Care	$	37	$	617	$	1,221
Disability and Life		10		828		2,954
International		579		976		204
Run-off Retirement		--		2,542		--
Run-off Reinsurance		--		890		746
Other Operations		81		11,684		145
Corporate		--		--		--
Total	$	707	$	17,537	$	5,270
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

FS-10

SUPPLEMENTARY INSURANCE INFORMATION

(In millions)

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
$	79	$	9,830	$	261	$	6,371		$	71	$	4,014
	44		2,108		256		1,578			6		630
	334		1,526		79		861			113		420
	--		2		32		26			--		17
	1		64		95		26			--		54
	41		111		435		415			12		61
	--		--		37		(13	)		--		154
$	499	$	13,641	$	1,195	$	9,264		$	202	$	5,350
$	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

________________________

(1) Amounts presented are shown net of the effects of reinsurance. See Note 8 to the Financial Statements included in CIGNA’s 2006 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-11

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, 2006:
Life insurance in force	$	326,958	$	43,458	$	128,263	$	411,763		31.1	%
Premiums and fees:
Life insurance and annuities	$	2,081	$	298	$	411	$	2,194		18.7	%
Accident and health insurance		11,514		181		114		11,447		1.0	%
Total	$	13,595	$	479	$	525	$	13,641		3.8	%
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	$	2,094	$	315	$	420	$	2,199		19.1	%
Accident and health insurance		11,600		157		53		11,496		.5	%
Total	$	13,694	$	472	$	473	$	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	$	2,266	$	366	$	428	$	2,328		18.4	%
Accident and health insurance		11,988		113		33		11,908		.3	%
Total	$	14,254	$	479	$	461	$	14,236		3.2	%

FS-12

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
2006:
Investment asset valuation reserves:
Mortgage loans	$	2	$	3		$	-	$	(5	)	$	-
Allowance for doubtful accounts:
Premiums, accounts and notes
receivable		62		5			1		(22	)		46
Deferred tax asset valuation
allowance		161		7			-		6			174
Reinsurance recoverables		158		12			-		(9	)		161
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	)		16		(84	)		161
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

________________________

(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-13

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 October 25, 2006	Filed as Exhibit 3 to the registrant’s Form 8-K filed on October 30, 2006 and incorporated herein by reference.
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 herewith.

Exhibits 10.1 through 10.18 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 herewith.
10.2		Amended and Restated Restricted Stock/Stock Equivalent Plan for Non-Employee Directors of CIGNA Corporation effective January 23, 2007	Filed herewith.
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 herewith.
	(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.

E-1

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.
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 herewith.
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 herewith.
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 herewith.
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.

E-2

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.
10.17	Schedule regarding Amended Deferred Stock Unit Agreements effective July 26, 2006 with Messrs. Hanway, Bell and Murabito and Form of Deferred Stock Unit Agreement	Filed as Exhibit 10.1 to the registrant's Form 10-Q for the quarter ended June 30, 2006 and incorporated herein by reference.
10.18	Agreement and Release dated March 21, 2006 with Ms. Soltz	Filed as Exhibit 10.1 to the registrants Form 8-K dated March 24, 2006 and incorporated herein be reference.
12	Computation of Ratios of Earnings to Fixed Charges	Filed herewith.
13	Portions of registrant's 2006 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.
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-4.C

Exhibit 4(c)     

AMENDMENT NO. 2 TO RIGHTS AGREEMENT

        This Amendment, dated as of December 31, 2001 (the “Amendment”), is by and among CIGNA Corporation, a Delaware corporation (the “Company”), First Chicago Trust Company of New York, a corporation organized under the laws of the State of New York (“First Chicago”), and EquiServe Trust Company, N.A., a national association (“EquiServe”), and amends the Amended and Restated Rights Agreement dated as of December 16, 1998 (the “Rights Agreement”) between the Company and First Chicago.

        WHEREAS, the Company and First Chicago are currently parties to the Rights Agreement, pursuant to which First Chicago serves as Rights Agent;

        WHEREAS, First Chicago intends to resign as Rights Agent and the Company intends to appoint EquiServe to succeed First Chicago as Rights Agent; and

        WHEREAS, EquiServe wishes to accept the appointment as successor Rights Agent and the parties hereto wish to make certain changes to the Rights Agreement to facilitate this succession.

        NOW, THEREFORE, the Company, First Chicago and EquiServe agree as follows:

        1. Resignation of First Chicago as Rights Agent. Pursuant to Section 21 of the Rights Agreement, First Chicago hereby resigns as Rights Agent, and the Company accepts such resignation, effective as of 12:01 a.m., New York time, December 31, 2001.

        2. Appointment of EquiServe as Successor Rights Agent. Pursuant to Section 21 of the Rights Agreement, the Company hereby appoints EquiServe as successor Rights Agent, and EquiServe hereby accepts such appointment, effective as of 12:01 a.m., New York time, December 31, 2001, subject to all the terms and conditions of the Rights Agreement as amended hereby. EquiServe hereby represents and warrants to the Company that it meets the qualifications of a successor rights agent as set forth in Section 21 of the Rights Agreement.

        3. Amendments to Rights Agreement. The parties hereto agree that the Rights Agreement shall be amended as provided below, effective as of the date of this Amendment except as may otherwise be provided below:

               (a) From and after the time that the appointment of EquiServe as successor Rights Agent is effective all references in the Rights Agreement (including all exhibits thereto) to First Chicago as Rights Agent shall be deemed to refer to EquiServe as successor Rights Agent. From and after the effective date of this Amendment, all references in the Rights Agreement to the Rights Agreement shall be deemed to refer to the Rights Agreement as amended by this Amendment.

               (b) Section 3(c) of the Rights Agreement shall be amended as of the effective time of the appointment of EquiServe as successor Rights Agent by adding a sentence, substantially in the form of the following sentence, immediately after the last sentence of the legend set forth therein:

Effective as of December 31, 2001, EquiServe Trust Company, N.A., succeeded First Chicago Trust Company of New York as Rights Agent.

The following legend, or a legend substantially similar thereto, may, in the alternative be affixed.

This certificate also evidences and entitles the holder hereof to certain rights as set forth in an Amended and Restated Rights Agreement between CIGNA Corporation and EquiServe Trust Company, N.A. (as successor Rights Agent), dated as of December 31, 2001, as amended from time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of CIGNA Corporation. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. CIGNA Corporation will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and certain related persons, whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void.

               (c) Section 26 of the Rights Agreement is amended by deleting the name and address of First Chicago and substituting the following therefor:

EquiServe Trust Company, N.A.
525 Washington Boulevard
Suite 4690
Jersey City, NJ 07303
Attention: Robbin Mayo

        4. Miscellaneous.

               (a) Except as otherwise expressly provided, or unless the context otherwise requires, all terms used herein have the meanings assigned to them in the Rights Agreement.

               (b) Each party hereto waives any requirement under the Rights Agreement that any additional notice be provided to it pertaining to the matters covered by this Amendment.

               (c) This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which counterparts shall together constitute but one and the same document.

        IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the day and year first written above.

CIGNA CORPORATION

By: /s/ Carol J. Ward

Name: Carol J. Ward

Title: Corporate Secretary

FIRST CHICAGO TRUST COMPANY

OF NEW YORK

By: /s/ M. J. Foley

Name: M. J. Foley

Title: Chief Marketing Officer

EQUISERVE TRUST COMPANY, N.A.

By: /s/ Thomas A. Ferrari

Name: Thomas A. Ferrari

Title: Senior Managing Director

EX-10.1

Exhibit 10.1     

DEFERRED COMPENSATION PLAN FOR DIRECTORS OF CIGNA CORPORATION

(Amended and Restated As Of January 1, 1997)

ARTICLE I.   DEFINITIONS

The following are defined terms wherever they appear in the Plan.

     1.1   “Administrator” shall mean the person, or committee, appointed by the Chief Executive Officer of CIGNA Corporation, and charged with responsibility for administration of the Plan.

     1.2   "Annual Credit Amount” shall mean an amount set from time to time by resolution of the Board of Directors.

     1.3   “Board of Directors” or “Board” shall mean the Board of Directors of CIGNA Corporation.

     1.4   “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 ("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 CIGNA Corporation having voting power which is either: (l) more than 50 percent of the voting power of the shares which voted in the election of directors of CIGNA Corporation at the shareholders' meeting immediately preceding such determination; or, (2) more than 25 percent of the voting power of common shares outstanding of CIGNA Corporation; or,

             (b) As a result of a merger or consolidation to which CIGNA Corporation is a party, either: (l) CIGNA Corporation is not the surviving corporation; or, (2) Directors of CIGNA 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.

     1.5   “CIGNA Common Stock” or “Common Stock” or “Stock” shall mean the common stock of CIGNA Corporation, par value of one dollar ($1.00) per share.

     1.6   “Committee” shall mean the Corporate Governance Committee of the Board of Directors of CIGNA Corporation, or the successor to such committee.

     1.7   “Deferral Election” shall mean the instrument executed by a Participant which specifies amounts and items of compensation to be deferred into the Deferred Compensation Account.

     1.8   “ Deferred Compensation Account” shall mean the separate account established under the Plan for each Participant, as described in Section 3.1.

     1.9   “ Participant” shall mean each individual who as a Director of CIGNA Corporation participates in the Plan in accordance with the terms and conditions of the Plan.

     1.10   “Payment Election” shall mean the instrument executed by a Participant which specifies the method of payment of compensation deferred.

     1.11   “Plan” shall mean the Deferred Compensation Plan for Directors of CIGNA Corporation, as it may be amended or restated from time to time by the Board of Directors.

     1.12   “ Restatement Date” shall mean January 1, 1997, the effective date of the Plan, as amended and restated.

     1.13   “Restricted Deferred Compensation Account” shall mean the separate account established under the Plan for each Participant participating pursuant to Section 5.1.

     1.14   “ Termination of Service” shall mean termination of services as a director of CIGNA Corporation, including but not limited to termination by retirement, death or disability.

     1.15   “Valuation Date” shall mean the close of business on the last business day of each month.

ARTICLE II.   PARTICIPATION

     2.1   Eligibility to Participate in the Plan.

     The individuals who are eligible to participate in the Plan are those persons who serve as directors of CIGNA Corporation.

     2.2   Participation in the Plan.

             (a) A Participant may elect to defer receipt of all or a portion of those items of compensation for services as a director as are specified by the Administrator.

             (b) The election to defer is made by delivering a properly executed Deferral Election to the Administrator. The Deferral Election shall specify the item or items of compensation to be deferred, and the amount of such compensation to be deferred. The election for payment of compensation deferred is made by delivering a properly executed Payment Election to the Administrator. The Payment Election shall specify the

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method by which such deferred compensation is to be paid, and the date or dates for payment of such deferred compensation.

             (c) An election to defer compensation must be filed by the Participant prior to the commencement of a calendar year during which such compensation will be paid.

             (d) Notwithstanding Section 2.2(c), an election to defer compensation made by an individual who subsequently begins active service as a director of CIGNA Corporation, is filed prior to the date upon which such active service begins, shall be effective according to Section 2.2(e)(2), below.

             (e) An election to defer compensation is effective: (l) for the year beginning after the election, and for subsequent years, unless modified or revoked; or, (2) if Section 2.2(d) applies, for the remainder of the first year of active service, as of the first day of active service, and for subsequent years, unless modified or revoked.

     2.3   Elections Pertaining to Payments.

     In executing a Payment Election, the Participant shall elect among the methods of payment as are specified by the Committee.

             (a) If a method of payment provides for periodic payments, the payments shall be made at least annually, over a period not to exceed 15 (fifteen) years.

             (b) If the payments are to commence after Termination of Service, no payments may be made before the first day of January following the calendar year during which the Participant terminates service.

             (c) The balance of a Participant's Deferred Compensation Account and Restricted Deferred Compensation Account shall be paid, in all events, no later than January of the fifteenth year following Termination of Service.

             (d) If there is not in effect as of Participant's Termination of Service a valid Payment Election, the Participant's Deferred Compensation Account and Restricted Deferred Compensation Account shall be paid annually over a period of 15 (fifteen) years.

     2.4   Modification of Elections Pertaining to Payments.

     With respect to payment of deferred compensation following Termination of Service, a Participant may request modification of his existing Payment Election, for payment under another method among those specified by the Committee. Any request for modification of such Payment Election shall be made before the Participant terminates service. The Committee shall consider any such modification request. In determining whether the request should be allowed, the Committee shall consider the Participant’s financial needs, including any changed circumstances, as well as the projected financial needs of CIGNA Corporation. If the Committee determines that the request should be

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allowed, the requested modifications shall be made. The Participant shall effect the modifications through execution of a new Payment Election, which shall constitute the only Payment Election which is outstanding and effective.

     2.5   Reduction or Termination of Future Deferral.

              (a) A Participant may elect to reduce or to revoke his deferral of compensation into his Deferred Compensation Account, but such election shall have effect only prospectively. A Participant shall effect an election to reduce his deferral of compensation by execution of a new Deferral Election, which shall constitute the only Deferral Election which is outstanding and effective. A Participant shall effect an election to revoke his deferral of compensation into his Deferred Compensation Account by informing the Administrator in writing. Only one election to reduce and one election to revoke may be made under this Section 2.5 by each Participant in a calendar year.

              (b) An election to reduce or to revoke deferral of compensation under Section 2.5(a) above shall become effective in the second calendar month following receipt of such election by the Administrator.

ARTICLE III.   COMPENSATION DEFERRED

     3.1   Deferred Compensation Account.

     A Deferred Compensation Account shall be established for each director when the director becomes a Participant. Compensation deferred by a Participant under the Plan shall be credited to the Deferred Compensation Account on the date such compensation would have been paid to the Participant. Hypothetical income on deferred compensation shall be credited to the Deferred Compensation Account as provided in Section 3.3, below.

     3.2   Balance of Deferred Compensation Account.

     The balance of each Participant’s Deferred Compensation Account shall include compensation deferred by the Participant, plus amounts credited to the Participant’s Deferred Compensation Account pursuant to Section 5.3, plus income, hypothetical dividends and gains credited with respect to hypothetical investments. Losses from hypothetical investments shall reduce the Participant’s Deferred Compensation Account balance. The balance of each Participant’s Deferred Compensation Account shall be determined as of each Valuation Date.

     3.3   Hypothetical Investment.

              (a) Compensation deferred under the Plan which would have been paid in cash shall be assumed to be invested, without charge, in one or more hypothetical investment vehicles as are specified from time to time by the Committee. With respect to such hypothetical investment:

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                (1) Cash compensation deferred shall be deemed to earn income under the hypothetical investment vehicle. The Administrator shall credit such income to the Participant’s Deferred Compensation Account, pursuant to Section 3.4 below.

                (2) The Committee, in its sole discretion, may provide that cash compensation deferred after the Restatement date is deemed invested in a different hypothetical investment vehicle or vehicles than the investment vehicle in which cash compensation deferred before the Restatement Date is deemed invested.

                (3) The Committee, in its sole discretion, may provide Plan Participants with options for one or more additional hypothetical investment vehicles for investment of cash compensation deferred under the Plan, with respect to which:

                   (A) a Participant may modify his election of hypothetical investment and may make any transfers between and among hypothetical investments, through a written request to the Administrator; provided that,

                   (B) only one such modification or transfer shall be allowed during any calendar quarter.

                   (C) any such modification or transfer shall be effective in the second calendar month following receipt of the request by the Plan Administrator.

                   (D) such modifications and transfers will be in accordance with rules and procedures adopted by the Plan Administrator.

              (b) Compensation deferred under the Plan into the Participant's Deferred Compensation Account as an alternative to receipt of Common Stock or credited to the Participant's Restricted Deferred Compensation Account pursuant to Sections 5.1 or 5.2 of the Plan shall be deemed to be invested, hypothetically and without charge, in whole shares of hypothetical Common Stock. Shares of hypothetical Common Stock shall be subject to adjustment in order to reflect Common Stock dividends, splits, and reclassification. Except in the event of a Change of Control, amounts in the Participant's Deferred Compensation Account and Restricted Deferred Compensation Account deemed invested in hypothetical Common Stock must remain so invested, and no other investment vehicle available hereunder may be substituted therefor until the January following the Participant's Termination of Service. Thereafter, intra-Plan transfers may be made only in accordance with Section 3.3(a) above; provided that all such intra-Plan transfers occurring within six months after the Participant's Termination of Service shall be subject to approval by the Administrator to ensure compliance shall with Section 16 of the Securities Exchange Act of 1934.

              (c) Amounts equal to cash dividends which would have been paid on shares of Common Stock shall be deemed paid on whole shares of hypothetical Common Stock in the Participant's Deferred Compensation Account and Restricted Deferred Compensation Account. Such amounts shall be credited to the Participant's Deferred Compensation Account and

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shall be hypothetically invested in accordance with Section 3.3(a) unless the Participant elects to have such amounts invested in one or more of the other hypothetical investment vehicles specified from time to time by the Committee.

              (d) In the event of a Change of Control, the Committee shall provide Participants with the option for investment in at least one hypothetical investment vehicle, the annual income earned on which must be not less than 50 basis points over the Ten-Year Constant Treasury Maturity Yield as reported by the Federal Reserve Board, based upon the November averages for the preceding year.

     3.4   Time of Hypothetical Investment.

              (a) The balance of each Participant's Deferred Compensation Account shall be deemed hypothetically invested on each Valuation Date, and income shall accrue on such balance upon such date, from the previous Valuation Date.

              (b) Compensation which would have been paid in cash shall be deemed invested in the Participant's Deferred Compensation Account on the Valuation Date next following such hypothetical investment or credit.

              (c) Compensation hypothetically invested in Common Stock shall be deemed invested in whole shares of Common Stock as of the date such compensation otherwise would have been payable to the Participant. The number of whole shares of Common Stock in which compensation is deemed hypothetically invested in the Deferred Compensation Account shall be determined with respect to the last trade date in the month in which such compensation otherwise would have been payable, by reference to the closing price on the last business day of such month as reported on the Composite tape (or successor means of publishing stock prices), provided, that in absence of such information, the Stock value shall be determined by the Committee.

     3.5   Statement of Account.

     The Administrator shall provide each Participant a statement of his Deferred Compensation Account at least annually.

ARTICLE IV.   PAYMENT OF DEFERRED COMPENSATION

     4.1   Payment of Deferred Compensation.

              (a) The Administrator shall pay amounts from the Participant's Deferred Compensation Account, according to the Participant's Payment Election.

              (b) Compensation deferred into the Deferred Compensation Account under the Plan shall be paid to the Participant in cash pursuant to Section 4.1(a).

     4.2   Financial Necessity Payment.

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     Notwithstanding any other provision of the Plan, if the Committee, after consideration of a Participant’s application, determines that the Participant has a financial necessity beyond the Participant’s control, and of such a substantial nature that immediate payment of compensation deferred under the Plan is warranted, the Committee in its sole and absolute discretion may direct that all or a portion of the balance of the Participant’s Deferred Compensation Account be paid to the Participant in cash. The amount of any such distribution shall be limited to the amount deemed necessary by the Committee to alleviate or remedy the hardship. The payment shall be made in a manner and at the time specified by the Committee. A Participant receiving a Financial Necessity Payment is deemed to have revoked his election for deferral of compensation under the Plan, as of the time of the Financial Necessity Payment. Any subsequent deferral of compensation under the Plan shall require that the Participant execute a new Deferral Election, subject to terms of Section 2.2(e)(1) hereof.

     4.3   Certain Accelerated Payments.

              (a) If a Participant terminates service under circumstances which are such that the Committee deems it in the best interest of the Participant and of CIGNA Corporation that payment of the Participant's Deferred Compensation Account and Restricted Deferred Compensation Account be accelerated, then the Committee, upon its own motion and in its sole discretion, may direct that the Participant's Deferred Compensation Account and Restricted Deferred Compensation Account balances be paid to him immediately.

              (b) If, as a result of substantial and unforeseen changes affecting (1) the business of CIGNA Corporation, (2) the personal or professional circumstances of a Participant, or (3) operation or administration of the Plan, the Committee determines that the interests of the Participant and of CIGNA Corporation are best served through accelerated payment of the Participant's Deferred Compensation Account and Restricted Deferred Compensation Account, the Committee on its own motion and in its sole discretion may direct that the Participant's Deferred Compensation Account and Restricted Deferred Compensation balances be paid to him immediately.

              (c) A Participant who is not entitled to payment of his Deferred Compensation Account under any other provision of Article IV may make a written request to the Committee for an accelerated payment of his entire Deferred Compensation Account balance except for that portion equal to hypothetical dividends on hypothetical Common Stock initially credited to the Participants' Restricted Deferred Compensation Account pursuant to Section 5.1(a). If the Committee receives such a request, it shall make a final valuation of the unrestricted portion of the Participant's Deferred Compensation Account and pay ninety per cent (90%) of the Deferred Compensation Account balance to the Participant. The Participant shall forfeit the remaining ten per cent (10%) of his Deferred Compensation Account balance to the Corporation. Payments under this Section 4.3(c) may be made only from that portion of a Participant's Account, including hypothetical investment results, attributable to compensation deferred after 1995.

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     4.4   Payments of a Deceased Participant's Account

              (a) If a Participant dies before his entire Deferred Compensation Account and Restricted Deferred Compensation Account has been paid to him, the Administrator shall pay the Deferred Compensation Account balance and Restricted Deferred Compensation Account in a single lump sum payment to the person(s) or trust(s) designated in writing by the Participant as his beneficiary(ies) under the Plan. The Administrator is authorized to establish rules and procedures for designations of beneficiaries and shall have the sole discretion to make determinations regarding the existence and identity of beneficiaries and the validity of beneficiary designations.

              (b) Notwithstanding Section 4.4(a), the Administrator shall pay the Deferred Compensation Account balance and Restricted Deferred Compensation Account balance, as soon as administratively feasible, in a single lump sum payment to the Participant's estate if:

                 (1) The Participant dies without having a valid beneficiary designation in effect;

                 (2) The Participant's designated beneficiary has predeceased him;

                 (3) The Participant's designated beneficiary cannot be found after what the Administrator determines, in his sole discretion, has been a reasonably diligent search; or

                 (4) The Administrator determines, in his sole discretion, that a payment in such form is in the best interest of the Corporation.

ARTICLE V.   Restricted Deferred Compensation Accounts

     5.1   Establishment of Restricted Deferred Compensation Accounts

              (a) A Restricted Deferred Compensation Account shall be established for each person serving as a director of CIGNA Corporation on December 31, 1996 except directors who (1) if they had retired on or before December 31, 1996, would have satisfied the eligibility requirements ("Eligibility Requirements") under Section 1 of the Retirement and Consulting Plan for Directors of CIGNA Corporation (the "Retirement Plan") and (2) did not waive their rights under the Retirement Plan on or before December 31, 1996. As of January 1, 1997, the present value of the accrued benefits under the Retirement Plan of each Participant for whom a Restricted Deferred Compensation Account has been established will be credited to that Participant's Restricted Deferred Compensation Account. The credited amounts will then be deemed to be invested and remain invested thereafter, hypothetically and without charge, in whole shares of hypothetical Common Stock. The number of whole hypothetical Common Shares to be credited to the Restricted Deferred Compensation Accounts shall be determined by using the average closing price for CIGNA Common Stock as reported on the

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Composite tape (or successor means of publishing stock prices) for the ten (10) business days prior to January 1, 1997.

              (b) A Restricted Deferred Compensation Account shall be established for each person first elected to the Board of Directors of CIGNA Corporation after December 31, 1996.

     5.2   Annual Credit Amount

     Beginning in 1997 and in each year thereafter, on the last business day of the month during which the Corporation’s Annual Meeting of Shareholders is held, the Annual Credit Amount will be credited to the Restricted Deferred Compensation Account of each Participant who is then a Director of CIGNA Corporation for whom such an account has been established pursuant to Section 5.1. That amount shall be assumed to be invested and remain invested thereafter, hypothetically and without charge, in whole shares of hypothetical Common Stock. The number of whole shares shall be determined by dividing the Annual Credit Amount by the average closing price for CIGNA Common Stock (as reported on the Composite tape or successor means of publishing stock prices) for the last ten (10) business days of the month during which CIGNA Corporation’s Annual Meeting of Shareholders is held.

     5.3   Dividends and Adjustments

     Hypothetical dividends shall be credited to the Participant’s Deferred Compensation Account and be invested and adjusted as provided in Section 3.3(c).

     5.4   Time of Payment

     Payments of the balance in the Restricted Deferred Compensation Account shall: be made in cash; commence the January following the calendar year in which the Participant’s Termination of Service occurs -- except as allowed by Section 4.3(a) or (b); and be made in accordance with the Participant’s applicable Payment Election. If a Participant dies before the entire balance in his Restricted Deferred Compensation Account has been paid to him, the Administrator shall pay such balances pursuant to Section 4.4 of this Plan.

     5.5   Statement of Restricted Deferred Compensation Account

     The Administrator shall provide each Participant a statement of his Restricted Deferred Compensation Account at least annually. The balance in the Participant’s Restricted Deferred Compensation Account shall be calculated in accordance with Section 3.2 of the Plan.

ARTICLE VI.   GENERAL PROVISIONS

     6.1   Committee Membership.

     A Participant who is also a member of the Committee shall take no part in any decision pertaining to a request by such Participant under Sections 2.4, 4.2, and 4.3 hereof.

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     6.2   Participant's Rights Unsecured.

     The right of any Participant to receive payments under the provisions of the Plan represents an unsecured claim against the general assets of CIGNA Corporation, or against the general assets of any successor company which assumes the liabilities of CIGNA Corporation.

     6.3   Assignability.

     No right to receive payments hereunder shall be transferable or assignable by a Participant. Any attempted assignment or alienation of payments hereunder shall be void and of no force or effect.

     6.4   Administration.

     Except as otherwise provided herein, the Plan shall be administered by the Administrator who shall have the authority to adopt rules and regulations for carrying out the Plan, and who shall interpret, construe and implement the provisions of the Plan.

     6.5   Amendment.

     The Plan may be amended, restated, modified, or terminated by the Board of Directors. No amendment, restatement, modification, or termination shall reduce the dollar value of a Participant’s Deferred Compensation Account balance or Restricted Deferred Compensation Account balance as of the Valuation Date immediately preceding such action.

     6.6   Correction of Errors and Inconsistencies.

     The Committee upon its own motion, or at the request of the Administrator or of a Participant, shall have the authority to effect consistency among deferral elections, payment elections, or hypothetical investment with respect to amounts deferred by a Participant under the Plan, so as to avoid or rectify difficulties in Plan administration. In no event shall such action by the Committee reduce the dollar value of a Participant’s Deferred Compensation Account balance or Restricted Deferred Compensation Account balance as of the Valuation Date immediately preceding such action, nor shall the Committee take any action inconsistent with Section 3.3(b) hereof. The Committee may take such action with respect to a Participant’s Deferred Compensation Account or Restricted Deferred Compensation Account, regardless of whether such Participant may continue as a Director of CIGNA Corporation, or whether he may have terminated service. Without limiting the foregoing, the Committee may take such action upon the request of the Administrator, in order to avoid deferral of fractional shares of Stock.

     6.7   Compliance with Section 16.

     If the Administrator determines that, in order to comply with Section 16 of the Securities Exchange Act of 1934, as amended, it is necessary for the Board rather than the Committee to take any action which the Plan authorizes the Committee to take, the Administrator shall

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request the Board to do so.

     6.8   Construction.

     The masculine gender where appearing in the Plan shall be deemed to include the feminine gender. The singular shall be deemed to include the plural; and the plural the singular.

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EX-10.2

Exhibit 10.2

AMENDED AND RESTATED RESTRICTED STOCK/STOCK EQUIVALENT

PLAN FOR NON-EMPLOYEE DIRECTORS OF CIGNA CORPORATION

Amended and Restated Effective January 25, 2007

1. Purpose.

The Restricted Stock/Stock Equivalent Plan for Non-Employee Directors of CIGNA Corporation (the "Plan") is intended to provide directors of CIGNA Corporation (the "Company") with a proprietary interest in the Company's success and progress by granting them shares of the Company's Common Stock or Common Stock Equivalents ("Common Stock" or “Stock Equivalents”) which are restricted in accordance with the terms and conditions set forth below ("Restricted Shares"or “Restricted Share Equivalents”). The Plan is intended to increase the alignment of personal economic interest between directors and shareholders generally and to strengthen the Company's ability to continue attracting and retaining highly qualified directors. No grants will be made under the Plan on or after January 17, 2006 except to Eligible Directors (as defined below) whose service as a member of the Company’s Board of Directors (the "Board") started before January 1, 2006.

2. Administration.

The Plan is to be administered by the Corporate Governance Committee of the Board or any successor committee with responsibility for compensation of directors (the "Committee").

3. Eligibility and Grants.

All Eligible Directors shall be eligible to participate in the Plan. “Eligible Directors” means all persons who (a) were members of the Board on September 30, 1989 (the “Effective Date”), or were elected to the Board after the Effective Date and before January 1, 2006 and (b) have served as directors for at least six months and, for the ten year period ending on the date such service began, were not officers or employees of the Company or any of its subsidiaries.

Each director who was an Eligible Director on the Effective Date was granted 4,500 Restricted Shares, effective as of the Effective Date. Each director who became an Eligible Director after the Effective Date but before October 1, 2004was granted 4,500 Restricted Shares, effective as of the date such director became an Eligible Director. Each director who becomes an Eligible Director after October 1, 2004 but before January 17, 2006 shall be granted 4,500 Restricted Share Equivalents, effective as of the date such director becomes an Eligible Director.

4. Terms and Conditions of Restricted Shares.

(a) General. Subject to the provisions of Section 4(c) below, the restrictions set forth in Section 4(b) shall apply to each grant of Restricted Sharesfor a period (the "Restricted Period") from the date of grant until the later of the expiration of the six-month period immediately following the date of grant or the date on which the shares vest as provided in Section 4(c).

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(b) Restrictions on Restricted Shares. A stock certificate representing the number of Restricted Shares granted shall be registered in each Eligible Director's name but shall be held in custody by the Company for the Eligible Director's account. The Eligible Director shall have all rights and privileges of a shareholder as to such Restricted Shares, including the right to receive dividends and the right to vote such Restricted Shares, except that the following restrictions shall apply: (i) the Eligible Director shall not be entitled to delivery of the certificate until the expiration of the Restricted Period, (ii) none of the Restricted Shares may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed of during the Restricted Period, and (iii) except as provided in Section 4(c), all of the Restricted Shares shall be forfeited and all rights of the Eligible Director to such Restricted Shares shall terminate without further obligation on the part of the Company upon the Eligible Director's ceasing to be a director of the Company prior to the expiration of the Restricted Period.

(c) Vesting of Restricted Shares

(i) The Restricted Shares granted to an Eligible Director shall vest on: (1) January 17, 2006, for an Eligible Director who as of that date has remained in continuous service as a director of the Company for at least nine years; (2) the ninth anniversary of the date an Eligible Director began service as a director of the Company if the Eligible Director has remained in continuous service as a director of the Company for that period and the Eligible Director had continuously served for fewer than nine years as of January 17, 2006; or (3) if earlier than the dates set forth in (1) or (2), upon termination of service as a director of the Company if the Eligible Director ceases to be a director by reason of Disability, death, Retirement or Change of Control. If an Eligible Director ceases to be a director of the Company for any other reason not listed in (3) above and the Restricted Shares have not otherwise vested pursuant to (1) or (2) above, the Eligible Director shall immediately forfeit all Restricted Shares except to the extent that a majority of the Board other than the Eligible Director approves the vesting of such Restricted Shares. Upon vesting, except as provided in Section 6, all restrictions applicable to such Restricted Sharesshall lapse. Such shares shall be delivered to the Eligible Director, or the Eligible Director's beneficiary or estate, in accordance with Section 4(d).

(ii) Disability. For purposes of this Plan, "Disability" shall mean a permanent and total disability as defined in Section 22(e)(3) of the Internal Revenue Code.

(iii) Retirement. For purposes of this Section 4(c), "Retirement" shall mean ceasing to be a director of the Company (i) on or after age 72, or (ii) on or after age 65 with the consent of a majority of the members of the Board other than the Eligible Director.

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(iv) Change of Control. For purposes of this Plan, "Change of Control" shall mean:

(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 ("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 Company having voting power which is either (i) more than 50% of the voting power of the shares which voted in the election of directors of the Company at the shareholders' meeting immediately preceding such determination, or (ii) more than 25% of the voting power of the Company's outstanding common shares; or

(B) as a result of a merger or consolidation to which the Company is a party, either (i) the Company is not the surviving corporation or (ii) Directors of the Company 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: (i) were directors at the beginning of such consecutive 24-month period; or (ii) were elected by, or on nomination or recommendation of, at least a majority (consisting of at least nine directors) of the Board.

(d) Delivery of Shares. At the end of the Restricted Period, the number of Restricted Shareswhich have vested shall be delivered free of all such restrictions to the Eligible Director or the Eligible Director's beneficiary or estate, as the case may be.The shares shall be certificated and delivered or delivered via book entry deposit into the Eligible Director’s account at the Corporation’s stock transfer agent.

5. Terms and Conditions of Restricted Share Equivalents.

(a) General. An account shall be established on the books and records of the Company to record the number of Restricted Share Equivalents granted by the Company to the Eligible Director. Subject to the provisions of Section 5(c) below, the restrictions set forth in Section 5(b) shall apply to each grant of Restricted Share Equivalents.

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(b) Restrictions on Restricted Share Equivalents. The following restrictions shall apply to Restricted Share Equivalents: (1) the Eligible Director shall not be entitled to the payment of the Restricted Share Equivalents until the Payment Date provided in Section 5(d); (2) none of the Restricted Share Equivalents may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed of prior to the Payment Date; and (3) all of the Restricted Share Equivalents shall be forfeited and all rights of the Eligible Director to such Restricted Share Equivalents shall terminate without further obligation on the part of the Company upon the Eligible Director ceasing to be a director of the Company prior to the date the Restricted Share Equivalents vest.

(c) Vesting of Restricted Share Equivalents.

(1) The Restricted Share Equivalents granted to an Eligible Director shall vest on the later of:

(A) Six months after the date of grant; or

(B) The earliest of:

(i) The Eligible Director's ninth anniversary of continuous service as a director of the Company,

(ii) The Eligible Director's attainment of age 65,

(iii) The Eligible Director's Disability,

(iv) The Eligible Director's death, or

(v) The occurrence of a Change of Control.

(2) If an Eligible Director’s resignation is accepted because he or she failed to receive the required majority vote for reelection and his or her Restricted Share Equivalents have not yet vested pursuant to Section 5(c)(1), then a pro-rated portion of the Eligible Director’s Restricted Share Equivalents shall automatically vest effective as of the date of such resignation, with the portion to vest determined by multiplying 4500 by the following fraction: the number of complete months the Eligible Director performed continuous service as a director of the Company divided by 108, eliminating any resulting fractional Restricted Share Equivalent.

(3) If an Eligible Director ceases to be a director of the Company and any of his or her Restricted Share Equivalents have not otherwise vested pursuant to this Section 5(c), the Eligible Director shall immediately forfeit all such remaining Restricted Share Equivalents, except to the extent a majority of the Board other than the Eligible Director approves their vesting.

(d) Payment of Vested Restricted Share Equivalents. The cash value of the vested Restricted Share Equivalents shall be determined as of an Eligible Director's last business day of service as a director of the Company (the "Valuation Date") by using the closing price on the Valuation Date as reported on the Composite tape or successor means of publishing stock price. The Valuation Date cash valueshall be paid to the Eligible Director, or the Eligible Director's beneficiary or estate, as the case may be, within 45 days of the Eligible Director's separation from service, but no later than the end of the calendar year in which the Eligible Director separates from service or, if later, the fifteenth day of the third month following the Eligible Director's separation from service (the "Payment Date").

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(e) Hypothetical Dividends. Hypothetical dividends (amounts equal to cash dividends paid on shares of Common Stock) shall be paid on the Restricted Share Equivalents no later than the end of the calendar year in which cash dividends on shares of Common Stock are paid or, if later, the fifteenth day of the third month following the date cash dividends on shares of Common Stock are paid.

6. Regulatory Compliance.

No Common Stockgranted pursuant to this Plan shall be sold or distributed by an Eligible Director or an Eligible Director's beneficiary or estate until all appropriate listing, registration and qualification requirements and consents and approvals have been satisfied or obtained, free of any condition unacceptable to the Board of Directors.

7. Adjustment in Event of Changes in Capitalization.

In the event of a recapitalization, stock split, stock dividend, combination or exchange of shares, merger, consolidation, rights offering, separation, reorganization or liquidation, or any other change in the corporate structure or shares of the Company, the Committee may make such equitable adjustments, to prevent dilution or enlargement of rights, as it may deem appropriate in the number and class of shares authorized to be granted as Restricted Sharesor in the number of Restricted Share Equivalents. Restricted Shares or Restricted Share Equivalentsissued as a consequence of any such change in the corporate structure or shares of the Company shall be issued subject to the same restrictions and provisions applicable to the Restricted Shares or Restricted Share Equivalentswith respect to which they are issued.

8. Termination or Amendment of the Plan.

The Board may at any time terminate the Plan and may from time to time alter or amend the Plan or any part hereof (including any amendment deemed necessary to ensure that the Company may comply with any regulatory requirement referred to in Section 6) without shareholder approval, unless otherwise required by law or by the rules of the Securities and Exchange Commission or New York Stock Exchange. No termination or amendment of the Plan may, without the consent of an Eligible Director, impair the rights of such director with respect to Restricted Shares or Restricted ShareEquivalentsgranted under the Plan.

9. Miscellaneous.

(a) Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any director for reelection by the Company's shareholders.

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(b) The Company shall have the right to require, prior to the issuance or delivery of any Restricted Shares, payment by an Eligible Director of any taxes required by law with respect to the issuance or delivery of such shares, or the lapse of restrictions thereon, or to withhold any taxes as required by law with respect to the cash value of the Restricted Share Equivalents.

(c) The shares of Common Stock granted as Restricted Shares under the Plan may be either authorized but unissued shares or shares which have been or may be reacquired by the Company, as determined from time to time by the Board.

10. Effective Dates.

The Plan became effective as of September 30, 1989. The effective date of this Restatement of the Restricted Stock/Stock Equivalent Plan for Non-Employee Directors of CIGNA Corporation is January 25, 2006.

END OF DOCUMENT

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EX-10.5A

Exhibit 10.5(a)     

CIGNA EXECUTIVE SEVERANCE BENEFITS PLAN

ARTICLE 1
Definitions

The following are defined terms wherever they appear in this Plan.

1.1 “Additional Payment” means the benefit described in Section 3.6 of the Plan.

1.2 “Board” means the Board of Directors of CIGNA Corporation or a successor.

1.3 “CIGNA” means CIGNA Corporation, a Delaware corporation, its subsidiaries, successors and predecessors.

1.4 “Cause” means conviction of the Participant for a felony involving fraud or dishonesty directed against CIGNA.

1.5 “Change of Control” means:

(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 (“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 CIGNA Corporation having voting power which is either (1) more than 50% of the voting power of the shares which voted in the election of Directors of CIGNA Corporation at the shareholders’ meeting immediately preceding such determination, or (2) more than 25% of the voting power of CIGNA Corporation’s outstanding common shares; or

(b)  As a result of a merger or consolidation to which CIGNA Corporation is a party, either (1) CIGNA Corporation is not the surviving corporation or (2) Directors of CIGNA 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 on nomination or recommendation of, at least a majority (consisting of at least nine directors) of the Board.

1.6 “Code” means the Internal Revenue Code of 1986, as amended.

1.7 “Committee” means the People Resources Committee of the Board, or a successor committee.

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1.8 “Covered Executive” means any person employed by CIGNA in a position at a Salary Grade Level of 60 or higher (or an equivalent position).

1.9 “Excess Parachute Payments” means the amount defined in Code Section 280G.

1.10 “Excise Tax” means any excise tax under Code Section 4999 for any Excess Parachute Payments, or any similar tax, and any interest or penalties relating to such tax..

1.11 “Parachute Payments” means any payments defined in Code Section 280G(b)(2).

1.12 “Participant” means an employee of CIGNA who meets the eligibility requirements set forth in Article 2.

1.13 “Plan” means the CIGNA Executive Severance Benefits Plan, an amendment and restatement of the CIGNA Corporation Severance Benefits Plan for Members of the Executive Group, as it may be amended from time to time.

1.14 “Severance Pay Plan” means the CIGNA Severance Pay Plan, as it may be amended from time to time, or any successor plan.

1.15 “Severance Payment” means any payment, distribution or economic benefit to or for the benefit of a Terminated Participant payable under the Plan or otherwise in connection with a Change of Control or Participant’s Termination upon a Change of Control, regardless of the plan or arrangement under which the payments are made. The term shall include, but not be limited to, Basic Severance Pay and Supplemental Severance Pay under this Plan and any economic benefit received by the Terminated Participant because of the acceleration of any rights under the CIGNA Long-Term Incentive Plan, or any predecessor or similar plan, regarding stock options, restricted stock grants, stock appreciation rights and dividend equivalent rights.

1.17 “Terminated Participant” means a Participant whose employment with CIGNA ends because of a Termination upon a Change of Control.

1.18 “Termination of Employment Date” means the date on which the Participant’s actual employment relationship with CIGNA ends.

1.19 “Termination upon a Change of Control” means the termination of a Participant’s employment with CIGNA upon or within two (2) years following a Change of Control (a) initiated by CIGNA or a successor, other than a Termination for Cause, or (b) initiated by an Employee after determining in his reasonable judgment that there has been a reduction in his authority, duties, responsibilities or title, any reduction in his compensation, or any changes caused by CIGNA in his office location of more than thirty-five (35) miles from its location on the date of the Change of Control.

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ARTICLE 2
Eligibility

2.1 Covered Executives. Subject to the limits in Section 2.2, any person who is a Covered Executive on the date immediately preceding his or her Termination of Employment Date shall be eligible for benefits under this Plan. Any person who is a Covered Executive on the date of a Change of Control shall remain a Covered Executive for the two-year period beginning on the date of a Change of Control.

2.2 Coordination of Benefits. A Covered Executive who is party to an individual agreement with CIGNA that provides severance benefits and who qualifies for severance benefits under both the agreement and this Plan shall receive the greater of the severance benefits provided under the agreement or this Plan, but not both.

ARTICLE 3
Benefits

3.1 Incorporation of Severance Pay Plan Provisions. Except as set forth in this Article 3, the provisions of the Severance Pay Plan, with the exception of any exclusions from eligibility of persons in positions above salary Grade 59 (or their equivalent), are incorporated by reference herein and made part of this Plan.

3.2 Termination Upon a Change of Control. The provisions of the Severance Pay Plan incorporated above in Section 3.1 into this Plan, shall apply to a Terminated Participant, except as provided in Sections 3.3 through 3.8 below.

3.3 Basic Severance Pay. Instead of Basic Severance Pay under Schedule II of the Severance Pay Plan, a Terminated Participant’s Basic Severance Pay shall equal his or her base salary rate, stated in weekly terms, multiplied by 104 weeks. Basic Severance Pay shall be paid to the Terminated Participant in 52 equal bi-weekly installments over a two-year period, unless the Terminated Participant elects a lump sum payment.

3.4 Supplemental Severance Pay. Supplemental Severance Pay for a Terminated Participant with a Termination of Employment Date from May 1 to December 31 shall be computed as under the Severance Pay Plan except that, instead of averaging bonuses or making pro-rata adjustments, the lump sum amount shall equal the higher of:

(a) the bonus actually received by the Terminated Participant for the calendar year preceding his Termination of Employment Date; or

(b) the amount of the target award that was applicable to the Terminated Participant immediately preceding the Change of Control. For purposes of this provision, “target award” means (1) the target award established by the Board or Committee for determining appropriate levels of incentive compensation payments under the CIGNA Key Management Incentive Bonus Plan or the CIGNA Executive Incentive Plan or (2) for any position for which no such target award has been established, the median level of

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annual incentive compensation paid for executives in comparable positions by a group of competitor companies, which median level has been approved by the Board or Committee.

3.5 Miscellaneous Benefits. During the six-month period beginning on a Participant’s Termination of Employment Date, CIGNA will provide the Terminated Participant with outplacement counseling, office space and secretarial services. A Terminated Participant may elect to have CIGNA provide executive financial planning and tax preparation services for the calendar year in which his or her Termination of Employment Date occurs in accordance with such programs then in effect.

3.6 Excise Tax Gross-Up. If a Terminated Participant incurs any Excise Tax liability for any Severance Payments received from CIGNA, then CIGNA shall provide the Terminated Participant with an Additional Payment in an amount such that the sum of the following amounts shall be equal to the Severance Payments:

(a) the net amount of any Severance Payments received by the Participant after deduction of any Excise Tax on the Severance Payments;

(b) the Additional Payment;

(c) any Excise Tax and federal, state and local income taxes upon the Additional Payment; and

(d) any penalties and interest related to such taxes.

CIGNA shall pay the Terminated Participant any Additional Payment due within 30 days after his or her Termination of Employment Date.

3.7 Tax Computation. For purposes of determining whether a Terminated Participant has any Excise Tax liability referred to in Section 3.6:

(a) All Severance Payments to the Terminated Participant shall be treated as Parachute Payments and all Excess Parachute Payments shall be treated as subject to the Excise Tax, except to the extent that tax counsel, selected by CIGNA’s independent auditors and acceptable to the Terminated Participant, renders a written opinion that all or any part of any Severance Payment does not constitute a Parachute Payment, or represents reasonable compensation for services actually rendered (within the meaning of Code Section 280G(b)(4)) in excess of the base amount (within the meaning of Code Section 280G(b)(3)), or is otherwise not subject to the Excise Tax;

(b) The amount of Severance Payments to be treated as subject to the Excise Tax shall equal the lesser of (1) the total amount of Severance Payments or (2) the amount of Excess Parachute Payments (after applying paragraph 3.7(a) above); and

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(c) The value of any noncash benefits and any deferred payments or benefits shall be determined by CIGNA’s independent auditors in accordance with the principles of Code Sections 280G(d)(3) and (4).

3.8 Computation of Additional Payment. For purposes of determining the amount of any Additional Payment to a Terminated Participant under Section 3.6 above:

(a) It shall be assumed that the Terminated Participant will pay Federal income tax at the highest marginal tax rate in the year the Additional Payment is made, and state and local income taxes at the highest marginal tax rates in the state and locality of the Terminated Participant’s residence on his or her Termination of Employment Date, net of the maximum reduction in Federal income taxes which could be obtained from deduction of any such state and local income taxes.

(b) If the Excise Tax subsequently determined to be owed by the Terminated Participant is less than the amount that was the basis for any Additional Payments made under Sections 3.6, then the Terminated Participant shall repay to CIGNA, as soon as the amount of his or her Excise Tax liability has been finally determined, the amount of any excess Additional Payment, plus interest.

(c) If the Excise Tax subsequently determined to be owed by the Terminated Participant is more than the amount that was the basis for any Additional Payments made under Sections 3.6, then CIGNA shall pay to the Terminated Participant, as soon as the amount of his or her Excise Tax liability has been finally determined and communicated in writing to CIGNA (and the amount shall be subject to verification by CIGNA’s independent auditors), the additional amount required to provide the Terminated Participant with the correct total Additional Payment, plus interest on the additional amount.

(d) The amount of interest to be paid under paragraphs 3.8(b) and (c) shall be the appropriate applicable federal rate provided under Code Section 1274(d)(1)(A) in effect on the date of the initial Additional Payment.

ARTICLE 4
Administration of the Plan

4.1 Amendment; Termination. This Plan may be amended, modified or terminated by the Board or Committee, in the sole and absolute discretion of either, at any time, except after a Change of Control. For the two-year period following a Change of Control, no amendment, modification or termination which would adversely affect any Participant in any manner may be made.

4.2 Effective Date. This Plan shall be effective January 1, 1997.

IN WITNESS WHEREOF, CIGNA Corporation has caused this Plan to be executed by the undersigned officer this 16th day of December, 1996, to be effective as of the date set forth herein.

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(Corporate Seal)
Attest:	CIGNA CORPORATION
/s/ Carol J. Ward	/s/ Donald M. Levinson
Carol J. Ward	Donald M. Levinson
Corporate Secretary	Executive Vice President

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EX-10.10

EXHIBIT 10.10

CIGNA DEFERRED COMPENSATION PLAN
(Amended and Restated as of October 24, 2001)

ARTICLE 1
Definitions

These terms have the following meanings under the Plan.

1.1 "Account" – the separate bookkeeping account established for a Participant that represents the Company’s unfunded, unsecured obligation to make future payments to the Participant.

1.2 "Administrator" – the person or committee charged with responsibility for administration of the Plan.

1.3 "Beneficiary" – the person or trust designated in writing under the Plan by the Participant to receive payment of his/her remaining Account balance after Participant’s death.

1.4 "Board Committee" – the People Resources Committee of the Board of Directors, or any successor committee.

1.5 "Board of Directors" – the board of directors of CIGNA Corporation.

1.6 "Change of Control" – any of these events:

(a) a corporation, person or group acting in concert as described in Section 14(d)(2) of 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 CIGNA Corporation having voting power that is either (1) more than 50% of the voting power of the shares which voted in the election of directors of CIGNA Corporation at the shareholders’ meeting immediately preceding such determination, or (2) more than 25% of the voting power of common shares outstanding of CIGNA Corporation, or

(b) as a result of a merger or consolidation to which CIGNA Corporation is a party, either (1) CIGNA Corporation is not the surviving corporation, or (2) Directors of CIGNA 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 of Directors 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 of Directors. "Continuity Directors" means those members of the Board of Directors who either: (1) were directors at

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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 of Directors.

1.7 "CIGNA Stock" – the common stock of CIGNA Corporation.

1.8 "Company" – CIGNA Corporation and each Subsidiary that has been authorized by the Chief Executive Officer of CIGNA Corporation to participate in the Plan and that has adopted the Plan and agreed to comply with its provisions.

1.9 "Corporate Committee" – the CIGNA Corporation Corporate Benefit Plan Committee, or any successor committee.

1.10 "Deferral Election" – the form described in section 2.3 by which a Participant specifies amounts and items of compensation to be deferred.

1.11 "Deferred Cash" – compensation deferred under the Plan that would otherwise have been paid to a Participant in cash.

1.12 "Deferred CIGNA Stock" – compensation deferred under the Plan that would otherwise have been paid to a Participant in shares of CIGNA Stock.

1.13 "Discretionary Transaction" – a transaction defined in Rule 16b-3(b)(1) promulgated under the Exchange Act.

1.14 "ERISA" – the Employee Retirement Income Security Act of 1974, as amended.

1.15 "Exchange Act" – the Securities Exchange Act of 1934, as amended.

1.16 "Participant" – an employee of a Company who elects to participate in the Plan in accordance with the terms and conditions of the Plan.

1.17 "Payment Election" – the form described in section 4.2 by which a Participant specifies the method and time of payment of compensation deferred under the Plan.

1.18 "Plan" – the CIGNA Deferred Compensation Plan, as it may be amended or restated (formerly called the Deferred Compensation Plan of CIGNA Corporation and Participating Subsidiaries).

1.19 "Stock Plan" – a plan or program that provides for payment of compensation in the form of shares of CIGNA Stock.

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1.20 "Subsidiary" – a corporation (or a partnership, joint venture or other unincorporated entity) of which more than 50% of the combined voting power of all classes of stock entitled to vote (or more than 50% of the capital, equity or profits interest) is owned directly or indirectly by CIGNA Corporation; provided that such corporation (or other entity) is included in CIGNA Corporation’s consolidated financial statements under generally accepted accounting principles.

1.21 "Termination of Employment" – the termination of Participant’s employment relationship with CIGNA Corporation or a Subsidiary, including a transaction by which the Participant’s employing Company ceases to be a Subsidiary unless Participant’s employer (or the purchaser of the employer) assumes the Plan’s liabilities and responsibilities with respect to the Participant. A Participant’s transfer of employment among CIGNA Corporation and Subsidiaries will not be a Termination of Employment.

1.22 "Valuation Date" – the last day of each month.

ARTICLE 2
Participation; Deferral Elections

2.1         Eligibility. The Plan is intended primarily to provide deferred compensation for a select group of management and highly compensated employees. The Corporate Committee shall determine which Company employees are eligible to participate in the Plan.

2.2         Participation. An eligible employee becomes a Participant by making a Deferral Election described in section 2.3.

2.3 Deferral Election.

(a) A Deferral Election specifies the amounts and items of compensation a Participant elects to defer under the Plan for a particular calendar year. The Administrator shall determine which items or categories of compensation may be deferred under the Plan. The Deferral Election must be in a form permitted or required by the Administrator, and the Administrator may permit or require electronic forms. The Administrator shall determine whether Deferral Election forms are sufficiently complete and timely (as described in section 2.3(b), (c) and (d)) and whether to reject forms that are incomplete.

(b) Except as described in section 2.3(c), a Deferral Election must be received by the Administrator no later than December 31 of the year before the year in which the compensation to be deferred would otherwise be paid; however, the Administrator may establish an earlier deadline.

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(c) A Deferral Election by a person who first becomes a Company employee after January 1 of the year must be received by the Administrator on or before the 30th calendar day after the date the person becomes a Company employee. A Deferral Election by a newly eligible employee shall apply only to the employee’s compensation for services performed after the Administrator receives the Deferral Election.

(d) An employee who makes a Deferral Election for the first time must also make a Payment Election (described in section 4.2). The Payment Election must be received by the Administrator by the Deferral Election deadline stated in section 2.3(b) or (c).

(e) Instead of requiring Participants to make new Deferral Elections for each new calendar year, the Administrator may provide that a Participant’s Deferral Election shall, unless modified or cancelled under the Plan, remain effective from year to year until the Participant’s Termination of Employment. However, for compensation otherwise payable in future years,a Participant may increase or reduce the amount of compensation being deferred, stop deferring compensation or change the items of compensation being deferred by completing and submitting a new Deferral Election by the deadline described in section 2.3(b). The new Deferral Election will be effective at the beginning of the calendar year following the deadline.

2.4          Reducing or Stopping Future Deferrals. A Participant may request to reduce the amount of compensation being deferred, or to stop deferring compensation, during the calendar year by submitting a written request to the Administrator together with a new Deferral Election and the reasons for the request. If the Administrator grants Participant’s request, the Administrator shall determine the effective date of the new Deferral Election; provided that the new Deferral Election shall apply only to compensation payable after the Administrator’s determination. The Administrator may grant only one such request for a Participant in any calendar year.

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ARTICLE 3
Deferred Compensation Account

3.1          General. The Administrator shall establish and maintain an Account for each Participant. The Administrator shall credit to the Account any compensation deferred by a Participant under the Plan. The Administrator shall also credit (or debit) to the Account any hypothetical income (or losses) on the deferred compensation. The credit for deferred compensation shall be effective as of the date the compensation would have otherwise been paid to the Participant. The credit (or debit) for hypothetical income (or losses) shall be as provided in section 3.3 or 3.4, as applicable.

3.2          Account Balance. The balance of each Participant’s Account shall include compensation deferred by the Participant and hypothetical income (or losses). The Account balance shall be reduced by any payments or forfeitures under Article 4. The Administrator shall determine each Participant’s Account balance as of each Valuation Date. The Administrator shall provide each Participant an Account statement at least annually.

3.3 Hypothetical Investment of Deferred Cash.

(a) Deferred Cash shall be treated as invested in one or more hypothetical investments described in section 3.3(b). The Administrator shall credit (or debit) to the Participant’s Account as of each Valuation Date hypothetical income (or losses) based on the performance of the applicable hypothetical investment. The credit (debit) shall be applied against the balance of Participant’s Account on the immediately preceding Valuation Date. The Administrator shall have authority to adopt, and from time to time change, rules and procedures for crediting (debiting) hypothetical income (losses) as to any amount of Deferred Cash that has been credited to a Participant’s Account for less than the entire month ending on the Valuation Date.

(b) The Corporate Committee shall determine at least one hypothetical investment for Deferred Cash and may provide some or all Plan Participants with options for more than one hypothetical investment. The Corporate Committee may add or eliminate hypothetical investments at any time, but any such action shall apply to the balance of a Participant’s Account no earlier than the Valuation Date immediately after the Corporate Committee changes hypothetical investments. The Administrator shall have authority to adopt rules and procedures by which a Participant with a choice of more than one hypothetical investment may change hypothetical investment elections, provided that a Participant shall not be able to make changes more than once each calendar quarter.

(c) If a Change of Control occurs, the annual income earned on at least one hypothetical fixed return guaranteed principal investment must be not less than 50 basis points over the Ten-year Constant Treasury Maturity Yield as reported by the Federal Reserve Board, based upon the November averages for the preceding year.

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3.4          Hypothetical Investment of Deferred CIGNA Stock. Deferred CIGNA Stock shall be credited to Participant’s Account as a number of shares of hypothetical CIGNA Stock. The number shall initially be the same number of shares that would have been issued to the Participant but for the deferral. After the initial credit, the number shall be adjusted as appropriate to reflect stock dividends, splits and reclassifications in accordance with the terms of the applicable Stock Plan. Deferred CIGNA Stock may not be deemed invested in any other hypothetical investment. An amount equal to the dividends which would otherwise be paid on shares of Deferred CIGNA Stock shall be credited to the Participant’s Account as Deferred Cash, as of the applicable dividend payment date, and deemed invested under Section 3.3. The Administrator shall take necessary action to avoid deferral or issuance of fractional shares of CIGNA Stock.

3.5          Transfer of Prior Deferrals to Plan Account. The Administrator may transfer to a Participant’s Account under this Plan any compensation previously deferred by the Participant under a deferred compensation plan of, or agreement with, any Company if that plan or agreement provides or permits such a transfer or if the Participant consents to such a transfer.

ARTICLE 4
Payment of Deferred Compensation

4.1          General. The Company shall pay amounts credited to Participant’s Account balance according to the Participant’s Payment Elections or under the other, applicable provisions of Article 4. Deferred CIGNA Stock shall be paid only in shares of CIGNA Stock issued under the applicable Stock Plan. The applicable Stock Plan is the plan under which the shares would have previously been issued but for the Participant’s deferral, or a successor plan.

4.2 Payment Election.

(a) Subject to section 4.3, a Payment Election must specify the payment method that shall apply to Participant’s deferred compensation and either the date of payment or the date payments are to begin.

(b) A Payment Election must be in a form permitted or required by the Administrator, and the Administrator may permit or require electronic forms. The Administrator shall determine whether a Payment Election form is sufficiently complete and shall reject incomplete forms.

(c) A Participant may make separate Payment Elections for Deferred Cash and Deferred CIGNA Stock. The Administrator may provide that a Participant’s Payment Election shall, once effective, remain effective unless and until modified under the Plan. However, a Participant may make a new Payment Election for any future calendar year deferrals by submitting a new Payment Election form. The new Payment Election must be received by the Administrator by the deadline for Deferral Elections described in section 2.3(b). The new Payment Election will be effective only for compensation that, absent deferral, would

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otherwise be payable in years after the year the Administrator receives the new Payment Election.

4.3 Payment Methods and Timing.

(a) Subject to the conditions in section 4.3(b) through (d), the Administrator shall have the authority to determine the payment methods and timing permitted under the Plan.

(b) If the payments are to begin after a Participant’s Termination of Employment then, subject to the other provisions of Article 4, no payments may be made before January 1 following the calendar year of Participant’s Termination of Employment. If a payment method provides for periodic payments, payments shall be made at least annually, over a period not to exceed 15 years. The balance of a Participant’s Account shall be paid, in all events, no later than January 31 of the 15th year after the calendar year of Participant’s Termination of Employment.

(c) The Administrator may permit, and may establish rules governing, Payment Elections that provide for payments to be made (or begin) on a specified date before a Participant’s Termination of Employment.

(d) To the extent there is not in effect at Participant’s Termination of Employment a valid Payment Election, the Participant’s Account shall be paid annually over a period of 15 years with the first installment payment in January of the year following the year of participant’s Termination of Employment.

4.4 Changing Payment Methods.

(a) A Participant may request a change in the method of payment under any Payment Election that provides for payments to begin after the Participant’s Termination of Employment, subject to these conditions:

(1)  The requested new payment method must be one that is permitted under section 4.3 (but not under section 4.3(c)).

(2) The request must be in writing addressed to the Administrator.

(3)  The request must include a new Payment Election form, specify the existing Payment Election and amounts of deferred compensation that are affected by the request and explain the reasons for the request.

(4) The Administrator must receive the request before the Participant's Termination of Employment.

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(b) A Participant’s request under section 4.4(a) will be granted only if the Administrator approves the request. In determining whether the request should be approved, the Administrator shall consider the Participant’s financial needs, including any changed circumstances, as well as the projected financial needs of the Company that is liable for such future payments.

4.5 Financial Necessity Payment.

(a) If the Administrator, after considering a Participant’s written request, determines that the Participant has an unanticipated financial necessity that is beyond his/her control and of such a substantial nature that immediate payment of Deferred Cash or issuance of Deferred CIGNA Stock is warranted, the Administrator in its sole and absolute discretion may direct that all or a portion of the Participant’s Account be paid to the Participant. The amount of the payment shall be limited to the amount deemed necessary by the Administrator to alleviate or remedy the hardship. The payment shall be made in the manner and at the time specified by the Administrator.

(b) The Administrator shall cancel the Deferral Election of a Participant who receives a payment under section 4.5(a). The cancellation shall be effective as of the date of the payment. To resume deferrals, the Participant must make a new Deferral Election under section 2.3(a).

4.6          Accelerated Payments upon Termination of Employment. The Administrator shall have sole and absolute discretion to direct that a Participant’s Account balance be paid immediately upon Termination of Employment if the Administrator deems it in the best interests of the Participant and of a Company that payment of the Participant’s Account be accelerated.

4.7 Payments of a Deceased Participant’s Account.

(a) Upon the death of a Participant the Administrator shall pay any remaining portion of Participant’s Account in a single lump sum payment to Participant’s Beneficiary. The Administrator may establish rules and procedures for designation of beneficiaries and shall make determinations regarding the existence and identity of beneficiaries and the validity of beneficiary designations. A Participant may designate more than one beneficiary.

(b) Notwithstanding Section 4.7(a), the Administrator shall pay Participant's Account in a single lump sum payment to the Participant's estate if:

(1) The Participant dies without having a valid beneficiary designation in effect;

(2) The Participant's designated Beneficiary died before the Participant died;

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(3) The Participant's designated Beneficiary cannot be found after what the Administrator determines has been a reasonably diligent search; or

(4) The Administrator determines that a payment in such form is in the best interest of one or more Companies.

(c) The Administrator shall generally make any payments described in section 4.7(a) and (b) in January following the year the Participant dies, but no earlier than 60 days after the date Participant dies. Nevertheless, the Administrator may make the payment as soon as practicable after the Participant’s death if the Administrator deems an accelerated payment to be in the best interest of the Company or the Participant’s Beneficiary or estate.

4.8          Accelerated Payment with Forfeiture. A Participant who is not entitled to a payment of his Account under any other provision of Article 4 may make a written request to the Administrator for an accelerated payment of:

(a) His entire Account, including hypothetical investment results, attributable to compensation deferred after 1995; or

(b) 25%, 50% or 75% of the portion of his Account balance that is attributable to compensation deferred after 1995 and that is (1) Deferred CIGNA stock or (2) Deferred Cash or (3) both (including hypothetical investment results), but only if the requested portion is at least $10,000.

As of the Valuation Date immediately after the Administrator receives such a request, the Administrator shall make a valuation of the Participant’s Account and pay to the Participant 90% of the Account balance or requested portion. The Participant shall forfeit to the applicable Company the remaining 10% of the Account balance or requested portion.

ARTICLE 5
General Provisions

5.1          Participant’s Rights Unsecured. The right of a Participant (or Beneficiary) to receive payments under the Plan represents an unsecured claim against the general assets of the Company that employs the Participant at the time that the compensation deferred otherwise would have been paid, or against the general assets of any successor company that assumes (or in case Participant transfers to employment with a different Company, is assigned) the liabilities of that Company. No Company guarantees or is liable for payments to any Participant employed by any other Company. Participant’s Account represents a mere promise by a Company to make payments in the future. The Plan at all times shall be considered entirely unfunded for both tax purposes and for purposes of Title I of ERISA.

9

5.2          Assignability. No right to receive Plan payments shall be transferable or assignable by a Participant or Beneficiary or subject in any manner to anticipation, sale, alienation, pledge, encumbrance, attachment or garnishment by creditors of a Participant or Beneficiary, any such attempt shall be void and of no force or effect.

5.3          Administration. CIGNA Corporation’s Chief Executive Officer shall appoint the Administrator. Except as otherwise provided by the Plan, the Administrator shall administer the Plan and shall have authority to adopt administrative rules and regulations. The Administrator may, by contract, designation or other arrangement, provide for others to perform ministerial duties and record keeping. If the Administrator is also a Participant, the Corporate Committee (and not the Administrator) shall take any action under the Plan related to that Participant’s request under Section 2.4, 4.3, 4.4, 4.5, 4.6 or 4.8.

5.4          Administrative Discretion. The Administrator and Corporate Committee shall, as to the responsibilities allocated to them separately under the Plan, have and sole and absolute discretion to interpret, construe and implement the provisions of the Plan, including any disputed or ambiguous terms; to make determinations relating to eligibility and benefits; and to make findings of fact. Their determinations shall be final and binding on all parties.

5.5          Amendment. The Plan may be amended, restated, modified, or terminated by the Board of Directors or the Board Committee. No amendment, restatement, modification, or termination shall reduce the balance of a Participant’s Account as of the Valuation Date immediately preceding such action.

5.6          Tax Withholding. To the extent required by the law in effect at the time a Plan payment is made, the Administrator shall take appropriate action to withhold taxes from the payment.

5.7          Corporate Reorganization. If a company that employs a Participant ceases to be a Subsidiary and retains liabilities and responsibility for a Participant’s Plan Account, then the Corporate Committee and Administrator shall have no further liability or responsibility for that Account or any legal obligation toward Participant after the company ceases to be a Subsidiary. That company shall designate a governing committee and plan administrator, as appropriate, to assume liability and responsibility for administration of the Account as of the date the company ceases to be a Subsidiary.

10

5.8          Correction of Errors and Inconsistencies. The Administrator may in its sole and absolute discretion take action to effect consistency among a Participant’s Deferral Elections, Payment Elections, or hypothetical investments in order to avoid or to rectify difficulties in Plan administration. In no event shall such action by the Administrator reduce the dollar value of a Participant’s Account balance existing on the Valuation Date immediately preceding such action (this provision shall not prevent the correction of mistakes in Account record keeping), nor shall the Administrator take action inconsistent with Section 3.4. The Administrator may take such action before or after Participant’s Termination of Employment.

5.9 Section 16 Compliance.

(a) Notwithstanding any contrary provision of the Plan or any applicable Payment Election, if CIGNA Stock is one of the hypothetical investment options for Deferred Cash available to a Participant subject to Section 16 of the Exchange Act, then:

(1) Any of the following transactions that involves a Participant’s Deferred Cash investment in hypothetical CIGNA Stock shall automatically be postponed until at least six months after the earlier of (i) the date Participant ceases being subject to Section 16 or (ii) the date of Participant’s most recent opposite-way transaction that is not exempt from Section 16(b) of the Exchange Act:

a. A cash distribution to the Participant (or Beneficiary) in connection with Participant's death, disability, retirement or other Termination of Employment (except for automatic payments made under Sections 4.3(d) or 4.7); and

b. A voluntary transfer among hypothetical investments made by the Participant (or Beneficiary) in connection with the Participant’s death, disability, retirement or other Termination of Employment.

(2)  Any election by the Participant to engage in a Discretionary Transaction shall automatically be void if that election is made within six months after such Participant’s election to engage in an opposite-way Discretionary Transaction under any CIGNA Corporation plan.

(b) The Administrator has sole and absolute discretion to take such action as may be necessary or desirable to ensure compliance with Section 16 of the Exchange Act.

11

EX-10.12C

Exhibit 10.12(c)     

CIGNA SUPPLEMENTAL PENSION PLAN
(Amended and Restated effective August 1, 1998)
AMENDMENT NO. 2

CIGNA Corporation has retained the right to amend the CIGNA Supplemental Pension Plan (“Plan”) under Article VI, Section 6.2 of the Plan, and CIGNA Corporation wishes to amend the Plan’s benefit payment provisions.

Therefore, the Plan is amended effective November 30, 2000, as follows:

1. Article IV of the Plan is amended by adding at the end a new Section 4.12, to read as follows:

4.12 Acceleration or Delay of Benefit Payment

(a) The Committee (or, in any matter involving a Committee member as Participant, CIGNA’s Chief Executive Officer) may, in its (or his or her) sole discretion, direct that:

(1) All or part of the Supplemental Pension Benefit under Section 3.1 otherwise payable to the Participant in the form of a single lump sum in the January described in Section 4.1(a) shall instead be accelerated or postponed (or both) as described in Section 4.12(b) or (c);

(2) All or part of the Supplemental Pre-Retirement Surviving Spouse Benefit under Section 4.3(a) otherwise payable to the Participant’s surviving Spouse in the form of a single lump sum under Section 4.3(b)(1) shall instead be postponed as described in Section 4.12(e) or (f); and

(3) All or part of Participant’s Supplemental Pension Benefit otherwise payable to the Participant’s surviving Spouse in the form of a single lump sum under Section 4.4(1) shall instead be postponed as described in Section 4.12(e) or (f).

(b) If the Committee directs all of the payment to be accelerated under section 4.12(a)(1), the Supplement Pension Benefit shall be paid to the Participant on or before December 31 of the year preceding the January described in Section 4.1(a), but in no event earlier than the date of the Participant’s severance from employment. If the Committee directs all of the payment to be postponed under section 4.12(a)(1), the Supplement Pension Benefit shall be paid to the Participant as soon as practicable in January of the calendar year after the year that contains the January described in Section 4.1(a). The payment shall be a single lump sum amount that is actuarially equivalent to the single lump sum amount otherwise payable in the applicable January.

1

(c) If the Committee directs that part of the payment be accelerated under section 4.12(a)(1), the part to be accelerated shall be paid to the Participant on or before December 31 of the year preceding the January described in Section 4.1(a), but in no event earlier than the date of the Participant’s severance from employment. If the Committee directs that part of the payment be postponed under section 4.12(a)(1), the part to be postponed shall be paid to the Participant as soon as practicable in the calendar year after the year that contains the January described in Section 4.1(a), but no earlier than 180 days after the date any previous Supplemental Pension Benefit payment to the Participant. Any part of the Supplemental Pension Benefit that is neither accelerated nor postponed shall be paid in the year described in Section 4.1(a), but no earlier than 180 days after any accelerated payment. All payments combined shall be actuarially equivalent to the single lump sum amount otherwise payable in the applicable January.

(d) Section 4.12(a) shall apply to a Participant entitled to receive a single lump sum payment of the entire Supplemental Pension Benefit under Section 4.1(a) as well as to a Participant who has requested under section 4.2(a) an Optional Payment Method for less than 100% of the Supplemental Pension Benefit.

(e) If the Committee directs all of the payment to be postponed under Section 4.12(a)(2) or (3), the Supplemental Pre-Retirement Surviving Spouse Benefit, or Participant’s Supplemental Pension Benefit, shall be paid to the Spouse no sooner than January 1 following the year of the Participant’s death. The payment shall be a single lump sum amount that is actuarially equivalent to the single lump sum amount otherwise payable as soon as practicable after Participant’s death.

(f) If the Committee directs only part of the payment to be postponed under Section 4.12(a)(2) or (3), the part of the Supplemental Pre-Retirement Surviving Spouse Benefit, or Participant’s Supplemental Pension Benefit, to be postponed shall be paid to the Spouse no earlier than January 1 following the year of the Participant’s death and no earlier than 180 days following the date of payment of the non- postponed part. For payments under Section 4.12(a)(2), the two payments combined shall be actuarially equivalent to the single lump sum amount otherwise payable under Section 4.3(b). For payments under Section 4.12(a)(3), the postponed payment shall be increased by the Interest Credit applicable to a Plan B Participant.

(g) After a Change of Control the Committee shall no longer have any discretion to direct acceleration or delay of payments under Section 4.12(a).

2.     Paragraphs 4.5(b) and (c) of Article IV are amended by replacing the phrase “Sections 4.1, 4.5(a) or 4.6(b)” with the phrase “Sections 4.1, 4.5(a), 4.6(b) or 4.12(a)(1).”

2

CIGNA Corporation causes this Amendment No. 2 to the CIGNA Supplemental Pension Plan to be executed on December 6, 2000 by its duly authorized officer.

Attest:	CIGNA CORPORATION
/s/ Carol J. Ward	By:	/s/ H. Edward Hanway
Carol J. Ward		H. Edward Hanway
Corporate Secretary		President and Chief Executive Officer

3

EX-10.14

Exhibit 10.14

DESCRIPTION OF MANDATORY DEFERRAL OF NON-DEDUCTIBLE COMPENSATION

CIGNA Corporation (“CIGNA”) may automatically defer payments of compensation (whether paid in stock or cash) to an executive of CIGNA or its subsidiaries to the extent that such compensation would, if paid immediately, not be deductible by CIGNA because of the limits imposed by Section 162(m) of the Internal Revenue Code of 1986 (“162(m)”). During the period when the compensation is deferred, the executive may elect to have a hypothetical interest rate apply to all or any part of the deferred amount based on: (a) a rate equal to the maximum rate that will not produce above-market interest for purposes of Item 402(b) of Regulation S-K of the Securities and Exchange Commission; or (b) a rate equal to the hypothetical investment results that would have been earned had it been invested in one or more hypothetical investment funds available under the Deferred Compensation Plan of CIGNA Corporation (excluding any fixed-rate return fund). If the executive fails to make a choice, the rate provided under (a) above will automatically apply.

EX-12

Exhibit 12

CIGNA CORPORATION

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(Dollars in millions)

	Year ended December 31,
	2006		2005		2004		2003		2002
Income (loss) from continuing operations    before income taxes (benefits)	$	1,731	$	1,793	$	2,375	$	848	$	(645	)
Adjustments:
Loss from equity investees		1		1		1		4		4
Income (loss) from continuing operations    before income taxes (benefits), as adjusted	$	1,732	$	1,794	$	2,376	$	852	$	(641	)
Fixed charges included in income:
Interest expense	$	104	$	105	$	107	$	111	$	121
Interest portion of rental expense		34		36		43		54		52
		138		141		150		165		173
Interest credited to contractholders		--		1		446		877		1,036
	$	138	$	142	$	596	$	1,042	$	1,209
Income available for fixed charges    (including interest credited to contractholders)	$	1,870	$	1,936	$	2,972	$	1,894	$	568
Income available for fixed charges    (excluding interest credited to contractholders)(1)	$	1,870	$	1,935	$	2,526	$	1,017	$	-
RATIO OF EARNINGS TO FIXED CHARGES:
Including interest credited to contractholders(1)		13.6		13.6		5.0		1.8		-
SUPPLEMENTAL RATIO:
Excluding interest credited to contractholders(1)		13.6		13.7		16.8		6.2		-

________________________

(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)	2006			2005			2004			2003			2002
REVENUES
Premiums and fees and other revenues	$	15,132		$	15,332		$	16,010		$	16,063		$	16,870
Net investment income		1,195			1,359			1,643			2,594			2,716
Realized investment gains (losses)		220			(7	)		523			151			(238	)
TOTAL REVENUES	$	16,547		$	16,684		$	18,176		$	18,808		$	19,348
RESULTS OF OPERATIONS:
Health Care	$	653		$	688		$	763		$	429		$	446
Disability and Life		226			227			182			155			133
International		138			109			76			55			31
Run-off Retirement		11			209			282			222			200
Run-off Reinsurance		(14	)		(64	)		(115	)		(359	)		(1,070	)
Other Operations		95			130			142			111			105
Corporate		(95	)		(12	)		(114	)		(127	)		(136	)
Realized investment gains (losses), net of taxes		145			(11	)		361			98			(155	)
Income (loss) from continuing operations		1,159			1,276			1,577			584			(446	)
Income (loss) from discontinued operations, net of taxes		(4	)		349			—			48			(1	)
Cumulative effect of accounting change, net of taxes		—			—			(139	)		—			—
NET INCOME (LOSS)	$	1,155		$	1,625		$	1,438		$	632		$	(447	)
Income (loss) per share from continuing operations:
Basic	$	10.50		$	10.02		$	11.55		$	4.18		$	(3.17	)
Diluted	$	10.32		$	9.83		$	11.44		$	4.16		$	(3.17	)
Net income (loss) per share:
Basic	$	10.46		$	12.76		$	10.54		$	4.52		$	(3.18	)
Diluted	$	10.28		$	12.52		$	10.43		$	4.50		$	(3.18	)
Common dividends declared per share	$	0.10		$	0.10		$	0.41		$	1.32		$	1.32
Total assets	$	42,399		$	44,893		$	81,059		$	90,199		$	89,019
Long-term debt	$	1,294		$	1,338		$	1,438		$	1,500		$	1,500
Shareholders’ equity	$	4,330		$	5,360		$	5,203		$	4,607		$	3,936
Per share	$	43.89		$	44.23		$	39.41		$	32.77		$	28.24
Common shares outstanding (in thousands)		98,654			121,191			132,007			140,591			139,370
Shareholders of record		9,117			9,440			10,249			9,608			9,945
Employees		27,100			28,000			28,600			32,700			41,200

25

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

INDEX

26	Introduction
26	Overview
27	Consolidated Results of Operations
35	Acquisitions and Dispositions
36	Other Matters
39	Health Care
42	Disability and Life
42	International
43	Run-off Retirement
43	Run-off Reinsurance
45	Other Operations
46	Corporate
46	Discontinued Operations
46	Liquidity and Capital Resources
51	Investment Assets
52	Market Risk
54	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 2007”). 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 54.

Certain insignificant reclassifications have been made to prior years’ amounts to conform to the 2006 presentation.

OVERVIEW

CIGNA Corporation and its subsidiaries constitute one of the largest investor-owned health care and related benefits organizations in the United States. Key product lines, offered through the workplace, include medical coverages and related specialty health care products and services such as pharmacy, behavioral health, dental benefits, and disease management; 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 life, accident and supplemental health insurance products and international health care products and services to businesses and individuals in selected markets. CIGNA also 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;

• the relationship between administrative costs and revenue; and

26

MANAGEMENT’S DISCUSSION AND ANALYSIS

• the ability to execute on key technology initiatives, including successfully managing outsourcing arrangements with vendors, including International Business Machines Corporation (IBM) (see page 50).

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 on continuing to improve the performance of and profitably grow the health care operations; as well as continuing to profitably grow 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) strengthen underwriting and pricing effectiveness; (3) improve medical membership results; (4) improve medical cost trends; (5) deliver quality member service; and (6) lower administrative expenses (see page 41 for further discussion).

CIGNA believes that the health care business model is evolving to one that focuses more directly on the role of the health care consumer. CIGNA has developed products, educational resources and customer support tools to assist consumers in making more informed choices regarding their health care and to achieve better health outcomes. CIGNA believes that its capabilities in consumerism, health advocacy and the provision of useful information position it to effectively meet this emerging market need.

CIGNA’s disability and life insurance operations continue to focus on profitable growth in the disability business in both the middle market and national accounts. 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, including issues relating to contract terms and coverage (see page 38 for further discussion).

CONSOLIDATED RESULTS OF OPERATIONS

(In millions)
Financial Summary	2006			2005			2004
Premiums and fees	$	13,641		$	13,695		$	14,236
Net investment income		1,195			1,359			1,643
Other revenues		1,491			1,637			1,774
Realized investment gains (losses)		220			(7	)		523
Total revenues		16,547			16,684			18,176
Benefits and expenses		14,816			14,891			15,801
Income from continuing operations before taxes		1,731			1,793			2,375
Income taxes		572			517			798
Income from continuing operations		1,159			1,276			1,577
Income (loss) from discontinued operations, net of taxes		(4	)		349			—
Income before cumulative effect of accounting change		1,155			1,625			1,577
Cumulative effect of accounting change, net of taxes ( See Note 2 to the Financial Statements)		—			—			(139	)
Net income	$	1,155		$	1,625		$	1,438
Realized investment gains (losses), net of taxes	$	145		$	(11	)	$	361

CIGNA’s income from continuing operations includes special items, which are summarized below.

Excluding special items, income from continuing operations in 2006 increased compared to 2005 reflecting:

• improved realized investment results primarily due to sales of equity interests in real estate limited liability entities;

• lower losses in the Run-off Reinsurance segment (see page 43); and

• higher earnings in the International segment driven by growth in the expatriate employee benefits business and life, accident and health insurance business (see page 42).

These factors were partially offset by lower net earnings in the Health Care segment due to less favorable prior year claim development. Excluding the favorable prior year claim development, Health Care results improved reflecting:

• higher contributions from the specialty businesses;

• higher medical membership;

• improved expense productivity; and

• lower losses in the Medicare Part D program ($1 million after-tax in 2006 compared with $12 million after-tax in 2005).

27

These drivers were tempered by lower results in the guaranteed cost and experience-rated businesses. See page 39 for additional information.

Excluding special items, income from continuing operations in 2005 compared with 2004 reflected:

• lower losses in the Run-off Reinsurance segment (see page 43 ) and Corporate (see page 46);

• lower net earnings in the ongoing operating businesses due to the impact of membership losses in the Health Care segment (see page 39), partially offset by higher earnings in the Disability and Life (see page 42) and International (see page 42) segments; and

• lower results in the Run-off Retirement segment (see page 43).

In order to facilitate an understanding and comparison of results of operations and permit analysis of trends in underlying revenue, expenses and income from continuing operations, the following table presents special items, which management believes are not representative of the underlying results of operations. See “Quarterly Financial Data” on page 94 for special items reported quarterly in 2006 and 2005.

SPECIAL ITEMS
(In millions)	Pre-Tax Benefit (Charge)			After-Tax Benefit (Charge)
2006
Charge associated with settlement of shareholder litigation (see page 38)	$	(38	)	$	(25	)
Cost reduction charge (see page 36)		(37	)		(23	)
Total	$	(75	)	$	(48	)
2005
Accelerated amortization of deferred gain on sale of retirement benefits business (see page 35)	$	322		$	204
Cost reduction charge (see page 36)		(51	)		(33	)
IRS tax settlement (see page 37)		6			81
Charge associated with a modified coinsurance arrangement (see page 35)		(12	)		(8	)
Total	$	265		$	244
2004
Accelerated amortization of deferred gain on sale of retirement benefits business (see page 35)	$	338		$	220
Cost reduction charge (see page 36)		(75	)		(49	)
Federal tax refund (see page 46)		5			28
Net charge associated with modified coinsurance arrangement (see page 35)		(39	)		(25	)
Effect of new accounting pronouncements (see page 43)		(17	)		(11	)
Gain on sale of investment advisory business (see page 36)		18			12
Total	$	230		$	175

Special items are discussed in further detail on the pages noted above.

28

MANAGEMENT’S DISCUSSION AND ANALYSIS

Revenues

Revenues decreased in 2006 primarily because of:

• lower deferred gain amortization associated with the sold retirement benefits business (see page 35);

• lower Health Care premiums and fees due to the loss of a large prescription drug contract, partially offset by membership growth and rate increases (see page 39); and

• lower net investment income primarily due to a reduction in assets resulting from the conversion of the single premium annuity business to indemnity reinsurance (see page 35) and the impact of share repurchase activity (see page 51).

These factors were largely offset by improved realized investment results primarily due to sales of equity interests in real estate limited liability entities.

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.

Outlook for 2007

CIGNA expects full year 2007 income from continuing operations, excluding realized investment results and special items, to be slightly lower than the comparable 2006 amount, which includes $54 million of favorable prior year claim development. Excluding the favorable prior year claim development in 2006, CIGNA expects full year 2007 income from continuing operations, excluding realized investment results and special items, to increase modestly from 2006 primarily due to strong growth in the health care operations and the disability and life insurance and international businesses, partially offset by lower earnings in the run-off businesses and Corporate. Corporate losses are expected to be higher due to the absence of favorable expense and tax items that occurred in 2006. CIGNA’s outlook is subject to the factors cited in the Cautionary Statement on page 54.

Management is not able to estimate 2007 income from continuing operations under generally accepted accounting principles because it includes realized investment gains (losses) and special items. Information is not available for management to reasonably estimate future realized investment gains (losses) due, in part, to interest rate and stock market volatility and other internal and external factors. Information is not available for management to identify or reasonably estimate 2007 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 the disclosures 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 used to estimate amounts reflected in CIGNA’s consolidated financial statements are appropriate. However, if actual experience differs from the assumptions 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 CIGNA’s liquidity and financial condition.

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

29

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, 2006 (representing the amount payable if all 900,000 contractholders had died as of that date) was approximately $4.9 billion. CIGNA had liabilities for future policy benefits for these contracts of $862 million as of December 31, 2006 and $951 million as of December 31, 2005.	CIGNA estimates these liabilities based on assumptions for lapse, partial surrender, mortality, interest rates (mean investment performance and discount rate), and volatility. These assumptions are based on CIGNA’s experience and future expectations over the long-term period. CIGNA monitors actual experience to update these 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 CIGNA’s 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 7 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 – $55 million •    Volatility – $40 million •    Lapse – $20 million •    Interest Rates: •    Mean Investment Performance – $35 million •    Discount Rate – $25 million •    Future Partial Surrenders – $5 million Management believes the current assumptions used to estimate these liabilities are appropriate. However, if actual experience differs from the assumptions (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.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Balance Sheet Caption / Nature of Critical Estimate Item	Assumptions / Approach Used	Effect if Different Assumptions Used
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: •     2006 – gross $960 million; net $710 million •     2005 – gross $1.2 billion; net $823 million •     2004 – gross $1.6 billion; net $1.1 billion These liabilities are presented above both gross and net of reinsurance and other recoverables. These liabilities generally exclude amounts for administrative services only business. See Note 5 to the Financial Statements for additional information.	CIGNA develops estimates for Health Care medical claims payable using actuarial principles and assumptions based on historical and projected claim payment patterns, medical cost trends, which are impacted by the utilization of medical services and the related costs of the services provided (unit costs), benefit design, seasonality, and other relevant operational factors. CIGNA consistently applies these actuarial principles and assumptions each reporting period, with consideration given to the variability of these factors, and recognizes the actuarial best estimate of the ultimate liability within a level of confidence, as required by actuarial standards of practice, which require that the liabilities be adequate under moderately adverse conditions. CIGNA’s estimate of the liability for medical claims incurred but not yet reported is primarily calculated using historical claim payment patterns and expected medical cost trends. CIGNA analyzes the historical claim payment patterns by comparing the dates claims were incurred, generally the dates services were provided, to the dates claims were paid to determine “completion factors”, which are a measure of the time to process claims. A completion factor is calculated for each month of incurred claims. CIGNA uses historical completion factors combined with an analysis of current trends and operational factors to develop current estimates of completion factors. CIGNA estimates the ultimate liability for claims incurred in each month by applying the current estimates of completion factors to the current paid claim data. The difference between this estimate of the ultimate liability and the current paid claim data is the estimate of the remaining claims to be paid for each incurral month. These monthly estimates are aggregated and included in CIGNA’s Health Care medical claims payable at the end of each reporting period. Completion factors are used to estimate the health care medical claims payable for all months where claims have not been completely resolved and paid, except for the most recent month as described below. Completion factors are impacted by several key items including changes in the level of claims processed electronically versus manually (auto-adjudication), changes in provider claims submission rates, membership changes and the mix of products. As noted, CIGNA uses historical completion factors combined with an analysis of current trends and operational factors to develop current estimates of completion factors. This approach implicitly assumes that historical completion rates will be a useful indicator for the current period. It is possible that the actual completion rates for the current period will develop differently from historical patterns, which could have a material impact on CIGNA’s medical claims payable and net income.	For the year ended December 31, 2006, actual experience differed from CIGNA’s key assumptions, resulting in $173 million of favorable incurred claims related to prior years’ medical claims payable of or 2.6% of the current year incurred claims as reported for the year ended December 31, 2005. For the year ended December 31, 2005, actual experience differed from CIGNA’s key assumptions, resulting in $326 million of favorable incurred claims related to prior years’ medical claims, or 4.7% of the current year incurred claims as reported for the year ended December 31, 2004. Specifically, the favorable impact is due to faster than expected completion factors and lower than expected medical cost trends, both of which included an assumption for moderately adverse experience. The corresponding impact of favorable prior year development on net income was $54 million for the year ended December 31, 2006 and $137 million for the year ended December 31, 2005. The change in the amount of the incurred claims related to prior years in the medical claims payable liability does not directly correspond to an increase or decrease in CIGNA’s net income. See Note 5 to the Financial Statements for additional information. While the recent variances were 2.6% for the year ended December 31, 2006 and 4.7% for the year ended December 31, 2005 related to the impact of the prior year medical claims payable; and 0.8% for the year ended December, 31, 2006 and 2.0% for the year ended December 31, 2005 related to the impact on net income, CIGNA does not anticipate that the circumstances that led to those recent changes in assumptions are likely to recur in the future. CIGNA has taken the following actions over the past several years: •   significantly improved the time to process claims, which impacts CIGNA’s completion factors; and •   renegotiated provider contracts, which impacts the unit cost of medical services. These actions have been factored into CIGNA’s current assumptions. Accordingly, CIGNA believes that based on the current mix of business as of December 31, 2006, relative to the health care medical claims payable, the annual impact of each 1% variance between the actual and expected incurred medical claims on CIGNA’s net income would be approximately $30 million, favorable or unfavorable dependent on the direction of the actual versus expected variance.

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Balance Sheet Caption / Nature of Critical Estimate Item	Assumptions / Approach Used	Effect if Different Assumptions Used
	Claims incurred in the most recent month have limited paid claim data, since a large portion of health care claims are not submitted to CIGNA for payment in the month services have been provided. This makes the completion factor approach less reliable for claims incurred in the most recent month. As a result, in any reporting period, for the estimates of the ultimate claims incurred in the most recent month, CIGNA primarily relies on medical cost trend analysis, which reflects expected claim payment patterns and other relevant operational considerations. Medical cost trend is impacted by several key factors including medical service utilization and unit costs and CIGNA’s ability to manage these factors through benefit design, underwriting, provider contracting and CIGNA’s medical management initiatives. These factors are affected by changes in the level and mix of medical benefits offered, including inpatient, outpatient and pharmacy, the impact of copays and deductibles, changes in provider practices and changes in consumer demographics and consumption behavior. Because historical trend factors are often not representative of current claim trends, the trend experienced for the most recent history along with an analysis of emerging trends, have been taken into consideration in establishing the liability for medical claims payable at December 31, 2006 and 2005. It is possible that the actual medical trend for the current period will develop differently from the expected, which could have a material impact on CIGNA’s medical claims payable and net income. For each reporting period, CIGNA evaluates key assumptions by comparing the assumptions used in establishing the medical claims payable to actual experience. When actual experience differs from the assumptions used in establishing the liability, medical claims payable are increased or decreased through current period net income. Additionally, CIGNA evaluates expected future developments and emerging trends which may impact key assumptions. The estimation process involves considerable judgment, reflecting the variability inherent in forecasting future claim payments. The adequacy of these estimates is highly sensitive to changes in CIGNA’s key assumptions, specifically completion factors, which are impacted by actual or expected changes in the submission and payment of medical claims, and medical cost trends, which are impacted by actual or expected changes in the utilization of medical services and unit costs. See Note 5 to the Financial Statements for additional information.	Based on the current mix of business, CIGNA would reasonably expect the variance between actual and expected incurred medical claims to be within the range of 0% to 2%. This potential variance is expected to be driven evenly by completion factors and monthly medical cost trends. While, these ranges are consistent with the more recent variation in actual completion factors and medical trend assumptions, including the impact of recent operational and environmental changes, there is significant uncertainty regarding the ultimate outcome of actual results versus individual assumptions, and accordingly, more precision is not appropriate. The amounts would be reflected in the Health Care Segment.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

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, 2006, CIGNA had liabilities of $88 million related to these contracts and net amounts recoverable from reinsurers of $51 million. CIGNA had an additional liability of $47 million associated with the cost of reinsurance as of December 31, 2006. As of December 31, 2005, CIGNA had liabilities of $88 million related to these contracts and amounts recoverable from reinsurers of $48 million. CIGNA also had an additional liability of $49 million associated with the cost of reinsurance as of December 31, 2005.	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. 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. The estimates of fair value for these liabilities may be impacted in the future by the implementation of Statement of Financial Accounting Standard No. 157, “Fair Value Measurements.” See Note 2 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 – Less than $1 million •     Market Returns – $7 million •     Volatility – $3 million •     Lapse – $2 million •     Interest Rates: •     Discount Rate – $2 million •     Long-Term Claim Interest Rate – $7 million •     Credit Risk – $3 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. However, if actual experience differs from the assumptions used in estimating these liabilities, the resulting change could have a material adverse effect on CIGNA’s 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.
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 as of December 31, were as follows: •     2006 – gross $506 million; net $360 million •     2005 – gross $565 million; net $417 million •     2004 – gross $756 million; net $571 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, 2006, would reduce net income by approximately $30 million after-tax. The amounts would be reflected in the Run-off Reinsurance segment. See Note 8 to the Financial Statements for additional information.

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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 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 $843 million as of December 31, 2006 and $971 million as of December 31, 2005. See Note 9 to the Financial Statements for additional information.	CIGNA 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, to measure pension costs CIGNA uses a market-related asset value method for domestic qualified pension plan assets invested in non-fixed income investments, which are approximately 80% of total plan assets. This method recognizes market appreciation or depreciation in the non-fixed income 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 $0.8 billion at December 31, 2006. 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, 2006, approximately $0.8 billion of the adjusted actuarial loss exceeded 10% of the projected benefit obligation and approximately $82 million after-tax will be expensed in 2007 net income. For the year ended December 31, 2006, $99 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. Using past experience, CIGNA expects that it is reasonably possible that a change in key assumptions of 10% could occur. If discount rates for the qualified and nonqualified pension plans changed by 10%: •    annual pension costs for 2007 would be impacted by approximately $20 million, after-tax; and •    the accrued pension benefit liability would be impacted by approximately $250 million as of December 31, 2006 resulting in an after-tax adjustment to shareholders’ equity of approximately $163 million as of December 31, 2006. If the expected return on domestic qualified pension plan assets changed by 10%, annual pension costs for 2007 would be impacted by approximately $14 million, after-tax. If the December 31, 2006 fair values of domestic qualified plan assets changed by 10%, pension liabilities recorded as an after-tax adjustment to shareholders’ equity would be approximately $215 million.
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. See “Quality Ratings” on page 51 for additional information. CIGNA recognized “other than temporary” impairments of investments in fixed maturities as follows (after-tax, excluding policyholder share): •    2006 – $18 million •    2005 – $12 million •    2004 – $10 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, 2006 would have decreased by approximately $37 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 $1 million after-tax.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

ACQUISITIONS AND DISPOSITIONS

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

Star-HRG Acquisition

On July 11, 2006, CIGNA acquired the operating assets of Star-HRG, a leading provider of low cost health plans and other employee benefits coverage for hourly and part-time workers and their families, for $156 million, including assumed liabilities. The acquisition was financed through the issuance of a note payable to the seller ( see Note 12 to the Financial Statements). The purchase price was allocated as follows: $57 million to identifiable intangible assets and the remaining $99 million to goodwill.

Intangible assets (primarily purchased customer relationships, software and trademarks) associated with the acquisition are being amortized on a straight-line basis over periods from 3 to 10 years.

The results of Star-HRG are included in the accompanying consolidated financial statements from the date of the acquisition.

Sale of the Brazilian Life Insurance Operations

During 2006, CIGNA entered into negotiations to sell its Brazilian life insurance business. The sale is expected to close in 2007 and as a result, CIGNA has classified this business as a discontinued operation. CIGNA recognized an impairment loss in 2006 with respect to this business of $17 million after-tax, primarily related to the write-off of unrecoverable foreign tax credits and foreign currency translation losses.

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 initial after-tax gain of $809 million, of which $267 million after-tax was recognized immediately. The after-tax gain was subsequently reduced by $3 million to reflect additional taxes on the sale. In 2006, the after-tax gain increased by $12 million resulting from the conversion of the single premium annuity business to indemnity reinsurance (see below). Both of these adjustments are reflected in the deferred portion of the gain.

As this transaction was primarily in the form of a reinsurance arrangement under which CIGNA retains the contractual obligation to pay these liabilities, $542 million of the initial 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. As of December 31, 2006, the remaining contractholder deposit funds and future policy benefits associated with the sold retirement benefits business totaled $2.5 billion. See Note 8 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
2006
Accelerated deferred gain amortization	$	8	$	7
Normal deferred gain amortization	$	10	$	7
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

*  Of these amounts, $338 million pre-tax and $220 million after-tax are noted as special items.

For 2006, accelerated deferred gain amortization was not reported as a special item due to immateriality. The remaining pre-tax deferred gain as of December 31, 2006 was $65 million, which will be recognized through 2032.

In 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 reinsurance. 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.

In 2005, in connection with another modified coinsurance arrangement, CIGNA received units of the buyer’s separate accounts and continues to carry those units as separate account assets on its balance sheet for the business not yet directly assumed by the buyer. At December 31, 2006, there were approximately $3.2 billion of separate account assets and liabilities associated with this business not yet directly assumed by the buyer.

From April 1, 2004 through March 31, 2006, CIGNA had a modified coinsurance arrangement relating to the single premium annuity business sold to the buyer. Under the arrangement, CIGNA retained the invested assets supporting the reinsured liabilities. These invested assets were held in a business trust established by CIGNA. During 2005, CIGNA

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recorded in other operating expenses a pre-tax charge of $12 million ($8 million after-tax) to offset realized investment results. This charge had no effect on CIGNA’s net income.

Effective April 1, 2006, the buyer converted this modified coinsurance arrangement to an indemnity reinsurance structure and took ownership of the trust assets. CIGNA transferred invested assets to the buyer and recorded a reinsurance recoverable of approximately $1.6 billion, which corresponds to the liabilities for the single premium annuity business held by CIGNA as of March 31, 2006. As disclosed above, the deferred gain increased by $12 million after-tax from the conversion.

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.

OTHER MATTERS

Initiatives to Lower Operating Expenses

From 2004 through 2006, CIGNA has undertaken several initiatives to realign its organization and consolidate support functions in an effort to increase efficiency and responsiveness to customers. See page 41 for further information on lowering administrative expenses.

In the fourth quarter of 2006, CIGNA completed a review of staffing levels in the health care operations and in supporting areas. As a result, CIGNA recognized in other operating expenses a charge for severance costs of $37 million pre-tax (Health Care – $24 million; Corporate – $13 million) and $23 million after-tax (Health Care – $15 million; Corporate – $8 million). CIGNA expects to achieve $45 million after-tax in estimated savings in 2007 and $68 million after-tax in annualized estimated savings from this specific program. A portion of these savings will be reinvested to further enhance CIGNA’s capabilities in the areas of consumerism and health advocacy.

In 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 charge for severance costs of $51 million pre-tax (Health Care – $22 million; Corporate – $29 million) and $33 million after-tax (Health Care – $14 million; Corporate – $19 million). CIGNA substantially completed this program in 2006.

In 2004, CIGNA adopted a 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) of which $75 million pre-tax ($49 million after-tax) is noted as a special item in 2004. CIGNA substantially completed this program in 2005.

Pension and Other Postretirement Benefit Liability

Effective December 31, 2006, CIGNA adopted Statement of Financial Accounting Standard (SFAS) No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans”. The overall effect was an after-tax increase to shareholders’ equity of $36 million. This increase occurs because prior service costs and net gains from past experience for other postretirement benefit plans more than offset the unrecognized underfunded pension liability. See Note 2(B) to the Financial Statements for further information.

In addition, prior to implementing SFAS No. 158, accumulated other comprehensive income increased in 2006 by $284 million after-tax, primarily due to lower minimum pension liabilities from the effect of asset returns in excess of expectations, amortization of losses from past experience, and an increase in the long-term interest rates used to determine the benefit obligation.

CIGNA contributed $544 million in 2005 for minimum funding requirements for the domestic pension plan and for voluntary contributions to the domestic and international pension plans. The decision to make voluntary contributions to the domestic pension plan was based upon the favorable economic impact the contributions would 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 did not make domestic pension plan contributions in 2006 and does not expect to make, nor is CIGNA required to make, domestic pension plan contributions in 2007.

Actual cash contributions made to the pension plans could vary significantly from the estimates of unfunded plan obligations based on actual future returns on pension assets and future interest rates, both of which are highly unpredictable. The Pension Protection Act of 2006 requires companies to fully fund defined benefit pension plans over a seven-year period beginning in 2008. CIGNA has evaluated this requirement in light of its pension plan and has made estimates of amounts to be funded in the future. Based on this assessment, CIGNA does not believe that the funding requirements of the Pension Protection Act will cause a material adverse effect on CIGNA’s liquidity in the future based on known facts.

See “Critical Accounting Estimates” on page 34 for the assumptions used to determine pension liabilities and the effects of hypothetical changes in those assumptions.

See Note 9 to the Financial Statements for a detailed discussion of CIGNA’s pension and other postretirement benefit plans including the nature of accounting for and funding of these plans.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

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.

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

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 and IRS 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 or judicial decisions 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 administrative burdens and costs;

• additional restrictions on the use of prescription drug formularies and rulings from pending purported class action litigation, which could result in adjustments to or the elimination of the average wholesale price or “AWP” of pharmaceutical products as a benchmark in establishing certain rates, charges, discounts, guarantees and fees for various prescription drugs;

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

• changes in public policy and in the political environment, which could affect state and federal law, including legislative and regulatory proposals related to health care issues, which could increase cost and affect the market for CIGNA’s health care products and services; and pension legislation, which could increase pension cost;

• additional variations among state laws mandating the time periods and administrative processes for payment of health care provider claims;

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

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

The 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

Managed care litigation. 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 over disallowed claims under the settlement submitted by a representative of certain class member physicians is proceeding to arbitration. Separately in April 2005, the court approved a settlement between CIGNA and the remaining plaintiffs, a class of non-physician health care professionals. In the fourth quarter of 2006, CIGNA received a $22 million pre-tax ($14 million after-tax) insurance recovery related to this litigation. The favorable impact of this recovery

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is included in Health Care’s segment results (see page 39). CIGNA continues to pursue additional recoveries from two other insurers.

Broker compensation. Various regulators, including the New York and Connecticut Attorneys General and the Florida Office of Insurance Regulation, 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. Some of CIGNA’s subsidiaries are included in one such lawsuit seeking injunctive relief against these contingent compensation practices. CIGNA is also providing information about ULR in connection with investigations by the U.S. Attorney’s Office for the Southern District of California and the San Diego District Attorney. In addition, CIGNA provided information about another broker to the U.S. Department of Labor. CIGNA is cooperating with the inquiries and investigations.

Separately, several purported class action lawsuits have been filed against brokers and insurance companies, including certain of CIGNA’s subsidiaries, asserting that contingent commissions are unlawful. These suits are now procedurally consolidated in a multi-district litigation proceeding in federal court in New Jersey. CIGNA denies the allegations and will vigorously defend itself in these cases. The parties are currently engaged in discovery.

CIGNA Corporation securities litigation. During the fourth quarter of 2006, CIGNA reached an agreement to resolve claims filed in federal court in 2002 against certain former and current officers and members of its Board of Directors on behalf of a class of CIGNA shareholders. The settlement, which specifies $93 million to be paid to the plaintiffs, was preliminarily approved by the U.S. District Court for the Eastern District of Pennsylvania on January 25, 2007. A final fairness hearing before the Court is expected to be held on April 27, 2007 with final approval expected shortly thereafter. Additionally, the settlement is dependent upon a certain level of class participation. In connection with the settlement agreement, CIGNA recorded an after-tax charge of $25 million ($38 million pre-tax) in Corporate. The charge includes certain costs to defend and is net of expected insurance recoveries.

In addition, CIGNA and certain of its current and former Directors have reached a separate settlement with the Plaintiffs in the related derivative action. Under that settlement, CIGNA’s insurers will deposit and apportion, on behalf of the individual defendants, $6 million of the aforementioned $93 million class action settlement, and have agreed to make a payment of not more than $720,000 for Plaintiff’s attorney’s fees subject to court approval. On January 25, 2007, the U.S. District Court for the Eastern District of Pennsylvania preliminarily approved the settlement and set a hearing on final approval on April 27, 2007. CIGNA expects final approval shortly thereafter.

Amara cash balance pension plan litigation. Plaintiffs representing CIGNA Pension Plan participants affected by the 1998 conversion to a cash balance formula filed a class action lawsuit against CIGNA and the CIGNA Pension Plan in December 2001. The plaintiffs allege, various ERISA violations including, among other things, that the Plan’s cash balance formula discriminates against older employees; the conversion resulted in a wear away period (during which the pre-conversion accrued benefit exceeded the post-conversion benefit); and these conditions are not adequately disclosed in the Plan. A non-jury trial began on September 11-15, 2006. Due to the court’s schedule, the proceedings were adjourned and the trial was completed on January 25, 2007. The judge has ordered the parties to submit post-trial briefs in advance of closing arguments to be held on June 4, 2007.

Run-off reinsurance litigation. In connection with CIGNA’s run-off reinsurance operations described on page 43, CIGNA purchased extensive retrocessional reinsurance for its Unicover contracts and also for some other segments of its non-Unicover business. CIGNA is appealing in court an adverse award in a retrocessional enforcement arbitration. A hearing on that appeal is scheduled for March 13-14, 2007. In addition, CIGNA recently commenced another retrocessional enforcement arbitration. Other disputes concerning these retrocessional contracts have been substantially resolved or settled.

CIGNA is routinely involved in numerous claims, lawsuits, regulatory and IRS audits, investigations and other legal matters arising, for the most part, in the ordinary course of 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.

38

MANAGEMENT’S DISCUSSION AND ANALYSIS

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.

HEALTH CARE

(In millions)
Financial Summary	2006			2005			2004
Premiums and fees	$	9,830		$	10,177		$	10,868
Net investment income		261			275			283
Other revenues		1,371			1,091			1,027
Segment revenues		11,462			11,543			12,178
Benefits and expenses		10,456			10,494			10,990
Income before taxes		1,006			1,049			1,188
Income taxes		353			361			425
Segment earnings	$	653		$	688		$	763
Realized investment gains, net of taxes	$	105		$	1		$	15
Special item (after-tax) included in segment earnings:
Cost reduction charge	$	(15	)	$	(14	)	$	(28	)

The Health Care segment includes 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. 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 within the health care business.

These products and services are offered through guaranteed cost, retrospectively experience-rated and service only funding arrangements. For a description of funding arrangements, see page 10 of CIGNA’s 2006 Form 10-K.

Results

Segment earnings include after-tax favorable prior year claim development of $54 million in 2006, $137 million in 2005 and $106 million in 2004.

Favorable prior year claim development in both 2006 and 2005 is primarily due to:

• higher than expected completion factors reflecting better than expected time to process claims driven by higher auto-adjudication rates and more timely submission of provider claims; and

• lower than expected medical cost trends driven by lower inpatient, outpatient and pharmacy service utilization and lower than expected unit cost trends due to provider contracting initiatives and the mix of services provided.

Excluding prior year claim development and the special items noted in the table above, segment earnings for 2006 were higher than the prior year reflecting:

• higher contributions from the specialty businesses;

• higher medical membership;

• improved expense productivity; and

• lower losses in the Medicare Part D program ($1 million after-tax in 2006 compared with $12 million after-tax in 2005).

These factors were partially offset by lower results in the guaranteed cost business reflecting premium increases which were less than medical cost increases and lower experienced-rated earnings.

Excluding prior year claim development and the special items noted in the table above, segment earnings decreased in 2005 compared with 2004 primarily reflecting the impact of net membership declines in revenues, partially offset by lower operating expenses and higher earnings in specialty health care operations.

Premiums and Fees

Premiums and fees reflect the loss in 2006 of a large prescription drug contract of $1.1 billion in the experience-rated business. The loss of this contract had minimal impact to earnings, however, the final settlement of this contract did result in net cash outflows in 2006 (see page 46 for additional information.)

Excluding the loss of this contract, premiums and fees increased by 9% in 2006 primarily due to increased guaranteed cost membership and rate increases, as well as premiums and fees associated with the Medicare Part D and voluntary/limited benefits businesses.

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

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The table below shows the premiums and fees generated by each area in the Health Care Segment:

(In millions)	2006		2005		2004
Medical:
Commercial HMO1	$	2,744	$	2,646	$	3,191
Other guaranteed cost		946		463		44
Voluntary/limited benefits		72		—		—
Experience-rated medical2		1,760		2,836		2,937
Dental		776		899		888
Medicare and Medicaid		321		286		286
Medicare Part D		215		—		—
Other medical3		929		926		1,133
Total medical		7,763		8,056		8,479
Life and other non-medical		305		399		496
Total premiums		8,068		8,455		8,975
Fees4		1,762		1,722		1,893
Total premiums and fees	$	9,830	$	10,177	$	10,868

¹ Includes premiums of $73 million in 2006 associated with the health care members in Tucson, Arizona (see Medical Membership below).

² Includes ($15) million in 2006 and $1.1 billion in 2005 related to a large prescription drug contract which was canceled effective January 1, 2006. Also, 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.

³ Other medical premiums include risk revenue for stop loss and specialty products.

⁴ Represent administrative service fees for medical members and related specialty products and, commencing on January 1, 2006 also include fees of $27 million related to Medicare Part D.

Benefits and Expenses

Health Care segment benefits and expenses consist of the following:

(In millions)	2006		2005		2004
Medical claims expense	$	6,111	$	6,305	$	6,616
Other benefit expenses		260		347		484
Other operating expenses		4,085		3,842		3,890
Total benefits and expenses	$	10,456	$	10,494	$	10,990

Other operating expenses for 2006 include the favorable impact of a $22 million pre-tax ($14 million after-tax) insurance recovery resulting from a litigation matter. Operating expenses in 2006 increased reflecting costs associated with certain revenue growth initiatives and amortization of software development. Excluding these items, other operating expenses for 2006 reflect improved productivity. See page 36 for information on cost reduction initiatives.

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 individual 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)	2006	2005	2004
Guaranteed cost:
Commercial HMO	764	813	900
Medicare and Medicaid	32	32	33
Other	366	214	56
Total guaranteed cost, excluding voluntary/limited benefits	1,162	1,059	989
Voluntary/limited benefits	164	—	—
Total guaranteed cost	1,326	1,059	989
Experience-rated1	935	1,129	1,257
Service	7,128	6,902	7,455
Total medical membership	9,389	9,090	9,701

¹ 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.

During 2006, CIGNA’s medical membership increased by 3% including 164,000 members with voluntary or other limited health care benefits coverage as a result of the Star-HRG acquisition in 2006. Excluding this acquisition, medical membership increased 1.5% reflecting growth in service and other guaranteed cost, partially offset by lower experience-rated membership.

In 2006, approximately 54,000 health care members in Tucson, Arizona were transitioned to CIGNA as the result of a Department of Justice requirement to divest certain contracts in connection with the merger of two health care industry competitors. Initially, CIGNA will serve as a reinsurer and, at the time of renewal, will work toward underwriting these customers directly on CIGNA contracts. Given the unique nature of this transaction, CIGNA will not include these members in its reported medical membership until such customers renew on CIGNA contracts.

In addition in 2006, approximately 84,000 members were reclassified from experience-rated to service. This change had no impact on reported revenues or segment earnings.

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

40

MANAGEMENT’S DISCUSSION AND ANALYSIS

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;

• strengthening underwriting and pricing effectiveness;

• improving medical membership results;

• improving medical cost trends;

• continuing to deliver quality member service; and

• lowering administrative expenses.

Offering products that meet emerging trends. 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. In addition, 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.

In July 2006, CIGNA acquired Star-HRG, a leading provider of low cost health plans and other employee benefits coverage for hourly and part-time workers and their families. This acquisition complements CIGNA’s existing product portfolio by giving CIGNA the capability to offer voluntary health insurance coverage. Also in 2006, CIGNA acquired vielife, a U.K. based leading provider of integrated online health management and coaching programs and entered into a long-term agreement with the University of Michigan to access certain intellectual property related to identification of health risks and employer worksite health and wellness programs.

In 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.

In 2005, CIGNA announced its strategic alliance with NationsHealth, Inc. (a distribution and services company) to jointly deliver Medicare Part D prescription drug plans.

Strengthening underwriting and pricing effectiveness. One of CIGNA’s key priorities is to achieve strong profitability in a competitive health care market. CIGNA is focused on effectively managing pricing and underwriting decisions at the case level and for the overall book of business, particularly for the guaranteed cost business.

Improving medical membership results. CIGNA is continuing 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.

CIGNA continues to evaluate opportunities with regional health care companies. CIGNA formed strategic alliances with New York-based MVP Health Care/Preferred Care in September 2006 and with Minnesota-based HealthPartners in April 2006. In addition, CIGNA entered into an agreement to acquire Memphis-based Mid-South Administrative Group, LLC (which was completed in January 2007) to give the Company an expanded local presence in Memphis and western Tennessee. Also, in 2005, CIGNA acquired Managed Care Consultants of Nevada.

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 continue to improve membership results.

Improving 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 improving 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 in selected markets and may pursue additional acquisitions and strategic alliances.

Continuing to deliver quality member and provider service. CIGNA continues to deliver competitive service to members, providers and customers. CIGNA believes that quality service can improve member retention and, when combined with useful health information and tools, help motivate members to become more engaged in their personal health, which will promote healthy outcomes and remove cost from the system.

Lowering administrative expenses. From 2004 through 2006, CIGNA has undertaken several initiatives to increase its operating efficiency and responsiveness to customers. CIGNA operates in an intensely competitive marketplace and its ability to establish a meaningful cost advantage is a key to achieving its strategic imperatives. CIGNA must remain

41

competitive with the other major players in the industry, all of whom essentially are competing in the same markets for the same customers and prospects. CIGNA’s strengths and capabilities as a consumer-focused health advocate provide it with a competitive advantage, but CIGNA must be able to deliver those capabilities efficiently and cost-effectively. The savings generated by these initiatives provide CIGNA with the ability to make investments in and enhance its capabilities in the areas of consumerism and health advocacy. CIGNA continues to perform operational reviews in order to identify additional cost savings. See page 36 for further information on cost reduction initiatives.

DISABILITY AND LIFE

(In millions)
Financial Summary	2006		2005			2004
Premiums and fees	$	2,108	$	2,065		$	1,923
Net investment income		256		264			253
Other revenues		161		198			202
Segment revenues		2,525		2,527			2,378
Benefits and expenses		2,214		2,208			2,125
Income before taxes		311		319			253
Income taxes		85		92			71
Segment earnings	$	226	$	227		$	182
Realized investment gains (losses), net of taxes	$	6	$	(4	)	$	20
Special item (after-tax) included in segment earnings:
Cost reduction items, net	$	—	$	—		$	(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 for 2006 reflect the favorable after-tax impact of $18 million related to reserve reviews, partially offset by severance charges. Excluding these items, segment earnings for 2006 reflected a more normal level of claims activity in the life business compared to 2005 as well as continued strong disability management 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.

Premiums and Fees

Premiums and fees increased in 2006 and 2005 primarily reflecting new business growth and strong customer retention in the disability insurance business.

INTERNATIONAL

(In millions)
Financial Summary	2006			2005			2004
Premiums and fees	$	1,526		$	1,243		$	1,026
Net investment income		79			71			58
Other revenues		2			(4	)		5
Segment revenues		1,607			1,310			1,089
Benefits and expenses		1,394			1,155			971
Income before taxes		213			155			118
Income taxes		75			46			42
Segment earnings	$	138		$	109		$	76
Realized investment gains (losses), net of taxes	$	(1	)	$	—		$	1
Special item (after-tax) included in segment earnings:
IRS tax settlement	$	—		$	7		$	—

The International segment includes:

• life, accident and supplemental health insurance products; and

• international health care products and services including those offered to expatriate employees of multinational corporations.

Results

Excluding the special item noted in the table above, International segment earnings increased in 2006 and 2005 primarily due to substantial earnings growth in the expatriate employee benefits business and the life, accident and health insurance business, particularly in South Korea.

Premiums and Fees

Premiums and fees increased 23% in 2006 and 21% in 2005. Excluding the effects of foreign currency changes, premiums and fees increased 20% in 2006 and 17% in 2005 reflecting new sales growth and improved customer retention in the expatriate employee benefits business and in the life, accident and health insurance operations, particularly in South Korea.

Other Matters

South Korea represents the single largest geographic market for CIGNA’s international businesses. In 2006, South Korea generated 29% of International’s revenues and 41% of its segment earnings. CIGNA International’s business in South Korea would be vulnerable to adverse consumer credit conditions and geopolitical and economic conditions in that country, which could have a significant impact on the International segment and on CIGNA’s consolidated results.

42

MANAGEMENT’S DISCUSSION AND ANALYSIS

RUN-OFF RETIREMENT

(In millions)
Financial Summary	2006			2005			2004
Premiums and fees	$	2		$	2		$	215
Net investment income		32			144			467
Other revenues		18			348			562
Segment revenues		52			494			1,244
Benefits and expenses		43			180			828
Income before income taxes (benefits)		9			314			416
Income taxes (benefits)		(2	)		105			134
Segment earnings	$	11		$	209		$	282
Realized investment gains (losses), net of taxes	$	(3	)	$	5		$	296
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	)

Beginning in 2006, accelerated deferred gain amortization is not reported as a special item due to immateriality.

Segment earnings for Run-off Retirement include:

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

• results of modified coinsurance arrangements in 2005 and 2006 prior to termination (see page 35);

• 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 in April 2004, net investment income represents amounts associated with the portion of that business reinsured under modified coinsurance arrangements until their terminations in 2005 and 2006. Those amounts were 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 declined from 2006 compared with 2005, reflecting lower normal deferred gain amortization in 2006 due to significant acceleration of gains through early 2005 resulting from contract novations. This decline was partially offset by the favorable impact in 2006 of $4 million resulting from the resolution of state and other tax matters.

Excluding the special items noted in the table above, segment earnings decreased in 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.

Other Revenues

Other revenues include:

(In millions, pre-tax)	2006		2005		2004
Normal deferred gain amortization	$	10	$	24	$	80
Accelerated deferred gain amortization	$	8	$	322	$	342	*
Changes in fair value of securities supporting experience-rated pension policyholder contracts	$	—	$	—	$	165

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

See page 35 for a discussion on deferred gain amortization and the conversion of the modified coinsurance arrangement associated with the single premium annuity business to indemnity reinsurance effective April 1, 2006.

RUN-OFF REINSURANCE

(In millions)
Financial Summary	2006			2005			2004
Premiums and fees	$	64		$	92		$	80
Net investment income		95			99			92
Other revenues		(97	)		(48	)		(162	)
Segment revenues		62			143			10
Benefits and expenses		80			219			118
Loss before income taxes (benefits)		(18	)		(76	)		(108	)
Income taxes (benefits)		(4	)		(12	)		7
Segment loss	$	(14	)	$	(64	)	$	(115	)
Realized investment gains (losses), net of taxes	$	22		$	(2	)	$	5

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 2006 reflecting:

• lower reserve increases related to credit risk;

• the absence in 2006 of an after-tax charge of $11 million for guaranteed minimum death benefit contracts recorded in 2005;

• the absence in 2006 of an after-tax charge of $9 million for guaranteed minimum income benefit contracts recorded in 2005; and

• favorable reserve runout in the workers’ compensation and personal accident businesses.

43

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 reserve increases related to credit risk.

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 $96 million in 2006, $48 million in 2005 and $165 million in 2004 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, 2006 related to this program was $703 million.

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 and forward contracts 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 30. See Note 7 to the Financial Statements for additional information about these assumptions and the reserve balances.

During 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 resulted from 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.

As a result of equity market declines and volatility in 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 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 7 of the Financial Statements.

As of December 31, 2006, the aggregate fair value of the underlying mutual fund investments was approximately $35.7 billion. The death benefit coverage in force as of that date (representing the amount that CIGNA would have to pay if all of the approximately 900,000 contractholders had died on that date) was approximately $4.9 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 also reinsured a guaranteed minimum income benefit under certain variable annuities issued by other insurance companies. See page 49 for further information about these contracts.

44

MANAGEMENT’S DISCUSSION AND ANALYSIS

Unicover and other run-off reinsurance. CIGNA’s reinsurance operations, which were discontinued in 2000 and are now an inactive business in run-off mode, reinsured workers’ compensation and personal accident business in the United States and London market. This included participation in a workers’ compensation reinsurance pool formerly managed by Unicover Managers, Inc.

CIGNA purchased extensive retrocessional reinsurance for the Unicover contracts (through the pool) and also purchased retrocessional coverage for its other workers’ compensation and personal accident assumed risks. Although CIGNA is involved in certain retrocessional enforcement arbitrations, most of the disputes concerning the retrocessional contracts have been resolved. See “Run-off reinsurance litigation” on page 38 for more information regarding these disputes.

CIGNA’s payment obligations under these contracts are based on ceding companies’ claim payments relating to accidents and injuries. These claim payments can in some cases extend many years into the future, and the amount of the ceding companies’ ultimate claims, and therefore the amount of CIGNA’s ultimate payment obligations and ultimate collection from retrocessionaires may not be known with certainty for some time.

Summary. CIGNA’s reserves for underlying reinsurance exposures assumed by CIGNA, as well as for amounts recoverable from retrocessionaires, are considered appropriate as of December 31, 2006, 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. CIGNA bears the risk of loss if its payment obligations to cedents increase or if its retrocessionaires are unable to meet, or successfully challenge, their reinsurance obligations to CIGNA.

OTHER OPERATIONS

(In millions)
Financial Summary	2006		2005			2004
Premiums and fees	$	111	$	116		$	124
Net investment income		435		465			475
Other revenues		84		100			173
Segment revenues		630		681			772
Benefits and expenses		488		512			559
Income before taxes		142		169			213
Income taxes		47		39			71
Segment earnings	$	95	$	130		$	142
Realized investment gains (losses), net of taxes	$	16	$	(11	)	$	24
Special items (after-tax) included in segment earnings:
IRS tax settlement	$	—	$	11		$	—
Gain on sale of investment advisory business	$	—	$	—		$	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 items noted in the table above, segment earnings for Other Operations decreased in 2006 primarily due to:

• lower earnings in the corporate life insurance business;

• lower deferred gain amortization in the individual life insurance and annuity business; and

• the absence of favorable tax adjustments recorded in 2005.

Excluding the special item noted in the table 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.

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 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.

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CORPORATE

(In millions)
Financial Summary	2006			2005			2004
Segment loss	$	(95	)	$	(12	)	$	(114	)
Special items (after-tax) included in segment loss:
Charge associated with settlement of shareholder litigation	$	(25	)	$	—		$	—
IRS tax settlement	$	—		$	63		$	—
Cost reduction charge	$	(8	)	$	(19	)	$	(20	)
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 the special items noted in the table above, the increase in segment loss primarily reflects the impact of less favorable tax adjustments in 2006 compared with 2005.

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;

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

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

Special items in 2004 include a federal tax refund that was received in connection with a disputed tax issue.

DISCONTINUED OPERATIONS

(In millions)
Financial Summary	2006			2005
Income before income (taxes) benefits	$	19		$	—
Income (taxes) benefits		(6	)		349
Income from operations		13			349
Impairment loss, net of tax		(17	)		—
Income (loss) from discontinued operations, net of taxes	$	(4	)	$	349

Results from discontinued operations in 2006 primarily represent:

• an impairment loss associated with the expected sale of the Brazilian life insurance operations (see page 35); and

• realized gains on the disposition of certain directly owned real estate investments (see Note 11(B) to the Financial Statements).

Results from discontinued operations in 2005 consist of tax benefits recognized from past divestitures. See page 37 for additional information.

LIQUIDITY AND CAPITAL RESOURCES

(In millions)
Financial Summary	2006		2005		2004
Short-term investments	$	89	$	439	$	71
Cash and cash equivalents	$	1,392	$	1,709	$	2,519
Short-term debt	$	382	$	100	$	—
Long-term debt	$	1,294	$	1,338	$	1,438
Shareholders’ equity	$	4,330	$	5,360	$	5,203

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 52 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.

See Note 15 to the Financial Statements for additional information.

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

(In millions)	2006			2005			2004
Operating activities	$	642		$	718		$	1,450
Investing activities	$	1,548		$	258		$	1,218
Financing activities	$	(2,513	)	$	(1,785	)	$	(1,541	)

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.

2006:

Cash flows from operating activities were affected by the following significant items in 2006 and 2005:

• net cash outflows in 2006 of $216 million to originate mortgage loans held for sale (see page 51 for additional information);

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MANAGEMENT’S DISCUSSION AND ANALYSIS

• higher net cash outflows in 2006 of $48 million associated with futures contracts entered into as part of a program to manage equity market risks in the run-off reinsurance segment;

• settlement in 2006 of certain liabilities associated with the single premium annuity business of $44 million;

• net cash outflows in 2006 of $171 million for experience rated refunds due to the loss of a large prescription drug contract, compared with net receipts of $107 million in 2005 from that contract;

• 2005 voluntary pension contributions of $440 million; and

• 2005 cash receipts from discontinued operations of $222 million.

Excluding these items, cash flows from operating activities was higher in 2006, primarily because the increase in cash revenues was greater than the increase in paid losses (excluding the losses of the large prescription drug contract in 2006) primarily due to membership and revenue growth in Health Care. In addition, paid expenses were lower in 2006, reflecting the absence of required pension contributions in 2006 (approximately $100 million in 2005).

• Cash provided by investing activities primarily consisted of net proceeds from investments of $1.8 billion, partially offset by net purchases of property and equipment of $136 million, net cash transferred of $45 million in connection with the conversion of the single premium annuity business to indemnity reinsurance and net cash used in acquisitions of $38 million.

• Cash used in financing activities primarily consisted of dividends on and repurchases of common stock of $2.8 billion, repayment of long-term debt of $100 million and net withdrawals of contractholder deposit funds of $124 million, partially offset by net proceeds of $246 million on issuance of long-term debt and proceeds of $251 million from issuances of common stock to employees under CIGNA’s stock plans.

2005:

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

• the 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).

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

Interest Expense

Interest expense on long-term debt and capital leases was $104 million in 2006, $105 million in 2005 and $107 million in 2004.

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.

In August 2006, CIGNA filed a universal shelf registration statement on Form S-3ASR with the SEC to take advantage of its status as a “well-known seasoned issuer” under the Securities Offering Reform Act. CIGNA may issue debt, equity or other securities from time to time, with amount, price, and terms to be determined at the time of sale.

47

In November 2006, CIGNA issued $250 million of 6.150% Senior Notes under this registration statement. The Notes bear interest at the rate of 6.150% per year, which is payable on May 15 and November 15 of each year, beginning May 15, 2007. The Notes will mature on November 15, 2036. CIGNA may redeem the Notes at any time, and from time to time, in whole or in part, at a specified redemption price.

In addition, CIGNA has $500 million remaining under an effective shelf registration statement filed with the Securities and Exchange Commission (SEC), 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 2006, CIGNA entered into a five-year revolving credit and letter of credit agreement for $1.75 billion which replaced its previous credit agreement. Of this amount, up to $1.25 billion may be used for letters of credit. CIGNA entered into the agreement for general corporate purposes, including support for the issuance of commercial paper and to obtain statutory reserve credit for certain reinsurance arrangements. There were no amounts outstanding under the credit facility nor any letters of credit issued as of December 31, 2006.

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 revolving credit and line of credit agreements of up to $1.75 billion.

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 27, 2007, the current ratings of CIGNA and Connecticut General Life Insurance Company (CG Life), CIGNA’s principal subsidiary, were as follows:

	CG Life Insurance Ratings	CIGNA Corporation Debt Ratings
		Senior Debt	Commercial Paper
A.M. Best	A	—	—
Moody’s	A2	Baa2	P2
S& P	A-	BBB	A2
Fitch	A	BBB	F2

The above table reflects Moody’s upgraded financial strength and debt ratings in February 2007, as well as A.M. Best’s upgraded financial strength rating in December 2006.

For additional information, refer to the Ratings section in CIGNA’s 2006 Form 10-K.

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.

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 sold retirement benefits business. Separate account assets 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, primarily associated with the sold retirement benefits business, 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

48

MANAGEMENT’S DISCUSSION AND ANALYSIS

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, 2006, employers maintained assets that exceeded the benefit obligations. Benefit obligations under these arrangements were $2.0 billion as of December 31, 2006. As of December 31, 2006, approximately 75% 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, 2006.

• 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 $29 million as of December 31, 2006. CIGNA had no additional liabilities for these guarantees as of December 31, 2006.

Other financial guarantees. CIGNA had indemnification obligations to lenders of up to $293 million as of December 31, 2006 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 2007 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, 2006.

As of December 31, 2006, CIGNA guaranteed that it would compensate the lessor for a shortfall of up to $44 million in the market value of leased equipment at the end of the lease. Guarantees of $28 million expire in 2012 and $16 million expire in 2016. CIGNA had additional liabilities for these guarantees of less than $1 million as of December 31, 2006.

CIGNA had indemnification obligations as of December 31, 2006 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. There were no liabilities required for these indemnification obligations as of December 31, 2006.

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 minimum income benefits under certain variable annuities issued by other insurance companies. 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 assumptions. See page 33 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 next available date (2007 through 2014); and

• All underlying mutual fund investment values remained at the December 31, 2006 value of $3.3 billion with no future returns.

The maximum potential undiscounted payments that CIGNA would make under those assumptions would aggregate to $864 million 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, 2006, CIGNA had liabilities of $88 million related to these contracts and net amounts recoverable from reinsurers of $51 million (including $2 million of claims that have already been paid by CIGNA). CIGNA had an additional liability of $47 million associated with the cost of reinsurance

49

as of December 31, 2006. As of December 31, 2005, CIGNA had liabilities of $88 million related to these contracts and 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.

See Note 20(C) to the Financial Statements for further information.

Contractual obligations. The maturities of CIGNA’s principal contractual cash obligations, as of December 31, 2006, 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	$	4,936	$	739	$	630	$	524	$	3,043
Future policy benefits		12,305		624		1,160		1,058		9,463
Health Care medical claims payable		960		951		7		—		2
Unpaid claims and claims expenses		5,055		1,445		948		665		1,997
Short-term debt		390		390		—		—		—
Long-term debt		2,790		92		186		627		1,885
Non-recourse obligations		99		52		15		32		—
Other long-term liabilities		467		168		161		43		95
Off-Balance Sheet:
Purchase obligations		1,656		568		646		267		175
Operating leases		474		91		158		99		126
Total	$	29,132	$	5,120	$	3,911	$	3,315	$	16,786

On-Balance Sheet

• Insurance liabilities. Contractual cash obligations for insurance liabilities, excluding unearned premiums and fees, represent estimated benefit payments for health, life and disability insurance policies and annuity contracts. Actual obligations in any single year will vary based on actual morbidity, mortality, lapse and withdrawal experience. The sum of the obligations presented above exceeds the corresponding insurance liabilities of $15.4 billion recorded on the balance sheet because these recorded 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. 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 are not expected to impact CIGNA. The total amount of these reinsured reserves excluded is approximately $7.4 billion.

• Short-term debt represents current maturities of long-term debt and scheduled interest payments.

• Long-term debt includes scheduled interest payments. Capital leases are included in long-term debt and represent obligations for software licenses.

• Non-recourse obligations represent principal and interest payments due which 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 swap contracts and certain reinsurance liabilities. Estimated payments of $100 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 does not expect to make, nor is CIGNA required to make, domestic pension plan contributions in 2007. CIGNA expects to make additional payments subsequent to 2007 for these obligations, however subsequent payments have been excluded from the table as their timing is based on plan assumptions which may materially differ from actual activities ( see Note 9 to the Financial Statements for further information on pension and other postretirement benefit obligations).

Off-Balance Sheet

• Purchase obligations. As of December 31, 2006, purchase obligations consisted of estimated payments required under contractual arrangements for future services and investment commitments as follows (in millions):

Fixed maturities	$	31
Mortgage loans		154
Real estate		11
Limited liability entities (other long-term investments)		510
Total investment commitments		706
Future service commitments		950
Total purchase obligations	$	1,656

Future service commitments include an agreement with IBM for various information technology (IT) infrastructure services. CIGNA’s commitment under this contract is approximately $710 million over a 7-year period. CIGNA has the ability to terminate this agreement with 90 days notice, subject to termination fees.

CIGNA’s remaining estimated future service commitments primarily represent contracts for certain outsourced business process and IT maintenance and support. CIGNA generally has the ability to terminate these agreements, but does not anticipate doing so at this time. Purchase obligations exclude contracts that are cancelable without penalty or those that do not specify minimum levels of goods or services to be purchased.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

• Operating leases and certain Outsourced service arrangements. For additional information, see Note 18 to the Financial Statements.

Share Repurchase

CIGNA maintains 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 has, and may continue from time to time, to repurchase shares on the open market through a Rule 10b5-1 plan which permits a company to repurchase its shares at times when it otherwise might be precluded from doing so under insider trading laws or because of self-imposed trading blackout periods.

CIGNA repurchased 25.3 million shares in 2006 for $2.8 billion, and 15.4 million shares in 2005 for $1.6 billion. On January 24, 2007, CIGNA’s Board of Directors increased the repurchase authority by $500 million. The total remaining share repurchase authorization as of February 27, 2007, was $630 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, 2006.

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 this 2006 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)	2006		2005
Federal government and agency	$	597	$	914
State and local government		2,488		2,512
Foreign government		966		818
Corporate		7,364		9,489
Federal agency mortgage-backed		2		44
Other mortgage-backed		223		504
Other asset-backed		515		666
Total	$	12,155	$	14,947

Quality ratings. As of December 31, 2006, $11.4 billion, or 94%, of the fixed maturities in CIGNA’s investment portfolio were investment grade (Baa and above, or equivalent), and the remaining $0.7 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 $4.3 billion as of December 31, 2006, and $5.8 billion as of December 31, 2005. 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 34 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

In connection with CIGNA’s investment strategy to enhance investment yields by selling senior participations, as of December 31, 2006, mortgage loans includes $124 million of mortgage loans originated with the intent to sell.

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

51

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 $1 million in 2006, $6 million in 2005 and $13 million in 2004.

The following table shows problem and potential problem investments at amortized cost as of December 31:

(In millions)	Gross		Reserve			Net
2006
Problem bonds	$	71	$	(50	)	$	21
Potential problem bonds	$	15	$	(1	)	$	14
Potential problem mortgage loans	$	22	$	—		$	22
Foreclosed real estate	$	16	$	(3	)	$	13
2005
Problem bonds	$	87	$	(62	)	$	25
Potential problem bonds	$	63	$	(18	)	$	45
Problem mortgage loans	$	12	$	(2	)	$	10
Potential problem mortgage loans	$	47	$	—		$	47

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 a modified coinsurance arrangement associated with the sold retirement benefits business prior to its conversion to indemnity reinsurance in April 2006.

(In millions)	2006		2005		2004
CIGNA	$	29	$	14	$	16
Other	$	—	$	2	$	8

CIGNA’s portion of these losses is a component of realized investment results.

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, Hong Kong dollar, Taiwan dollar, Chilean peso, British pound, euro and New Zealand dollar. 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 44 and 49 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(F) 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 and foreign exchange rates are presented separately for futures contracts used in a program for guaranteed minimum death benefits.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Management believes that actual results could differ materially from these examples because:

• these examples were developed using estimates and assumptions;

• changes in the fair values of all insurance-related assets and liabilities have been excluded because their primary risks are insurance rather than market risk;

• changes in the fair values of investments recorded using the equity method of accounting and liabilities for pension and other postretirement and postemployment benefit plans (and related assets) have been excluded, consistent with the disclosure guidance; and

• changes in the fair values of other significant assets and liabilities such as goodwill, deferred acquisition costs, taxes, and various accrued liabilities have been excluded; because they are not financial instruments, their primary risks are other than market risk.

The effects of hypothetical changes in market rates or prices on the fair values of certain of 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
	2006		2005
100 basis point increase in interest rates	$	1.0 billion	$	1.1 billion
10% strengthening in U.S. dollar to foreign currencies	$	160 million	$	150 million
10% decrease in market prices for equity exposures	$	30 million	$	30 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, S&P 400, Russell 2000, NASDAQ, TOPIX (Japanese), EUROSTOXX and FTSE (British) equity indices and a 10% weakening in the U.S. dollar to the Japanese yen, British pound and euro would have been a decrease of approximately $70 million in the fair value of the futures contracts outstanding under this program as of December 31, 2006. 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 7 to the Financial Statements for further discussion of this program and related guaranteed minimum death benefit contracts.

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 44) and income benefit contracts (see page 49); and

• pension liabilities since equity securities comprise a significant portion of the assets of CIGNA’s employee pension plans (see page 36).

53

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. These forward-looking statements are based on management’s beliefs and assumptions and on information available to management at the time the statements are or were made. Forward-looking statements include but are not limited to the information concerning possible or assumed future business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, trends and, in particular, CIGNA’s productivity initiatives, litigation and other legal matters, operational improvement in the health care operations, and the outlook for CIGNA’s full year 2007 results. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe”, “expect”, “plan”, “intend”, “anticipate”, “estimate”, “predict”, “potential”, “may”, “should”, or similar expressions.

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 37 for more information);

3. challenges and risks associated with implementing the improvement initiatives and strategic actions 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 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;

5. heightened competition, particularly price competition, which could reduce product margins and constrain growth in CIGNA’s businesses, primarily the health care business;

6. significant changes in interest rates;

7. 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;

8. 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;

9. 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);

10. adjustments to the reserve assumptions (including lapse, partial surrender, mortality, interest rates and volatility) used in estimating CIGNA’s liabilities for reinsurance contracts covering guaranteed minimum death benefits under certain variable annuities;

11. 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;

12. significant stock market declines, which could, among other things, result in increased pension expenses of CIGNA’s pension plans in future periods and the recognition of additional pension obligations;

13. 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;

14. significant deterioration in economic conditions, which could have an adverse effect on CIGNA’s operations and investments;

54

MANAGEMENT’S DISCUSSION AND ANALYSIS

15. changes in public policy and in the political environment, which could affect state and federal law, including legislative and regulatory proposals related to health care issues, which could increase cost and affect the market for CIGNA’s health care products and services; and amendments to income tax laws, which could affect the taxation of employer provided benefits, and pension legislation, which could increase pension cost;

16. potential public health epidemics and bio-terrorist activity, which could, among other things, cause CIGNA’s 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;

17. risks associated with security or interruption of information systems, which could, among other things, cause operational disruption;

18. challenges and risks associated with the successful management of CIGNA’s outsourcing projects or key vendors, including the agreement with IBM for provision of technology infrastructure and related services; and

19. risk factors detailed in CIGNA’s Form 10-K for the year ended December 31, 2006, including the Cautionary Statement in Management’s Discussion and Analysis.

This list of important factors is not intended to be exhaustive. Other sections of this annual report on Form 10-K, including the “Risk Factors” section 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. CIGNA does not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

55

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, 2006. 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, 2006 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, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

56

CIGNA Corporation

Consolidated Statements of Income

(In millions, except per share amounts)
For the years ended December 31,	2006			2005			2004
Revenues
Premiums and fees	$	13,641		$	13,695		$	14,236
Net investment income		1,195			1,359			1,643
Other revenues		1,491			1,637			1,774
Realized investment gains (losses)		220			(7	)		523
Total revenues		16,547			16,684			18,176
Benefits and Expenses
Health Care medical claims expense		6,111			6,305			6,616
Other benefit expenses		3,153			3,341			3,648
Other operating expenses		5,552			5,245			5,537
Total benefits and expenses		14,816			14,891			15,801
Income from Continuing Operations before Income Taxes		1,731			1,793			2,375
Income taxes (benefits):
Current		595			123			870
Deferred		(23	)		394			(72	)
Total taxes		572			517			798
Income from Continuing Operations		1,159			1,276			1,577
Income (Loss) from Discontinued Operations, Net of Taxes		(4	)		349			—
Income before Cumulative Effect of Accounting Change		1,155			1,625			1,577
Cumulative Effect of Accounting Change, Net of Taxes		—			—			(139	)
Net Income	$	1,155		$	1,625		$	1,438
Basic Earnings Per Share:
Income from continuing operations	$	10.50		$	10.02		$	11.55
Income (loss) from discontinued operations		(0.04	)		2.74			—
Income before cumulative effect of accounting change		10.46			12.76			11.55
Cumulative effect of accounting change, net of taxes		—			—			(1.01	)
Net income	$	10.46		$	12.76		$	10.54
Diluted Earnings Per Share:
Income from continuing operations	$	10.32		$	9.83		$	11.44
Income (loss) from discontinued operations		(0.04	)		2.69			—
Income before cumulative effect of accounting change		10.28			12.52			11.44
Cumulative effect of accounting change, net of taxes		—			—			(1.01	)
Net income	$	10.28		$	12.52		$	10.43

The accompanying Notes to the Financial Statements are an integral part of these statements.

57

CIGNA Corporation

Consolidated Balance Sheets

(In millions, except per share amounts)
As of December 31,				2006						2005
Assets
Investments:
Fixed maturities, at fair value (amortized cost, $11,373; $13,873)				$	12,155					$	14,947
Equity securities, at fair value (cost, $112; $113)					131						135
Mortgage loans					3,988						3,934
Policy loans					1,405						1,337
Real estate					117						80
Other long-term investments					418						504
Short-term investments					89						439
Total investments					18,303						21,376
Cash and cash equivalents					1,392						1,709
Accrued investment income					255						282
Premiums, accounts and notes receivable					1,459						1,628
Reinsurance recoverables					8,045						7,018
Deferred policy acquisition costs					707						618
Property and equipment					632						638
Deferred income taxes					926						1,087
Goodwill					1,736						1,622
Other assets, including other intangibles					379						306
Separate account assets					8,565						8,609
Total assets				$	42,399					$	44,893
Liabilities
Contractholder deposit funds				$	9,164					$	9,676
Future policy benefits					8,373						8,626
Unpaid claims and claim expenses					4,310						4,281
Health Care medical claims payable					960						1,165
Unearned premiums and fees					499						515
Total insurance and contractholder liabilities					23,306						24,263
Accounts payable, accrued expenses and other liabilities					4,435						5,157
Short-term debt					382						100
Long-term debt					1,294						1,338
Nonrecourse obligations					87						66
Separate account liabilities					8,565						8,609
Total liabilities					38,069						39,533
Contingencies — Note 20
Shareholders’ Equity
Common stock (shares issued, 160; 160)					40						40
Additional paid-in capital					2,451						2,385
Net unrealized appreciation, fixed maturities	$	187					$	195
Net unrealized appreciation, equity securities		22						24
Net unrealized depreciation, derivatives		(15	)					(14	)
Net translation of foreign currencies		33						2
Postretirement benefits liability adjustment		(396	)					—
Minimum pension liability adjustment		—						(716	)
Accumulated other comprehensive loss					(169	)					(509	)
Retained earnings					6,177						5,162
Less treasury stock, at cost					(4,169	)					(1,718	)
Total shareholders’ equity					4,330						5,360
Total liabilities and shareholders’ equity				$	42,399					$	44,893
Shareholders’ Equity Per Share				$	43.89					$	44.23

The accompanying Notes to the Financial Statements are an integral part of these statements.

58

CIGNA Corporation

Consolidated Statements of Comprehensive Income and Changes in Shareholders’ Equity

(In millions, except per share amounts)
For the years ended December 31,	2006						2005						2004
	Compre- hensive Income			Share- holders’ Equity			Compre- hensive Income			Share- holders’ Equity			Compre- hensive Income			Share- holders’ Equity
Common Stock , beginning of year				$	40					$	40					$	69
Retirement of treasury stock					—						—						(29	)
Common Stock , end of year					40						40						40
Additional Paid-In Capital, beginning of year					2,385						2,360						3,647
Retirement of treasury stock					—						—						(1,400	)
Effect of issuance of stock for employee benefit plans					66						25						113
Additional Paid-In Capital, end of year					2,451						2,385						2,360
Accumulated Other Comprehensive Loss, beginning of year					(509	)					(336	)					(54	)
Net unrealized depreciation, fixed maturities	$	(8	)		(8	)	$	(195	)		(195	)	$	(220	)		(220	)
Net unrealized appreciation (depreciation), equity securities		(2	)		(2	)		7			7			(12	)		(12	)
Net unrealized depreciation on securities		(10	)					(188	)					(232	)
Net unrealized appreciation (depreciation), derivatives		(1	)		(1	)		2			2			(4	)		(4	)
Net translation of foreign currencies		31			31			—			—			16			16
Minimum pension liability adjustment: prior to adoption of SFAS No. 158		284			284			13			13			(62	)		(62	)
Minimum pension liability adjustment: reversal on adoption of SFAS No. 158		—			432			—			—			—			—
Postretirement benefits liability adjustment: adoption of SFAS No. 158		—			(396	)		—			—			—			—
Other comprehensive income (loss)		304						(173	)					(282	)
Accumulated Other Comprehensive Loss, end of year					(169	)					(509	)					(336	)
Retained Earnings, beginning of year					5,162						3,679						9,502
Net income		1,155			1,155			1,625			1,625			1,438			1,438
Effects of issuance of stock for employee benefit plans					(129	)					(129	)					—
Retirement of treasury stock					—						—						(7,204	)
Common dividends declared (per share: $0.10; $0.10; $0.41)					(11	)					(13	)					(57	)
Retained Earnings, end of year					6,177						5,162						3,679
Treasury Stock, beginning of year					(1,718	)					(540	)					(8,557	)
Repurchase of common stock					(2,775	)					(1,621	)					(690	)
Retirement of treasury stock					—						—						8,633
Other, primarily issuance of treasury stock for employee benefit plans					324						443						74
Treasury Stock, end of year					(4,169	)					(1,718	)					(540	)
Total Comprehensive Income and Shareholders’ Equity	$	1,459		$	4,330		$	1,452		$	5,360		$	1,156		$	5,203

The accompanying Notes to the Financial Statements are an integral part of these statements.

59

CIGNA Corporation

Consolidated Statements of Cash Flows

(In millions)
For the years ended December 31,	2006			2005			2004
Cash Flows from Operating Activities
Net income	$	1,155		$	1,625		$	1,438
Adjustments to reconcile net income to net cash provided by operating activities:
(Income) loss from discontinued operations		4			(349	)		—
Cumulative effect of accounting change, net of taxes		—			—			139
Insurance liabilities		(390	)		(580	)		(771	)
Reinsurance recoverables		93			93			218
Deferred policy acquisition costs		(63	)		(71	)		(99	)
Premiums, accounts and notes receivable		69			179			358
Accounts payable, accrued expenses and other liabilities		(106	)		(345	)		(437	)
Current income taxes		245			(265	)		179
Deferred income taxes		(23	)		394			(72	)
Realized investment (gains) losses		(220	)		7			(523	)
Depreciation and amortization		208			221			230
Gains on sales of businesses (excluding discontinued operations)		(61	)		(396	)		(472	)
Mortgage loans originated and held for sale		(315	)		—			—
Proceeds from sales of mortgage loans held for sale		99			—			—
Proceeds from sales and maturities of securities supporting experience-rated pension policyholder contracts, net of purchases		—			—			1,049
Cash provided by operating activities of discontinued operations		—			222			—
Other, net		(53	)		(17	)		213
Net cash provided by operating activities		642			718			1,450
Cash Flows from Investing Activities
Proceeds from investments sold:
Fixed maturities		3,405			3,028			3,095
Equity securities		53			12			154
Mortgage loans		495			612			386
Other (primarily short-term investments)		1,185			767			2,082
Investment maturities and repayments:
Fixed maturities		964			968			766
Mortgage loans		432			348			651
Investments purchased:
Fixed maturities		(3,069	)		(3,108	)		(4,899	)
Equity securities		(43	)		(15	)		(13	)
Mortgage loans		(1,075	)		(1,364	)		(1,032	)
Other (primarily short-term investments)		(612	)		(910	)		(2,031	)
Proceeds on sales of businesses, net		—			—			2,121
Property and equipment, net		(136	)		(61	)		(38	)
Conversion of single premium annuity business		(45	)		—			—
Other acquisitions and dispositions, net cash used		(38	)		—			—
Cash provided by investing activities of discontinued operations		32			—			—
Other, net		—			(19	)		(24	)
Net cash provided by investing activities		1,548			258			1,218
Cash Flows from Financing Activities
Deposits and interest credited to contractholder deposit funds		503			607			2,368
Withdrawals and benefit payments from contractholder deposit funds		(627	)		(891	)		(3,107	)
Change in cash overdraft position		66			(216	)		(14	)
Net change in short-term debt		(75	)		—			—
Net proceeds on issuance of long-term debt		246			—			—
Repayment of long-term debt		(100	)		—			(76	)
Repurchase of common stock		(2,765	)		(1,618	)		(676	)
Issuance of common stock		251			346			64
Common dividends paid		(12	)		(13	)		(100	)
Net cash used in financing activities		(2,513	)		(1,785	)		(1,541	)
Effect of foreign currency rate changes on cash and cash equivalents		6			(1	)		—
Net increase (decrease) in cash and cash equivalents		(317	)		(810	)		1,127
Cash and cash equivalents, beginning of year		1,709			2,519			1,392
Cash and cash equivalents, end of year	$	1,392		$	1,709		$	2,519
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds	$	317		$	135		$	687
Interest paid	$	105		$	104		$	109

The accompanying Notes to the Financial Statements are an integral part of these statements.

60

Notes to the Financial Statements

Note 1 – Description of Business

CIGNA Corporation and its subsidiaries constitute one of the largest investor-owned health care and related benefits organizations in the United States. Key product lines, offered through the workplace, include medical coverages and related specialty health care products and services such as pharmacy, behavioral health, dental benefits, and disease management; 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 life, accident and supplemental health insurance products and international health care products and services to businesses and individuals in selected markets. CIGNA also 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 insignificant reclassifications have been made to prior years’ amounts to conform to the 2006 presentation.

Discontinued operations. Summarized financial data for discontinued operations is outlined below and primarily represents:

• an impairment loss in 2006 associated with the expected sale of the Brazilian life insurance operations as disclosed in Note 3;

• realized gains on the disposition of certain directly owned real estate investments in 2006 as disclosed in Note 11; and

• certain tax benefits recognized in 2005 from past divestitures as disclosed in Note 16.

(In millions)	2006			2005
Income before income (taxes) benefits	$	19		$	—
Income (taxes) benefits		(6	)		349
Income from operations		13			349
Impairment loss, net of tax		(17	)		—
Income (loss) from discontinued operations, net of taxes	$	(4	)	$	349

Unless otherwise indicated, amounts in these Notes exclude the effects of discontinued operations.

Variable interest entities. 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 at December 31 as follows:

(In millions)	2006				2005
	Real estate joint ventures1		Collateralized loan obligations2		Real estate joint ventures1		Collateralized loan obligations2
Assets	$	57	$	55	$	83	$	145
Variable rate debt (due in 2007)	$	—	$	—	$	14	$	—
Nonrecourse obligations		47		20		46		20
Other liabilities		—		6		9		14
Total liabilities and minority interest	$	47	$	26	$	69	$	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

Fair value option. In 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” to permit entities to choose to measure many financial instruments at fair value with subsequent changes in fair value to be reported in net income for the period. This choice is made for each individual financial instrument, is irrevocable and, after implementation, must be determined when the entity first commits to or recognizes the financial instrument. Implementation is required in the first quarter of 2008 with any changes in the measurement of financial instruments to be reported as an adjustment of the opening balance of Retained earnings. CIGNA is presently evaluating these new requirements to determine whether the fair value election will be used for various financial assets and liabilities at implementation or for financial assets and liabilities acquired subsequently.

61

Pension and other postretirement benefit plans. In 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Benefits Plans,” requiring that the overfunded or underfunded status of all defined benefit postretirement plans be measured as the difference between the fair value of plan assets and the benefit obligation and recognized in the balance sheet. Changes in actuarial gains and losses and prior service costs are required to be recognized in accumulated other comprehensive income, net of tax, each period. CIGNA implemented this standard effective December 31, 2006. The effects on the financial statements were as follows:

(In millions)	Before Application of SFAS No. 158			Adjust- ments			After Application of SFAS No. 158
Liability for pension benefits	$	744		$	99		$	843
Liability for other postretirement benefits	$	590		$	(155	)	$	435
Total liabilities	$	38,125		$	(56	)	$	38,069
Deferred income tax asset	$	946		$	(20	)	$	926
Accumulated other comprehensive (loss)	$	(205	)	$	36		$	(169	)
Total shareholders’ equity	$	4,294		$	36		$	4,330

Liabilities for pension benefits and other postretirement benefits are recorded in Accounts payable, accrued expenses and other liabilities on CIGNA’s balance sheet.

The implementation of SFAS No. 158 will not impact CIGNA’s pension expense, funding requirements or financial covenants. See Note 9 for further information on pension and other postretirement benefit plans.

Fair value measurements. In 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” to clarify how to measure fair value and to expand disclosures about fair value measurements. Implementation is required in the first quarter of 2008 with any changes to the fair values of assets or liabilities to be reported generally in net income or, for fixed maturities and equity securities held for sale and derivatives that hedge future cash flows, in accumulated other comprehensive income (loss) for the period. CIGNA is presently evaluating these new requirements to determine whether any changes to the fair value measurements of its assets and liabilities will result at implementation.

Uncertain tax positions. In 2006, the FASB issued an interpretation of SFAS No. 109, “Accounting for Income Taxes,” providing guidance to recognize and measure uncertain tax positions that are “more likely than not” to result in a benefit if challenged by the IRS. The guidance clarifies that the amount of tax benefit recognized should be measured using management’s best estimate based on the most favorable expected benefit with greater than a fifty percent likelihood of being realized. The interpretation also requires interest expense and penalties to be recognized for any reserved portion of an uncertain tax position beginning when the effect of that position is reported to tax authorities. CIGNA expects to implement this interpretation as required in the first quarter of 2007 with an estimated decrease to the opening balance of retained earnings of less than $50 million.

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. At adoption, CIGNA will elect to fair value certain existing investments in preferred stock and debt securities with call or conversion features and future changes in the fair value of these investments will be reported in net income. As a result, upon election, approximately $12 million of unrealized appreciation will be reclassified between the opening balances of Accumulated other comprehensive income and Retained earnings with no net change to Total shareholders’ equity. In addition, this amendment may affect future income recognition of certain future financial instruments if the fair value election is used or if additional derivatives are identified because any changes in their fair values will be recognized in net income each period.

Measuring financial statement misstatements. In 2006, the Securities Exchange Commission staff issued Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” This SAB requires that the effects of misstatements be quantified for each financial statement. CIGNA implemented this SAB as required in the fourth quarter of 2006 with no material effects to the financial statements because CIGNA uses an approach consistent with the new requirement when assessing the effects of prior period misstatements.

Deferred acquisition costs. In 2005, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 05-1, “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 at implementation. Although substantial contract changes are not expected to occur, the effect of this SOP in future periods may vary based on the nature and volume of any such contract changes.

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NOTES TO THE FINANCIAL STATEMENTS

Other-than-temporary impairment. Effective January 1, 2006, CIGNA implemented guidance provided by the FASB 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 of America, there was no material effect in accounting for fixed maturities and equity securities with other-than-temporary impairments at implementation. See Note 11 for a review of declines in fair value of fixed maturities and equity securities.

Stock compensation. SFAS No. 123 (as revised in 2004 and referred to as SFAS 123R) “Share-Based Payment” was effective January 1, 2006. This standard, which CIGNA early adopted in 2004, 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. CIGNA records compensation expense for stock options over their vesting periods based on the estimated fair value of the stock options, which is calculated using an option-pricing model. Compensation expense is 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. See Note 17 for further information on 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(C) for information about this sale.

The remaining cumulative effect in 2004 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.

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.

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 that are subject to fair value disclosure requirements, at the end of 2006 and 2005:

(In millions)	2006				2005
	Fair Value		Carrying Value		Fair Value		Carrying Value
Mortgage loans	$	4,060	$	3,988	$	3,949	$	3,934
Contractholder deposit funds, excluding universal life products	$	1,500	$	1,508	$	1,937	$	1,953
Long-term debt excluding capital leases	$	1,390	$	1,277	$	1,482	$	1,338

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. 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.

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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 generally carried at unpaid principal balances. Mortgage loans held for sale are carried at the lower of unpaid principal balance or market with any resulting valuation allowance reported in realized investment gains and losses. Mortgage loans are considered impaired when it is probable that CIGNA will not collect amounts due according to the terms of the loan agreement. 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.

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. Investments with original maturities of less than one year are classified as short-term. CIGNA classifies short-term investments as available for sale and carries them at fair value, which approximates cost.

Derivative financial instruments. Note 10(F) 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.

Investment gains and losses. Realized 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 on the disposition of certain directly owned real estate investments are eliminated from ongoing operations and reported in discontinued operations when the operations and cash flows of the underlying assets are clearly distinguishable and CIGNA has no significant continuing involvement in the operations.

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; 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.

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NOTES TO THE FINANCIAL STATEMENTS

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.

For universal life, annuity and other individual life insurance products, management estimates the present value of future revenues less expected payments. For group health indemnity products, management estimates the sum of future expected claims and related costs less unearned premiums and anticipated net investment income. If management’s 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. Anticipated investment income is considered in the calculation of premium deficiency losses for short-duration contracts. CIGNA recorded in other operating expenses amortization for policy acquisition costs of $202 million in 2006, $149 million in 2005 and $154 million in 2004.

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 acquiring, developing or modifying internal-use software are capitalized. Unamortized internal-use software costs were $270 million at December 31, 2006, and $306 million at December 31, 2005.

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 2006, of which $453 million has been capitalized and $660 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 increased as additional members migrated to the new systems through 2005. Accumulated amortization of capitalized amounts for this project was $239 million at December 31, 2006, and $153 million at December 31, 2005.

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, 2006 and 2005.

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 relationships, provider networks, and trademarks. 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. Other assets also include the gain position of certain derivatives (see Note 10(F)).

The gross carrying value of CIGNA’s other intangible assets was $266 million at December 31, 2006 and $215 million at December 31, 2005. The accumulated amortization was $202 million at December 31, 2006 and $181 million at December 31, 2005.

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 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 long-term life and

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supplemental health insurance policies and annuity products currently in force. These obligations are estimated using actuarial methods and primarily consist of reserves for annuity contracts, life insurance benefits, 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, morbidity, 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 10.00%. 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 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 7 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.

CIGNA develops these estimates for losses incurred but not yet reported using actuarial principles and assumptions based on historical and projected claim incidence patterns, claim size and the length of time over which payments are expected to be made. CIGNA consistently applies these actuarial principles and assumptions each reporting period, with consideration given to the variability of these factors, and recognizes the actuarial best estimate of the ultimate liability within a level of confidence, as required by actuarial standards of practice, which require that the liabilities be adequate under moderately adverse conditions.

CIGNA’s estimate of the liability for disability claims reported but not yet paid is primarily calculated as the present value of expected benefit payments to be made over the estimated time period that a policyholder remains disabled. CIGNA estimates the expected time period that a policyholder may be disabled by analyzing the rate at which an open claim is expected to close (claim resolution rate). Claim resolution rates may vary based upon the length of time a policyholder is disabled, the covered benefit period, cause of disability, benefit design and the policyholder’s age, gender and income level. CIGNA uses historical resolution rates combined with an analysis of current trends and operational factors to develop current estimates of resolution rates.

Because benefit payments may be made over an extended time period, CIGNA discounts certain claim liabilities related to group long-term disability and workers’ compensation. Discount rate assumptions are based on projected investment returns for the asset portfolios that support these liabilities and range from 3.5% to 6.5%. When estimates change, CIGNA records the adjustment in benefits and expenses in the period in which the change in estimate is identified.

O. 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.

CIGNA develops these estimates using actuarial principles and assumptions based on historical and projected claim payment patterns, medical cost trends, which are impacted by the utilization of medical services and the related costs of the services provided (unit costs), benefit design, seasonality, and other relevant operational factors. CIGNA consistently applies these actuarial principles and assumptions each reporting period, with consideration given to the variability of these factors, and recognizes the actuarial best estimate of the ultimate liability within a level of confidence, as required by actuarial standards of practice, which require that the liabilities be adequate under moderately adverse conditions.

CIGNA’s estimate of the liability for medical claims incurred but not yet reported is primarily calculated using historical claim payment patterns and expected medical cost trends. CIGNA analyzes the historical claim payment patterns by comparing the dates claims were incurred, generally the dates services were provided, to the dates claims were paid to determine “completion factors”, which are a measure of the time to process claims. A completion factor is calculated for each month of incurred claims. CIGNA uses historical completion factors combined with an analysis of current trends and operational factors to develop current estimates of completion factors. CIGNA estimates the ultimate liability for claims incurred in each month by applying the current estimates of completion factors to the current paid claim data. The difference between this estimate of the ultimate liability and the current paid claim data is the estimate of the remaining claims to be paid for each incurral month. These

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NOTES TO THE FINANCIAL STATEMENTS

monthly estimates are aggregated and included in CIGNA’s Health Care medical claims payable at the end of each reporting period. Completion factors are used to estimate the health care medical claims payable for all months where claims have not been completely resolved and paid, except for the most recent month as described below.

Completion factors are impacted by several key items including changes in the level of claims processed electronically versus manually (auto-adjudication), changes in provider claims submission rates, membership changes and the mix of products. As noted, CIGNA uses historical completion factors combined with an analysis of current trends and operational factors to develop current estimates of completion factors. This approach implicitly assumes that historical completion rates will be a useful indicator for the current period. It is possible that the actual completion rates for the current period will develop differently from historical patterns, which could have a material impact on CIGNA’s medical claims payable and net income.

Claims incurred in the most recent month have limited paid claim data, since a large portion of health care claims are not submitted to CIGNA for payment in the month services have been provided. This makes the completion factor approach less reliable for claims incurred in the most recent month. As a result, in any reporting period, for the estimates of the ultimate claims incurred in the most recent month, CIGNA primarily relies on medical cost trend analysis, which reflects expected claim payment patterns and other relevant operational considerations. Medical cost trend is impacted by several key factors including medical service utilization and unit costs and CIGNA’s ability to manage these factors through benefit design, underwriting, provider contracting and CIGNA’s medical management initiatives. These factors are affected by changes in the level and mix of medical benefits offered, including inpatient, outpatient and pharmacy, the impact of copays and deductibles, changes in provider practices and changes in consumer demographics and consumption behavior.

Because historical trend factors are often not representative of current claim trends, the trend experienced for the most recent history along with an analysis of emerging trends, have been taken into consideration in establishing the liability for Health Care medical claims payable at December 31, 2006 and 2005. It is possible that the actual medical trend for the current period will develop differently from the expected, which could have a material impact on CIGNA’s medical claims payable and net income.

For each reporting period, CIGNA evaluates key assumptions by comparing the assumptions used in establishing the medical claims payable to actual experience. When actual experience differs from the assumptions used in establishing the liability, medical claims payable are increased or decreased through current period net income. Additionally, CIGNA evaluates expected future developments and emerging trends which may impact key assumptions. The estimation process involves considerable judgment, reflecting the variability inherent in forecasting future claim payments. The adequacy of these estimates is highly sensitive to changes in CIGNA’s key assumptions, specifically completion factors, which are impacted by actual or expected changes in the submission and payment of medical claims, and medical cost trends, which are impacted by actual or expected changes in the utilization of medical services and unit costs.

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, other 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(F)).

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.

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• Contract fees, which are based upon related administrative expenses, are recognized in premiums and fees as they are earned ratably over the contract period.

Benefits and expenses for investment-related products consist primarily of income credited to policyholders in accordance with contract provisions.

Revenue for universal life products is recognized as follows:

• Net investment income on assets supporting universal life products is recognized as earned.

• Fees for mortality are recognized as assessed, which is as earned.

• Administration fees are recognized as services are provided.

• Surrender charges are recognized as assessed, which is 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 submitted, 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 2006, 2005 and 2004.

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.

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. Star-HRG Acquisition

On July 11, 2006, CIGNA acquired the operating assets of Star-HRG, a leading provider of low cost health plans and other employee benefits coverage for hourly and part-time workers and their families, for $156 million, including assumed liabilities. The acquisition was accounted for as a purchase, and was financed through the issuance of a note payable to the seller (see Note 12). The purchase price was allocated as follows: $57 million to identifiable intangible assets and the remaining $99 million to goodwill.

Intangible assets (primarily purchased customer relationships, software and trademarks) associated with the acquisition are being amortized on a straight-line basis over periods from 3 to 10 years.

The results of Star-HRG are included in the accompanying consolidated financial statements from the date of the acquisition.

B. Sale of the Brazilian Life Insurance Operations

During 2006, CIGNA entered into negotiations to sell its Brazilian life insurance business. The sale is expected to close in 2007 and as a result, CIGNA has classified this business as a discontinued operation. CIGNA recognized an impairment loss in 2006 with respect to this business of $17 million after-tax, primarily related to the write-off of unrecoverable foreign tax credits and foreign currency translation losses.

C. 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 initial after-tax gain of $809 million, of which $267 million after-tax was recognized immediately. The after-tax gain was subsequently reduced by $3 million to reflect additional taxes on the sale. In 2006, the after-tax gain increased by $12 million resulting from the conversion of the single premium annuity business to indemnity reinsurance (see below). Both of these adjustments are reflected in the deferred portion of the gain.

As this transaction was primarily in the form of a reinsurance arrangement under which CIGNA retains the contractual obligation to pay these liabilities, $542 million of the initial 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.

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NOTES TO THE FINANCIAL STATEMENTS

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. As of December 31, 2006, the remaining contractholder deposit funds and future policy benefits associated with the sold retirement benefits business totaled $2.5 billion. See Note 8 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
2006
Accelerated deferred gain amortization	$	8	$	7
Normal deferred gain amortization	$	10	$	7
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, 2006 was $65 million, which will be recognized through 2032.

In 2005, in connection with a modified coinsurance arrangement, CIGNA received units of the buyer’s separate accounts and continues to carry those units as separate account assets on its balance sheet for the business not yet directly assumed by the buyer. At December 31, 2006, there were approximately $3.2 billion of separate account assets and liabilities associated with this business not yet directly assumed by the buyer.

From April 1, 2004 through March 31, 2006, CIGNA had a modified coinsurance arrangement relating to the single premium annuity business sold to the buyer. Under the arrangement, CIGNA retained the invested assets supporting the reinsured liabilities. These invested assets were held in a business trust established by CIGNA.

Effective April 1, 2006, the buyer converted this modified coinsurance arrangement to an indemnity reinsurance structure and took ownership of the trust assets. CIGNA transferred invested assets to the buyer and recorded a reinsurance recoverable of approximately $1.6 billion, which corresponds to the liabilities for the single premium annuity business held by CIGNA as of March 31, 2006. As disclosed above, the deferred gain increased by $12 million after-tax from the conversion.

D. 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.

E. 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). CIGNA recognized deferred gains of $28 million after-tax in 2006, $32 million after-tax in 2005, and $37 million after-tax in 2004. The remaining deferred gain as of December 31, 2006, was $155 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
2006
Income from continuing operations	$	1,159	$	—		$	1,159
Shares (in thousands):
Weighted average		110,419		—			110,419
Options and restricted stock grants				1,909			1,909
Total shares		110,419		1,909			112,328
EPS	$	10.50	$	(0.18	)	$	10.32
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

69

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 their exercise price was greater than the average share price of CIGNA’s common shares for the period.

(In millions)	2006	2005	2004
Antidilutive options	1.3	2.6	11.8

Note 5 – Health Care Medical Claims Payable

Medical claims payable for the Health Care segment reflects estimates of the ultimate cost of claims that have been incurred but not yet reported, those which have been reported but not yet paid (reported claims in process) and other medical expense payable, which primarily comprises accruals for provider incentives and other amounts payable to providers. Incurred but not yet reported comprises the majority of the reserve balance at December 31 as follows:

(In millions)	2006		2005
Incurred but not yet reported	$	820	$	1,004
Reported claims in process		95		116
Other medical expense payable		45		45
Medical claims payable	$	960	$	1,165

Activity in medical claims payable was as follows for the years ended December 31:

(In millions)	2006			2005			2004
Balance at January 1,	$	1,165		$	1,594		$	2,173
Less: Reinsurance and other amounts recoverable		342			497			719
Balance at January 1, net		823			1,097			1,454
Incurred claims related to:
Current year		6,284			6,631			6,889
Prior years		(173	)		(326	)		(273	)
Total incurred		6,111			6,305			6,616
Paid claims related to:
Current year		5,615			5,844			5,914
Prior years		609			735			1,059
Total paid		6,224			6,579			6,973
Balance at December 31, net		710			823			1,097
Add: Reinsurance and other amounts recoverable		250			342			497
Balance at December 31,	$	960		$	1,165		$	1,594

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.

For the year ended December 31, 2006, actual experience differed from CIGNA’s key assumptions, resulting in favorable incurred claims related to prior years’ medical claims payable of $173 million, or 2.6% of the current year incurred claims as reported for the year ended December 31, 2005. For the year ended December 31, 2005, actual experience differed from CIGNA’s key assumptions, resulting in favorable incurred claims related to prior years’ medical claims payable of $326 million, or 4.7% of the current year incurred claims as reported for the year ended December 31, 2004. Specifically, the favorable impact is due to faster than expected completion factors and lower than expected medical cost trends, both of which included an assumption for moderately adverse experience.

Actual completion factors were faster than expected, resulting in a reduction of the medical claims payable of $99 million for the year ended December 31, 2006 and $205 million for the year ended December 31, 2005. This reduction represented 1.5% in 2006 and 3.0% in 2005 of the current year incurred claims as reported for the years ended December 31, 2005 and 2004, respectively, for the insured book of business. The faster completion factors reflected better than expected time to process claims, driven by higher auto-adjudication rates, the impact of claim recoveries and more timely submissions of provider claims.

Actual medical cost trend was lower than estimated, resulting in a reduction of the medical claims payable of $74 million for the year ended December 31, 2006 and $121 million for the year ended December 31, 2005. This reduction represented 1.1% in 2006 and 1.7% in 2005 of the current year incurred claims as reported for the years ended December 31, 2005 and 2004, respectively, for the insured book of business. The better than expected medical cost trend was driven by lower inpatient, outpatient and pharmacy service utilization and lower than expected unit cost trends. The lower than expected unit cost trends reflected our provider contracting initiatives and the mix of services provided.

The corresponding impact of favorable prior year development on net income was $54 million for the year ended December 31, 2006 and $137 million for the year ended December 31, 2005, or 0.8% in 2006 and 2.0% in 2005 of the current year incurred claims as reported for the years ended December 31, 2005 and 2004, respectively. The change in the amount of the incurred claims related to prior years in the medical claims payable liability does not directly correspond to an increase or decrease in CIGNA’s net income recognized for the following reasons:

First, due to the nature of CIGNA’s retrospectively experience-rated business, only adjustments to medical claims payable on accounts in deficit affect net income. An increase or decrease to medical claims payable on accounts in deficit, in effect, accrue to CIGNA and directly impact net income. An account is in deficit when the accumulated medical costs and administrative charges, including profit charges, exceed the accumulated premium received. Adjustments to medical claims payable on accounts in surplus accrue directly to the policyholder with no impact on CIGNA’s net income. An

70

NOTES TO THE FINANCIAL STATEMENTS

account is in surplus when the accumulated premium received exceeds the accumulated medical costs and administrative charges, including profit charges.

Second, CIGNA consistently recognizes the actuarial best estimate of the ultimate liability within a level of confidence, as required by actuarial standards of practice, which require that the liabilities be adequate under moderately adverse conditions. As CIGNA establishes the liability for each incurral year, CIGNA ensures that its assumptions appropriately consider moderately adverse conditions. When a portion of the development related to the prior year incurred claims is offset by an increase deemed appropriate to address moderately adverse conditions for the current year incurred claims, CIGNA does not consider that offset amount as having any impact on net income.

The determination of liabilities for Health Care medical claims payable requires CIGNA to make critical accounting estimates. See Note 2(O) for additional information.

Note 6 – Initiatives to Lower Operating Expenses

From 2004 through 2006, CIGNA has undertaken several initiatives to realign its organization and consolidate support functions in an effort to increase efficiency and responsiveness to customers.

In the fourth quarter of 2006, CIGNA completed a review of staffing levels in the health care operations and in supporting areas. As a result, CIGNA recognized in other operating expenses a charge for severance costs of $37 million pre-tax ($23 million after-tax).

In 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 charge for severance costs of $51 million pre-tax ($33 million after-tax). CIGNA substantially completed this program in 2006.

In 2004, CIGNA adopted a 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). CIGNA substantially completed this program in 2005.

Note 7 – 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 and forward contract gains or losses.

Activity in future policy benefit reserves for these guaranteed minimum death benefit contracts was as follows:

(In millions)	2006		2005		2004
Balance at January 1	$	951	$	988	$	1,182
Less: Reinsurance recoverable at 1/1		24		30		52
Add: Incurred benefits		15		105		(28	)
Less: Paid benefits		97		136		144
Add: Reinsurance recoverable at 12/31		17		24		30
Balance at December 31	$	862	$	951	$	988

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, 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 reflect the impact of a reserve action 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) and volatility. These assumptions are based on CIGNA’s experience and future expectations over the long-term period. 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

71

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 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.

The following provides information about CIGNA’s reserving methodology and assumptions for guaranteed minimum death benefits as of December 31, 2006.

• 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 0-21% 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)	2006		2005
Highest anniversary annuity value
Account value	$	29,398	$	33,370
Net amount at risk	$	4,157	$	5,902
Average attained age of contractholders		68		66
Anniversary value reset
Account value	$	2,658	$	2,911
Net amount at risk	$	49	$	108
Average attained age of contractholders		62		61
Other
Account value	$	3,663	$	3,891
Net amount at risk	$	694	$	941
Average attained age of contractholders		66		65
Total
Account value	$	35,719	$	40,172
Net amount at risk	$	4,900	$	6,951
Average attained age of contractholders (weighted by exposure)		67		66
Number of contractholders (approx.)		0.9 million		1.0 million

During 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 resulted from updates to partial surrender assumptions, reflecting the impact of stock market declines, as well as other assumptions.

As a result of equity market declines and volatility in 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.

72

NOTES TO THE FINANCIAL STATEMENTS

CIGNA expects to adjust the 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 $96 million in 2006, $48 million in 2005, and $164 million in 2004 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, 2006, was $703 million. There were no foreign currency forward contracts held at December 31, 2006 or 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 8 – 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.

A. Retirement Benefits Business

CIGNA had a reinsurance recoverable of $2.5 billion at December 31, 2006 and $1.2 billion at December 31, 2005 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 change from 2005 includes an increase of $1.6 billion as a result of the conversion of the single premium annuity business to indemnity reinsurance effective April 1, 2006. 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.

B. Individual Life and Annuity Reinsurance

CIGNA had a reinsurance recoverable of $4.8 billion at December 31, 2006, and $5.0 billion at December 31, 2005, from The Lincoln National Life Insurance Company that arose from the 1998 sale of CIGNA’s individual life insurance and annuity business through an indemnity reinsurance arrangement.

C. Unicover and Other Run-off Reinsurance

CIGNA’s Run-off Reinsurance operations reinsured workers’ compensation and personal accident business in the United States and London market. This included participation in a workers’ compensation reinsurance pool formerly managed by Unicover Managers, Inc.

CIGNA purchased extensive retrocessional reinsurance for the Unicover contracts (through the pool) and also purchased retrocessional coverage for its other workers compensation and personal accident assumed risks. Although CIGNA is involved in certain retrocessional enforcement arbitrations, most of the disputes concerning the retrocessional contracts have been resolved. See Note 20(E) “Litigation and other legal matters” for more information regarding these disputes.

CIGNA’s payment obligations under these contracts are based on ceding companies’ claim payments relating to accidents and injuries. These claim payments can in some cases extend many years into the future, and the amount of the ceding companies’ ultimate claims, and therefore the amount of CIGNA’s ultimate payment obligations and ultimate collection from retrocessionaires may not be known with certainty for some time.

D. Summary

CIGNA’s reserves for underlying reinsurance exposures assumed by CIGNA, as well as for amounts recoverable from retrocessionaires, are considered appropriate as of December 31, 2006, 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. CIGNA bears the risk of loss if its payment obligations to cedents increase or if its retrocessionaires are unable to meet, or successfully challenge, their reinsurance obligations to CIGNA.

E. 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.

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F. 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)	2006			2005			2004
Premiums and Fees
Short-duration contracts:
Direct	$	12,333		$	12,483		$	12,886
Assumed		443			398			378
Ceded		(181	)		(158	)		(118	)
		12,595			12,723			13,146
Long-duration contracts:
Direct		1,262			1,211			1,368
Assumed		82			75			83
Ceded:
Individual life insurance     and annuity business sold		(256	)		(270	)		(301	)
Other		(42	)		(44	)		(60	)
		1,046			972			1,090
Total	$	13,641		$	13,695		$	14,236
Reinsurance recoveries
Individual life insurance and annuity business sold	$	343		$	332		$	326
Other		181			141			166
Total	$	524		$	473		$	492

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 9 – 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 Post retirement Benefits
(In millions)	2006			2005			2006			2005
Change in benefit obligation
Benefit obligation, January 1	$	4,175		$	3,952		$	492		$	538
Service cost		71			72			2			2
Interest cost		223			221			26			27
(Gain) loss from past experience		(7	)		181			(15	)		(31	)
Benefits paid from plan assets		(249	)		(233	)		(4	)		(3	)
Benefits paid—other		(27	)		(31	)		(36	)		(36	)
Amendments		—			13			—			—
Curtailment		—			—			—			(5	)
Benefit obligation, December 31		4,186			4,175			465			492
Change in plan assets
Fair value of plan assets, January 1		3,109			2,542			33			35
Actual return on plan assets		481			256			1			1
Benefits paid		(249	)		(233	)		(4	)		(3	)
Contributions		2			544			—			—
Fair value of plan assets, December 31		3,343			3,109			30			33
Funded Status	$	(843	)		(1,066	)		(435	)		(459	)
Unrecognized net gains (losses) from past experience		N/A			(1,201	)		N/A			37
Unrecognized prior service cost		N/A			4			N/A			123
Net amount recognized in the balance sheet		N/A		$	(131	)		N/A		$	619
Accrued benefit liability		N/A		$	971			N/A		$	619
Accumulated other comprehensive loss		N/A			(1,102	)		N/A			—
Net amount recognized in the balance sheet		N/A		$	(131	)		N/A		$	619

N/A—No longer applicable with the implementation of SFAS No. 158

74

NOTES TO THE FINANCIAL STATEMENTS

The postretirement benefits liability adjustment included in accumulated other comprehensive loss consists of the following as of December 31, 2006:

	Pension Benefits			Other Post retirement Benefits
(In millions)	2006			2006
Unrecognized net gain (loss)	$	(767	)	$	49
Unrecognized prior service cost		3			106
Postretirement benefits liability adjustment	$	(764	)	$	155

Pension benefits. Effective December 31, 2006, CIGNA adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans”. The overall effect was an after-tax increase to Shareholders’ equity of $36 million. This increase occurs because prior service cost and net gains from past experience for other postretirement benefits plans more than offset the unrecognized underfunded pension liability. See Note 2(B) for further information.

In addition, prior to implementing SFAS No. 158, accumulated other comprehensive income increased in 2006 by $284 million after-tax, primarily due to lower minimum pension liabilities from the effect of asset returns in excess of expectations, amortization of losses from past experience, and an increase in the long-term interest rates used to determine the benefit obligation.

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.

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 certain underfunded pension plans. These plans were underfunded by $843 million in 2006 and $435 million in 2005 and had related accumulated benefit obligations of $4.1 billion as of December 31, 2006 and 2005.

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 for minimum funding requirements for the domestic pension plan and for voluntary contributions to the domestic and international pension plans.

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 did not make domestic pension plan contributions in 2006 and does not expect to make, nor is CIGNA required to make, domestic pension plan contributions in 2007.

Components of net pension cost, for the years ended December 31 were as follows:

(In millions)	2006			2005			2004
Service cost	$	71		$	72		$	73
Interest cost		223			221			221
Expected return on plan assets		(208	)		(181	)		(189	)
Amortization of:
Net loss from past experience		152			141			104
Prior service cost		(1	)		(1	)		(2	)
Net pension cost	$	237		$	252		$	207

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. CIGNA expects to recognize in 2007 $126 million of pre-tax loss from amortization of past experience and $1 million of pre-tax gain from amortization of prior service cost.

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 $315 million at December 31, 2006, and $341 million at December 31, 2005. Retiree life insurance plans had accumulated benefit obligations of $150 million as of December 31, 2006 and $151 million as of December 31, 2005.

Components of net other postretirement benefit cost for the years ended December 31 were as follows:

(In millions)	2006			2005			2004
Service cost	$	2		$	2		$	2
Interest cost		26			27			31
Expected return on plan assets		(2	)		(2	)		(2	)
Amortization of:
Net gain from past experience		(2	)		(2	)		—
Prior service cost		(17	)		(17	)		(16	)
Net other postretirement benefit cost	$	7		$	8		$	15

CIGNA also recognized pre-tax curtailment gains in 2005 and 2004 for other postretirement benefits as follows:

(In millions)	2005		2004
Operational effectiveness review	$	—	$	12
Sale of the retirement benefits business		—		8
Dental plan amendment		2		—
Total curtailment gains	$	2	$	20

75

CIGNA expects to recognize in 2007 $17 million of pre-tax gain related to amortization of prior service cost and $3 million of pre-tax gain from amortization of past experience.

The estimated rate of future increases in the per capita cost of health care benefits beginning in 2007 was 8%, decreasing to 5% over 3 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 2006 reported amounts as follows:

(In millions)	Increase		Decrease
Effect on total service and interest cost	$	1	$	1
Effect on postretirement benefit obligation	$	14	$	13

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
	2006	2005	2006
Equity securities	70%	70%	68%
Fixed income	19%	16%	20%
Real estate	5%	8%	7%
Other	6%	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.

A portion of the 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. Most of these separate accounts are reinsured and managed by the buyer of the retirement benefits business.

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 and related benefit costs based on the following weighted average assumptions as of and for the years ended December 31:

	2006	2005
Discount rate:
Pension benefit obligation	5.75%	5.50%
Other postretirement benefit obligation	5.75%	5.50%
Pension benefit cost	5.50%	5.75%
Other postretirement benefit cost	5.50%	5.50%
Expected return on plan assets:
Projected pension benefit obligation	7.50%	7.50%
Pension benefit cost	7.50%	7.50%
Accumulated other postretirement benefit obligation	5.00%	5.00%
Other postretirement benefit cost	5.00%	7.00%
Expected rate of compensation increase:
Projected pension benefit obligation	3.50%	3.50%
Pension benefit cost	3.50%	3.50%
Accumulated other postretirement benefit obligation	3.00%	3.00%
Other postretirement benefit cost	3.00%	3.00%

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.

To measure pension costs, CIGNA uses a market-related asset valuation for domestic pension plan assets invested in non-fixed income investments. 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.

76

NOTES TO THE FINANCIAL STATEMENTS

Benefit payments. The following benefit payments, including expected future services, are expected to be paid in:

			Other Post retirement Benefits
(In millions)	Pension Benefits		Gross		Net of Medicare Part D Subsidy
2007	$	297	$	48	$	43
2008	$	294	$	46	$	43
2009	$	293	$	45	$	43
2010	$	294	$	44	$	42
2011	$	289	$	43	$	41
2012-2016	$	1,525	$	198	$	187

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 $42 million for 2006, $36 million for 2005 and $38 million for 2004.

Note 10 – Investments

A. Fixed Maturities and Equity Securities

Fixed maturities included securities classified as trading, which are carried at fair value, of $27 million (amortized cost of $26 million) as of December 31, 2006 and $39 million (amortized cost of $38 million) as of December 31, 2005. Fixed maturities and equity securities included $88 million at December 31, 2006 and $49 million at December 31, 2005, 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, 2006:

(In millions)	Amortized Cost		Fair Value
Due in one year or less	$	458	$	465
Due after one year through five years		2,836		2,910
Due after five years through ten years		4,235		4,337
Due after ten years		3,153		3,682
Mortgage–and other asset-backed securities		665		734
Total	$	11,347	$	12,128

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, 2006
(In millions)	Amortized Cost		Unrealized Appreciation		Unrealized Depreciation			Fair Value
Federal government and agency	$	356	$	242	$	(1	)	$	597
State and local government		2,360		132		(4	)		2,488
Foreign government		902		73		(9	)		966
Corporate		7,063		322		(43	)		7,342
Federal agency mortgage-backed		2		—		—			2
Other mortgage- backed		215		6		—			221
Other asset-backed		449		63		—			512
Total	$	11,347	$	838	$	(57	)	$	12,128
	December 31, 2005
(In millions)
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

The above table includes net appreciation of $494 million at December 31, 2006 and $773 million at December 31, 2005 for adjustments required for future policy benefits and, in 2005, for modified coinsurance liabilities.

As of December 31, 2006, CIGNA had commitments to purchase $31 million of fixed maturities bearing interest at a fixed market rate. CIGNA expects to disburse the committed amounts in 2007.

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;

77

• 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.

As of December 31, 2006, fixed maturities (primarily investment grade corporate bonds) 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	$	1,423	$	1,437	$	(14	)
Below investment grade	$	87	$	88	$	(1	)
More than one year:
Investment grade	$	1,157	$	1,196	$	(39	)
Below investment grade	$	71	$	74	$	(3	)

The unrealized depreciation of investment grade fixed maturities is primarily due to increases in interest rates since purchase. There were no equity securities with a material decline in fair value from cost as of December 31, 2006. See Note 11(B) for discussion of impairments included in realized investment gains and losses.

B. Mortgage Loans and Real Estate

In connection with CIGNA’s investment strategy to enhance investment yields by selling senior participations, as of December 31, 2006, mortgage loans includes $124 million of mortgage loans originated with the intent to sell.

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)	2006		2005
Property type
Office buildings	$	1,305	$	1,395
Apartment buildings		891		489
Retail facilities		654		773
Industrial		609		673
Hotels		537		602
Other		109		82
Total	$	4,105	$	4,014
Geographic region
Pacific	$	993	$	1,013
South Atlantic		953		1,021
New England		665		588
Central		659		674
Middle Atlantic		439		335
Mountain		396		383
Total	$	4,105	$	4,014

At December 31, 2006, scheduled mortgage loan maturities were as follows (in millions, unless otherwise indicated): $122 in 2007, $182 in 2008, $405 in 2009, $627 in 2010 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, 2006, CIGNA had commitments to extend credit under commercial mortgage loan agreements of $154 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, 2006, CIGNA had commitments to contribute additional equity of $11 million to real estate investments. CIGNA expects to disburse most of the committed amounts in 2007.

C. Other Long-term Investments

As of December 31, other long-term investments consisted of the following:

(In millions)	2006		2005
Real estate and other entities	$	377	$	339
Mezzanine loans and other		41		165
Total	$	418	$	504

As of December 31, 2006, CIGNA had commitments to contribute:

• $253 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

• $257 million to entities that hold securities diversified by issuer and maturity date.

CIGNA expects to disburse approximately 40% of the committed amounts in 2007 and the remaining disbursed by 2011.

D. Short-Term Investments and Cash Equivalents

Short-term investments and cash equivalents included corporate securities of $973 million, federal government securities of $117 million and money market funds of $101 million at December 31, 2006. CIGNA’s short-term investments and cash equivalents at December 31, 2005, included corporate securities of $1.6 billion, money market funds of $232 million and federal government securities of $64 million.

E. Concentration of Risk

As of December 31, 2006 and 2005, CIGNA did not have a concentration of investments in a single issuer or borrower exceeding 10% of shareholders’ equity.

78

NOTES TO THE FINANCIAL STATEMENTS

F. 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 losses of $11 million in 2006 from terminating swaps hedging interest rate and foreign currency risk of fixed maturities. CIGNA recorded pre-tax realized investment gains from swaps on commercial loan pools of $7 million in 2006 and 2005, and $17 million in 2004.

See Note 7 for a discussion of derivatives associated with guaranteed minimum death benefit contracts and Note 20(C) to the Financial Statements for a discussion of derivatives associated with guaranteed minimum income benefit contracts. The other effects of derivatives were not material to CIGNA’s consolidated results of operations, liquidity or financial condition for 2006, 2005 or 2004.

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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 euros, Japanese yen and British pounds.	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, Canadian dollars and British pounds for periods of up to 15 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. 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 investment gains and losses. Quarterly fees and gains and losses on purchases and sales are also reported in realized investment 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	Prior to April 1, 2006, 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 reinsurance, CIGNA transferred the invested assets underlying these modified coinsurance arrangements.	Changes in fair values are reported in other liabilities and other revenues.

80

NOTES TO THE FINANCIAL STATEMENTS

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)	2006		2005		2004
Fixed maturities	$	768	$	921	$	970
Securities supporting experience-rated pension policyholder contracts		—		—		160
Equity securities		11		9		10
Mortgage loans		266		270		366
Policy loans		78		90		101
Real estate		12		11		18
Other long-term investments		26		37		25
Short-term investments and cash		77		69		42
		1,238		1,407		1,692
Less investment expenses		43		48		49
Net investment income	$	1,195	$	1,359	$	1,643

Net investment income for separate accounts (which is not reflected in CIGNA’s revenues) was $151 million for 2006, $154 million for 2005, and $903 million for 2004. Net investment income attributable to experience-rated pension policyholder contracts (which was included in CIGNA’s revenues and was primarily offset by amounts included in benefits and expenses until the sale of the retirement benefits business in April 2004) was approximately $250 million for 2004.

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.

(In millions)	2006			2005			2004
Fixed maturities	$	(25	)	$	(2	)	$	157
Equity securities		8			4			41
Mortgage loans		(7	)		(2	)		228
Real estate		(5	)		—			49
Other investments, including derivatives		249			(7	)		48
Realized investment gains (losses) from continuing operations, before income taxes		220			(7	)		523
Less income taxes		75			4			162
Realized investment gains (losses) from continuing operations		145			(11	)		361
Realized investment gains from discontinued operations, before income taxes		19			—			—
Less income taxes		6			—			—
Realized investment gains from discontinued operations		13			—			—
Net realized investment gains (losses)	$	158		$	(11	)	$	361

In 2006, realized investment results from continuing operations primarily reflect:

• gains on other investments from sales of equity interests in real estate limited liability entities; and

• losses on fixed maturities largely due to the impact of rising interest rates.

In 2006, realized investment results from discontinued operations reflect gains on the sale of directly owned real estate properties held for the production of investment income. Proceeds on these sales have been separately identified in CIGNA’s Consolidated Statements of Cash Flows.

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 $44 million in 2006, $24 million in 2005, and $26 million in 2004.

Realized investment gains and losses that are not reflected in CIGNA’s revenues for the years ended December 31 were as follows:

(In millions)	2006		2005		2004
Separate accounts	$	207	$	5,361	$	1,365
Investment results required to adjust future policy and contractholder benefits	$	11	$	9	$	368

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)	2006			2005			2004
Proceeds from sales	$	3,458		$	3,040		$	3,249
Gross gains on sales	$	49		$	40		$	273
Gross losses on sales	$	(55	)	$	(46	)	$	(52	)

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Note 12 – Debt

(In millions)	2006		2005
Short-term:
Current maturities of long-term debt	$	376	$	100
Short-term note payable		6		—
Total short-term debt	$	382	$	100
Long-term:
Uncollateralized debt:
7.4% Notes due 2007	$	—	$	291
8.25% Notes due 2007		—		85
7% Notes due 2011		222		222
6.375% Notes due 2011		226		226
6.37% Note due 2021		78		—
7.65% Notes due 2023		100		100
8.3% Notes due 2023		17		17
7.875% Debentures due 2027		300		300
8.3% Step Down Notes due 2033		83		83
6.15% Notes due 2036		250		—
Other		18		14
Total long-term debt	$	1,294	$	1,338

Other long-term debt in 2006 includes capital lease obligations for software licenses.

In August 2006, CIGNA filed a universal shelf registration statement on Form S-3ASR with the Securities and Exchange Commission (SEC) to take advantage of its status as a “well known seasoned issuer” under the Securities Offering Reform Act. CIGNA may issue debt, equity or other securities from time to time, with amount, price, and terms to be determined at the time of sale.

In November 2006, CIGNA issued $250 million of 6.150% Senior Notes under this registration statement. The Notes bear interest at the rate of 6.150% per year, which is payable on May 15 and November 15 of each year, beginning May 15, 2007. The Notes will mature on November 15, 2036. The Company may redeem the Notes at any time, and from time to time, in whole or in part, at a specified redemption price.

Also, in connection with the Star-HRG acquisition in 2006, CIGNA issued to the seller a note payable of $151 million. Of that amount, $73 million was repaid during 2006 and the remaining $78 million is due in 2021.

Maturities of debt and capital leases are as follows (in millions): $382 in 2007, $2 in 2008, $3 in 2009, $3 in 2010, $452 million in 2011 and the remainder in years after 2011. Interest expense on long-term debt and capital leases was $104 million in 2006, $105 million in 2005, and $107 million in 2004.

CIGNA may issue commercial paper primarily to manage imbalances between operating cash flow 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, 2006 and 2005.

In May 2006, CIGNA entered into a five-year revolving credit and letter of credit agreement for $1.75 billion which replaced its previous credit agreement. Of this amount, up to $1.25 billion may be used for letters of credit. CIGNA entered into the agreement for general corporate purposes, including support for the issuance of commercial paper and to obtain statutory reserve credit for certain reinsurance arrangements. There were no amounts outstanding under the credit facility nor any letters of credit issued as of December 31, 2006.

In addition, as of December 31, 2006, CIGNA had $500 million remaining under an effective shelf registration statement filed with the SEC, which may be issued as debt securities, equity securities or both.

Note 13 – Common and Preferred Stock

As of December 31, CIGNA had issued the following shares:

(Shares in thousands)	2006		2005
Common: Par value $0.25 600,000 shares authorized
Outstanding—January 1	121,191		132,007
Issued for stock option and other benefit plans	2,762		4,587
Repurchase of common stock	(25,299	)	(15,403	)
Outstanding—December 31	98,654		121,191
Treasury stock	61,375		38,838
Issued—December 31	160,029		160,029

CIGNA maintains 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 has, and may continue from time to time, to repurchase shares on the open market through a Rule 10b5-1 plan which permits a company to repurchase its shares at times when it otherwise might be precluded from doing so under insider trading laws or because of self-imposed trading blackout periods.

In 1997, CIGNA’s Board of Directors adopted a shareholder rights plan, which will expire on August 4, 2007. Upon expiration of the shareholder rights plan, the Board will not adopt a new shareholder rights plan without first seeking shareholder approval, unless the Board determines that adoption of a shareholder rights plan without prior shareholder approval is in the best interest of CIGNA’s shareholders.

Under the existing plan, 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.

82

NOTES TO THE FINANCIAL STATEMENTS

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, 2006 or 2005.

Note 14 – Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) excludes:

• amounts required to adjust future policy benefits for certain annuities; and

• amounts required to adjust other liabilities after the initial reclassification of unrealized appreciation under a modified coinsurance arrangement.

Changes in accumulated other comprehensive income (loss) were as follows:

(In millions)	Pre-Tax			Tax (Expense) Benefit			After-Tax
2006
Net unrealized depreciation, securities:
Net unrealized depreciation on securities arising during the year	$	(33	)	$	12		$	(21	)
Plus: reclassification adjustment for losses included in net income		17			(6	)		11
Net unrealized depreciation, securities	$	(16	)	$	6		$	(10	)
Net unrealized depreciation derivatives:
Net unrealized depreciation on derivatives arising during the year	$	(13	)	$	5		$	(8	)
Plus: reclassification adjustment for losses included in net income		11			(4	)		7
Net unrealized depreciation, derivatives	$	(2	)	$	1		$	(1	)
Net translation of foreign currencies	$	48		$	(17	)	$	31
Minimum pension liability adjustment
Activity prior to adoption of SFAS No. 158	$	437		$	(153	)	$	284
Adoption of SFAS No. 158		665			(233	)		432
Minimum pension liability adjustment	$	1,102		$	(386	)	$	716
Postretirement benefits liability adjustment:
Adoption of SFAS No. 158	$	(609	)	$	213		$	(396	)
2005
Net unrealized depreciation, securities:
Net unrealized depreciation on securities arising during the year	$	(288	)	$	101		$	(187	)
Less: reclassification adjustment for gains included in net income		(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

(In millions)	Pre-Tax			Tax (Expense) Benefit			After-Tax
2004
Net unrealized depreciation, securities:
Net unrealized appreciation on securities arising during the year	$	97		$	(34	)	$	63
Less: reclassification adjustment for gains included in net income		(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	)

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)	2006		2005		2004
Net income (loss)	$	1,288	$	1,077	$	1,032
Surplus	$	3,218	$	3,597	$	3,714

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 2007 without prior approval is approximately $1.1 billion. The amount of net assets of CIGNA that could not be distributed without prior approval as of December 31, 2006, was approximately $3.1 billion.

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Note 16 – Income Taxes

Deferred income tax assets and liabilities as of December 31 are shown below.

(In millions)	2006			2005
Deferred tax assets
Employee and retiree benefit plans	$	668		$	782
Investments, net		31			43
Other insurance and contractholder liabilities		258			249
Deferred gain on sale of business		102			146
Policy acquisition expenses		125			116
Loss carryforwards		110			116
Bad debt expense		84			82
Other		82			93
Deferred tax assets before valuation allowance		1,460			1,627
Valuation allowance for deferred tax assets		(174	)		(161	)
Deferred tax assets, net of valuation allowance		1,286			1,466
Deferred tax liabilities
Depreciation and amortization		202			206
Unrealized appreciation on investments		112			118
Other		46			55
Total deferred tax liabilities		360			379
Net deferred income tax assets	$	926		$	1,087

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 $926 million as of December 31, 2006 and $1.1 billion as of December 31, 2005. 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 (see table above). The $13 million increase in the valuation allowance during 2006 relates primarily to the run-off reinsurance and international operations, and includes $6 million related to discontinued operations. The valuation allowance at December 31, 2006 continues to be primarily related 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 $271 million were available at December 31, 2006. Subject to statutory limitations, the operating losses are available to offset taxable income subject to statutory limitations and begin to expire in 2022. CIGNA has no unused capital losses as of December 31, 2006.

Current income taxes payable included in Accounts payable, accrued expenses and other liabilities in the consolidated balance sheet was $193 million as of December 31, 2006. 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.

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

(In millions)	2006			2005			2004
Current taxes
U.S. income	$	553		$	73		$	815
Foreign income		25			28			35
State income		17			22			20
		595			123			870
Deferred taxes (benefits)
U.S. income		(22	)		401			(77	)
Foreign income		(1	)		(11	)		2
State income		—			4			3
		(23	)		394			(72	)
Total income taxes	$	572		$	517		$	798

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)	2006			2005			2004
Tax expense at nominal rate	$	606		$	628		$	831
Tax-exempt interest income		(34	)		(34	)		(33	)
Dividends received deduction		(6	)		(12	)		(21	)
Resolution of federal tax matters		—			(84	)		(31	)
State income tax (net of federal income tax benefit)		9			18			11
Change in valuation allowance		7			15			51
Other		(10	)		(14	)		(10	)
Total income taxes	$	572		$	517		$	798

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.

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

84

NOTES TO THE FINANCIAL STATEMENTS

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). Audits of tax years through 2002 have been completed and the IRS is currently in the process of auditing 2003 and 2004. Completion of the current audit is expected to occur in 2007, but could extend beyond depending on developments related to certain unresolved matters. In management’s opinion, adequate tax liabilities, including related interest charges should the IRS prevail, have been established to address exposures involving tax positions CIGNA has 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.

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 and restricted stock units.

Compensation cost and related tax benefits for these awards were as follows:

(In millions)	2006		2005		2004
Compensation cost	$	41	$	35	$	68
Tax benefits	$	14	$	12	$	23

CIGNA had the following number of shares of common stock available for award at December 31: 11.0 million in 2006, 11.5 million in 2005 and 11.7 million in 2004.

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)	2006				2005				2004
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding—January 1	8,872		$	82.49	13,692		$	77.66	15,782		$	79.51
Granted	552		$	120.90	834		$	90.14	3,174		$	55.86
Exercised	(3,083	)	$	77.71	(4,821	)	$	70.17	(1,564	)	$	50.23
Expired or canceled	(356	)	$	95.40	(833	)	$	82.02	(3,700	)	$	78.43
Outstanding—December 31	5,985		$	87.73	8,872		$	82.49	13,692		$	77.66
Options exercisable at year-end	4,613		$	86.82	6,514		$	89.40	10,417		$	84.17

Compensation expense of $20 million related to unvested stock options at December 31, 2006 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)	2006		2005		2004
Intrinsic value of options exercised	$	136	$	148	$	25
Cash received for options exercised	$	212	$	312	$	64
Excess tax benefits realized from options exercised	$	28	$	18	$	—

The following table summarizes information for outstanding common stock options at December 31, 2006:

(In millions, except options in thousands)	Options Outstanding		Options Exercisable
Number		5,985		4,613
Total intrinsic value	$	262	$	206
Weighted average exercise price	$	87.73	$	86.82
Weighted average remaining contractual life (years)		5.4 years		4.6 years

The weighted average fair value of options granted under employee incentive plans was $43.70 for 2006, $34.17 for

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2005 and $19.80 for 2004, using the Black- Scholes option-pricing model and the following assumptions:

	2006	2005	2004
Dividend yield	0.1%	0.1%	0.2%
Expected volatility	35.0%	35.0%	47.6%
Risk-free interest rate	4.6%	3.9%	2.2%
Expected option life	4.5 years	5.25 years	3.3 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 2006 and 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 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.

The table below shows the status of, and changes in, restricted stock grants during the last three years:

(Grants in thousands)	2006				2005				2004
	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	1,253		$	63.02	1,286		$	58.31	1,508		$	59.69
Granted	215		$	121.24	337		$	92.79	428		$	57.14
Vested	(410	)	$	51.71	(152	)	$	86.18	(154	)	$	88.06
Forfeited	(123	)	$	72.40	(218	)	$	56.51	(496	)	$	52.42
Outstanding—December 31	935		$	80.16	1,253		$	63.02	1,286		$	58.31

The grant date fair value of restricted stock vested was: $21 million in 2006, $13 million in 2005 and $14 million in 2004.

At the end of 2006, approximately 2,300 employees held 0.9 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. Through 2006, all units have either vested or have been forfeited.

Note 18 – Leases, Rentals and Outsourced Service Arrangements

Rental expenses for operating leases, principally for office space, amounted to $104 million in 2006, $121 million in 2005 and $137 million in 2004. As of December 31, 2006, future net minimum rental payments under non-cancelable operating leases were approximately $474 million, payable as follows (in millions): $91 in 2007, $90 in 2008, $68 in 2009, $54 in 2010, $45 in 2011 and $126 thereafter.

CIGNA has several outsourced service arrangements with third parties, primarily for human resource and information technology support services. The initial service periods under these arrangements range from 2 to 7 years and they are reported primarily as operating leases under SFAS No. 13, “Accounting for Leases.” CIGNA recorded in other operating expense $24 million in 2006 and $3 million in 2005 for these arrangements.

Note 19 – Segment Information

CIGNA’s operating segments generally reflect groups of related products, except for the International segment which 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.

Consolidated pre-tax income from continuing operations is primarily attributable to domestic operations. Consolidated pre-tax income from continuing operations generated by CIGNA’s foreign operations was approximately 12% in 2006, 9% in 2005, and 5% in 2004.

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,

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NOTES TO THE FINANCIAL STATEMENTS

administrative and systems expenses on systematic bases. Income taxes are generally computed as if each segment were filing a separate income tax return.

CIGNA presents segment information as follows:

Health Care includes 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 within CIGNA’s health care business.

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 supplemental health insurance products and international health care products and services offered in selected markets outside the United States, primarily in Asia and Europe.

Run-off Retirement includes:

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

• results of modified coinsurance arrangements prior to termination in 2005 and 2006;

• 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 includes accident, workers’ compensation, international life and health, and life and annuity reinsurance businesses. CIGNA has stopped underwriting new reinsurance business in 2000.

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.

Summarized segment financial information for the years ended and as of December 31 was as follows:

(In millions)	2006			2005			2004
Health Care
Premiums and fees and other revenues	$	11,201		$	11,268		$	11,895
Net investment income		261			275			283
Segment revenues	$	11,462		$	11,543		$	12,178
Income taxes	$	353		$	361		$	425
Segment earnings	$	653		$	688		$	763
Disability and Life
Premiums and fees and other revenues	$	2,269		$	2,263		$	2,125
Net investment income		256			264			253
Segment revenues	$	2,525		$	2,527		$	2,378
Income taxes	$	85			92		$	71
Segment earnings	$	226		$	227		$	182
International
Premiums and fees and other revenues	$	1,528		$	1,239		$	1,031
Net investment income		79			71			58
Segment revenues	$	1,607		$	1,310		$	1,089
Income taxes	$	75		$	46		$	42
Equity in loss of investees	$	(1	)	$	(1	)	$	(1	)
Segment earnings	$	138		$	109		$	76
Run-off Retirement
Premiums and fees and other revenues	$	20		$	350		$	777
Net investment income		32		$	144			467
Segment revenues	$	52		$	494		$	1,244
Income taxes (benefits)	$	(2	)	$	105		$	134
Segment earnings	$	11		$	209		$	282
Run-off Reinsurance
Premiums and fees and other revenues	$	(33	)	$	44		$	(82	)
Net investment income		95			99			92
Segment revenues	$	62		$	143		$	10
Income taxes (benefits)	$	(4	)	$	(12	)	$	7
Segment loss	$	(14	)	$	(64	)	$	(115	)

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(In millions)	2006			2005			2004
Other Operations
Premiums and fees and other revenues	$	195		$	216		$	297
Net investment income		435			465			475
Segment revenues	$	630		$	681		$	772
Income taxes	$	47		$	39		$	71
Segment earnings	$	95		$	130		$	142
Corporate
Other revenues and eliminations	$	(48	)	$	(48	)	$	(33	)
Net investment income		37			41			15
Segment revenues	$	(11	)	$	(7	)	$	(18	)
Income tax benefits	$	(57	)	$	(118	)	$	(114	)
Segment loss	$	(95	)	$	(12	)	$	(114	)
Realized investment gains (losses) from continuing operations
Realized investment gains (losses) from continuing operations	$	220		$	(7	)	$	523
Income taxes		75			4			162
Realized investment gains (losses) from continuing operations, net of taxes	$	145		$	(11	)	$	361
Total
Premiums and fees and other revenues	$	15,132		$	15,332		$	16,010
Net investment income		1,195			1,359			1,643
Realized investment gains (losses) from continuing operations		220		$	(7	)		523
Total revenues	$	16,547		$	16,684		$	18,176
Income taxes	$	572		$	517		$	798
Segment earnings	$	1,014		$	1,287		$	1,216
Realized investment gains (losses) from continuing operations, net of taxes		145			(11	)		361
Income from continuing operations	$	1,159		$	1,276		$	1,577

CIGNA does not report assets by segment since this is not a metric utilized by the chief operating decision-maker in evaluating segment results.

Premiums and fees and other revenues by product type were as follows for the years ended December 31:

(In millions)	2006		2005		2004
Medical	$	10,227	$	10,344	$	10,853
Disability		798		709		653
Life, Accident and Health		2,439		2,432		2,311
Other		1,668		1,847		2,193
Total	$	15,132	$	15,332	$	16,010

Note 20 – Contingencies

A. Financial Guarantees Primarily Associated with the sold Retirement Benefits Business

CIGNA, through its subsidiaries, is contingently liable for various financial guarantees provided in the ordinary course of business.

Separate account assets 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, primarily associated with the sold retirement benefits business, 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, 2006, employers maintained assets that exceeded the benefit obligations. Benefit obligations under these arrangements were $2.0 billion as of December 31, 2006. As of December 31, 2006 approximately 75% 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, 2006.

• 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 $29 million as of December 31, 2006. CIGNA had no additional liabilities for these guarantees as of December 31, 2006.

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NOTES TO THE FINANCIAL STATEMENTS

B. Other Financial Guarantees

CIGNA had indemnification obligations to lenders of up to $293 million as of December 31, 2006 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 2007 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, 2006.

As of December 31, 2006 CIGNA guaranteed that it would compensate the lessor for a shortfall of up to $44 million in the market value of leased equipment at the end of the lease. Guarantees of $28 million expire in 2012 and $16 million expire in 2016. CIGNA had additional liabilities for these guarantees of less than $1 million as of December 31, 2006.

CIGNA had indemnification obligations as of December 31, 2006, 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. There were no liabilities required for these indemnification obligations as of December 31, 2006.

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 minimum income benefits under certain variable annuities issued by other insurance companies. 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 that 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.

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 8-11% varying by equity fund type; 6-7% varying by bond fund type; and 5-6% for money market funds.

• The volatility assumption is 14-23%, varying by equity fund type; 5-7%, 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%.

89

• 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 next available date (2007 through 2014); and

• All underlying mutual fund investment values remained at the December 31, 2006 value of $3.3 billion with no future returns.

The maximum potential undiscounted payments that CIGNA would make under those assumptions would aggregate to $864 million 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, 2006, CIGNA had liabilities of $88 million related to these contracts and net amounts recoverable from reinsurers of $51 million (including $2 million of claims that have already been paid by CIGNA). CIGNA had an additional liability of $47 million associated with the cost of reinsurance as of December 31, 2006. As of December 31, 2005, CIGNA had liabilities of $88 million related to these contracts and 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.

See Note 10(F) 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 and IRS 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 and legislative changes or judicial decisions 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 and rulings from pending purported class action litigation, which could result in adjustments to or the elimination of the average wholesale price or “AWP” of pharmaceutical products as a benchmark in establishing certain rates, charges, discounts, guarantees and fees for various prescription drugs;

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

• changes in public policy and in the political environment, which could affect state and federal law, including legislative and regulatory proposals related to health care issues, which could increase cost and affect the market for CIGNA’s health care products and services; and pension legislation, which could increase pension cost;

• 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 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.

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. As of December 31, 2006, CIGNA’s insurance and HMO subsidiaries have recorded $21 million in liabilities and $5 million in assets for insolvency fund and other insurance-related assessments.

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NOTES TO THE FINANCIAL STATEMENTS

Concentration of risk. South Korea represents the single largest geographic market for CIGNA’s international businesses. In 2006, South Korea generated 29% of International’s revenues and 41% of its segment earnings. CIGNA International’s business in South Korea would be vulnerable to adverse consumer credit conditions and geopolitical and economic conditions in that country, which could have a significant impact on CIGNA’s consolidated results.

E. Litigation and Other Legal Matters

Managed care litigation. 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 over disallowed claims under the settlement submitted by a representative of certain class member physicians is proceeding to arbitration. Separately, in April 2005, the court approved a settlement between CIGNA and the remaining plaintiffs, a class of non-physician health care professionals. In the fourth quarter of 2006, CIGNA received a $22 million pre-tax ($14 million after-tax) insurance recovery related to this litigation. CIGNA continues to pursue additional recoveries from two other insurers.

Broker compensation. Various regulators, including the New York and Connecticut Attorneys General and the Florida Office of Insurance Regulation, 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. Some of CIGNA’s subsidiaries are included in one such lawsuit seeking injunctive relief against these contingent compensation practices. CIGNA is also providing information about ULR in connection with investigations by the U.S. Attorney’s Office for the Southern District of California and the San Diego District Attorney. In addition, CIGNA provided information about another broker to the U.S. Department of Labor. CIGNA is cooperating with the inquiries and investigations.

Separately, several purported class action lawsuits have been filed against brokers and insurance companies, including certain of CIGNA’s subsidiaries, asserting that contingent commissions are unlawful. These suits are now procedurally consolidated in a multi-district litigation proceeding in federal court in New Jersey. CIGNA denies the allegations and will vigorously defend itself in these cases. The parties are currently engaged in discovery.

CIGNA Corporation securities litigation. During the fourth quarter of 2006, CIGNA reached an agreement to resolve claims filed in federal court in 2002 against former and current officers and member of the Board of Directors on behalf of a class of CIGNA shareholders. The settlement, which specifies $93 million to be paid to the plaintiffs, was preliminarily approved by the U.S. District Court for the Eastern District of Pennsylvania on January 25, 2007. A final fairness hearing before the Court is expected to be held on April 27, 2007 with final approval expected shortly thereafter. Additionally, the settlement is dependent upon a certain level of class participation. In connection with the settlement agreement, CIGNA recorded an after-tax charge of $25 million ($38 million pre-tax). The charge includes certain costs to defend and is net of expected insurance recoveries.

In addition, CIGNA and certain of its current and former Directors have reached a separate settlement with the Plaintiffs in the related derivative action. Under that settlement, CIGNA’s insurers will deposit and apportion, on behalf of the individual defendants, $6 million of the aforementioned $93 million class action settlement, and have agreed to make a payment of not more than $720,000 for Plaintiff’s attorney’s fees subject to court approval. On January 25, 2007, the U.S. District Court for the Eastern District of Pennsylvania preliminarily approved the settlement and set a hearing on final approval on April 27, 2007. CIGNA expects final approval shortly thereafter.

Amara cash balance pension plan litigation. Plaintiffs representing CIGNA Pension Plan participants affected by the 1998 conversion to a cash balance formula filed a class action lawsuit against CIGNA and the CIGNA Pension Plan in December 2001. The plaintiffs allege, various ERISA violations including, among other things, that the Plan’s cash balance formula discriminates against older employees; the conversion resulted in a wear away period (during which the pre-conversion accrued benefit exceeded the post-conversion benefit); and these conditions are not adequately disclosed in the Plan. A non-jury trial began on September 11-15, 2006. Due to the court’s schedule, the proceedings were adjourned and then the trial was completed on January 25, 2007. The judge has ordered the parties to submit post-trial briefs in advance of closing arguments to be held June 4, 2007.

Run-off reinsurance litigation. In connection with CIGNA’s run-off reinsurance operations described in Note 8, CIGNA purchased extensive retrocessional reinsurance for its Unicover contracts and also for some other segments of its non-Unicover business. CIGNA is appealing in court an adverse award in a retrocessional

enforcement arbitration. A hearing on that appeal is scheduled for March 13-14, 2007. In addition, CIGNA recently commenced another retrocessional enforcement arbitration. Other disputes concerning these retrocessional contracts have been substantially resolved or settled.

CIGNA is routinely involved in numerous claims, lawsuits, regulatory and IRS audits, investigations and other legal matters arising, for the most part, in the ordinary course of 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

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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.

92

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 consolidated financial statements and of its internal control over financial reporting as of December 31, 2006, 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, 2006 and December 31, 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006 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, 2006 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, 2006, 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 28, 2007

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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, 2006 and 2005. 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
2006
Total revenues	$	4,107		$	4,098		$	4,137		$	4,205
Income from continuing operations before income taxes		528			408			446			349
Net income		352			273			298			232	1
Net income per share:
Basic		2.93			2.37			2.80			2.32
Diluted		2.87			2.33			2.75			2.28
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	2		720	3		259	4		210	5
Net income per share:
Basic		3.34			5.58			2.04			1.71
Diluted		3.28			5.48			2.00			1.67
Stock and Dividend Data
2006
Price range of common stock — high	$	133.77		$	133.11		$	119.50		$	132.64
— low	$	109.58		$	88.05		$	91.05		$	114.21
Dividends declared per common share	$	0.025		$	0.025		$	0.025		$	0.025
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	$	0.025		$	0.025		$	0.025		$	0.025

⁽¹⁾ The fourth quarter of 2006 includes an after-tax charge of $25 million related to the settlement of the shareholder class action litigation and an after-tax charge of $23 million related to CIGNA’s expense reduction initiatives.

⁽²⁾ 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.

⁽³⁾ 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.

⁽⁴⁾ 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.

⁽⁵⁾ 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.

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Performance Graph

The following graph, which covers the five-year period ending December 29, 2006, compares the cumulative total shareholder return (assuming reinvestment of dividends) on CIGNA’s common stock with the cumulative total shareholder return on:

(i) the Standard and Poor’s (S&P) 500 Index and

(ii) a weighted average of the S&P Managed Health Care, Life & Health Insurance Indexes.

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EX-21

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

Listed below are subsidiaries of CIGNA Corporation as of December 31, 2006 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. (Maryland)

(9)    CIGNA Dental Health of Missouri, Inc. (Missouri)

(10)   CIGNA Dental Health of New Jersey, Inc. (New Jersey)

(11)  CIGNA Dental Health of North Carolina, Inc. (North Carolina)

(12)  CIGNA Dental Health of Ohio, Inc. (Ohio)

(13)  CIGNA Dental Health of Pennsylvania, Inc. (Pennsylvania)

(14)  CIGNA Dental Health of Texas, Inc. (Texas)

(15)  CIGNA Dental Health of Virginia, Inc. (Virginia)

(16)  CIGNA Dental Health Plan of Arizona, Inc. (Arizona)

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)CareAllies, LLC (Delaware)

(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 non-affiliate)

(2)LINA Life Insurance Company of Korea (Korea)

(3)Linatex, Inc. (Delaware)

J.Tel-Drug, Inc. (South Dakota)

K.vielife Holdings Limited (United Kingdom)

II.CIGNA Global Holdings, Inc. (Delaware)

A.CIGNA International Marketing (Thailand) Limited (Thailand) (99.98% with balance owned by affiliates)

B.CIGNA Global Reinsurance Company, Ltd. (Bermuda)

(1)CIGNA Holdings Overseas, Inc. (Delaware)

(a)CIGNA Apac Holdings Limited (New Zealand)

(i) CIGNA Hong Kong Holdings Company Limited (Hong Kong)

(a) CIGNA Worldwide General Insurance Company Limited (Hong Kong)

(b) CIGNA Worldwide Life Insurance Company Limted (Hong Kong)

(ii)CIGNA Life Insurance New Zealand Limited (New Zealand)

(iii)CIGNA Taiwan Life Insurance Company Limited (New Zealand)

(b) CIGNA Europe Insurance Company S.A.-N.V. (Belgium) (99.99% with balance owned by an affiliate)

(c)   CIGNA European Services (UK) Limited (United Kingdom)

(d)   CIGNA Life Insurance Company of Europe S.A.- N.V. (Belgium) (99.99% with balance owned by an affiliate)

 (e)   Empresa Guatemalteca CIGNA de Seguros, Sociedad Anonima (Guatemala)

(97.43% with balance owned by non-affiliates)

(f)CIGNA Seguradora S.A. (Brazil) (99.92% 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)RHP Thailand Limited (Thailand)

(i)KDM (Thailand) Limited (Thailand)

(a) CIGNA Insurance Public Company Limited (Thailand)

(2)CIGNA Worldwide Insurance Company (Delaware)

(a)    PT. Asuransi CIGNA (Indonesia) (80% with balance owned by non-affiliate)

(b) CIGNA Global Insurance Company Limited (Guernsey) (99.99% with balance owned by affiliate)

C.CIGNA International Corporation (Delaware)

D.CIGNA International Services, Inc. (Delaware)

III.CIGNA Investment Group, Inc. (Delaware)

A.CIGNA International Finance Inc. (Delaware)

(1)CIGNA International Investment Advisors, Ltd. (Delaware)

           (a)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 (Nos. 333-136704 and 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 28 , 2007 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 28, 2007 relating to the financial statement schedules, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers, LLP

Philadelphia, Pennsylvania

February 28, 2007

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 28, 2007	/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 28, 2007	/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, 2006 (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 28, 2007

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, 2006 (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 28, 2007