INDEX

Introduction                            43
Consolidated Results of Operations      46
Critical Accounting Estimates           49
Segment Reporting
Health Care                             54
Disability and Life                     59
International                           60
Run-off Reinsurance                     62
Other Operations                        65
Corporate                               66
Discontinued Operations                 66
Industry Developments and Other Matters 67
Liquidity and Capital Resources         67
Investment Assets                       73
Market Risk                             76
Cautionary Statement                    78

INTRODUCTION
In this filing and in other marketplace communications, CIGNA Corporation and its subsidiaries (the Company) make certain forward-looking statements relating to the Company's financial condition and results of operations, as well as to trends and assumptions that may affect the Company. Generally, forward-looking statements can be identified through the use of predictive words (e.g., "Outlook for 2009"). Actual results may differ from the Company's predictions. Some factors that could cause results to differ are discussed throughout Management's Discussion and Analysis (MD&A), including in the Cautionary Statement beginning on page 78. The forward-looking statements contained in this filing represent management's current estimate as of the date of this filing. Management does not assume any obligation to update these estimates.
Certain reclassifications have been made to prior period amounts to conform to the presentation of 2008 amounts.
Overview
The Company constitutes one of the largest investor-owned health service 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. In addition, the Company has an international operation that offers life, accident and supplemental health insurance products as well as international health care products and services to businesses and individuals in selected markets. The Company also has certain inactive businesses, including a Run-off Reinsurance segment.
Ongoing Operations
The Company generates revenues, net income and cash flow from ongoing operations by:
• maintaining and growing its customer base;
• charging prices that reflect emerging experience;
• investing available cash at attractive rates of return for appropriate durations; and
• effectively managing other operating expenses.

The Company's ability to increase revenue, net income and operating cash flow is directly related to its ability to address broad economic and industry factors and execute its strategic initiatives, the success of which is measured by certain key factors as discussed below.

Key factors affecting the Company's results from ongoing operations include:
• the ability to profitably price products and services at competitive levels;
• the volume of customers served and the mix of products and services purchased by those customers;
• the ability to cross sell its various health and related benefit products;
• the relationship between other operating expenses and revenue; and
• the effectiveness of the Company's capital deployment initiatives.

Run-off Operations
Effectively managing the various exposures of its run-off operations is important to the Company's ongoing profitability, operating cash flows and available capital. The results are influenced by a range of economic factors, especially movements in equity markets and interest rates. Results are also influenced by behavioral factors, including partial surrender election rates for GMDB contracts and annuity election rates for GMIB contracts, as well as the collection of amounts recoverable from retrocessionaires. In order to manage these risks, the Company operates a GMDB equity hedge program to substantially reduce the impact of equity market movements. The Company actively monitors the performance of the hedge program, and evaluates the cost/benefit of hedging other risks. The Company also actively studies policyholder behavior experience and adjusts future expectations based on the results of the studies, as warranted. We also perform regular audits of the ceding companies to ensure treaty compliance that premiums received and claims paid are properly reflective of the underlying risks and to maximize the probability of subsequent collection of claims from retrocessionaires. Finally, the Company monitors the credit standing of the retrocessionaires.
Summary
The Company's overall results are influenced by a range of economic and other factors, especially:
• cost trends and inflation for medical and related services;
• utilization patterns of medical and other services;
• employment levels;
• the tort liability system;
• developments in the political environment both domestically and internationally;
• interest rates, equity market returns, foreign currency fluctuations and credit market volatility, including the availability and cost of credit in the future; and
• federal and state regulation.

The Company regularly monitors the trends impacting operating results from the above mentioned key factors and economic and other factors affecting its operations. The Company develops strategic and tactical plans designed to improve performance and maximize its competitive position in the markets it serves. The Company'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.
The Company is continuing to improve the performance of and profitably grow its ongoing businesses and manage the risks associated with the run-off reinsurance operations.
Acquisition of Great-West Healthcare
On April 1, 2008, the Company acquired the Healthcare division of Great-West Life and Annuity, Inc. ("Great-West Healthcare" or the "acquired business") through 100% indemnity reinsurance agreements and the acquisition of certain affiliates and other assets and liabilities of Great-West Healthcare. The purchase price was approximately $1.5 billion and consisted of a payment to the seller of approximately $1.4 billion for the net assets acquired and the assumption of net liabilities under the reinsurance agreement of approximately $0.1 billion. Great-West Healthcare primarily sells medical plans on a self-funded basis with stop-loss coverage to select and regional employer groups. Great-West Healthcare's offerings also include the following specialty products: stop-loss, life, disability, medical, dental, vision, prescription drug coverage, and accidental death and dismemberment insurance. The acquisition, which was accounted for as a purchase, was financed through a combination of cash and the issuance of both short and long-term debt. See Note 3 to the Consolidated Financial Statements for additional information.

Initiatives to Lower Operating Expenses
The Company has undertaken several initiatives to realign its organization and consolidate support functions in an effort to increase efficiency and responsiveness to customers and to reduce costs.
In 2008, the Company conducted a comprehensive review of its ongoing businesses with an emphasis on reducing operating expenses in the Health Care segment. As a result of the review, during the fourth quarter of 2008, the Company committed to a plan to reduce operating costs in order to meet the challenges and opportunities presented by the current economic environment. The Company anticipates the plan will be substantially complete by the end of 2009. As a result, the Company recognized in other operating expenses a total charge of $55 million pre-tax ($35 million after-tax), which included $44 million pre-tax ($28 million after-tax) for severance and other related costs resulting from reductions of approximately 1,100 positions in its workforce and $11 million pre-tax ($7 million after-tax) resulting from consolidation of facilities. The Company expects to pay $53 million in cash related to this charge, most of which will occur in 2009. The Health Care segment reported $44 million pre-tax ($27 million after-tax) of the total charge. The remainder was reported as follows: Disability and Life: $3 million pre-tax ($2 million after-tax), and International: $8 million pre-tax ($6 million after-tax). As a result of these actions, the Company expects annualized after-tax savings of approximately $70 million, a portion of which is expected to be realized in 2009.

CONSOLIDATED RESULTS OF OPERATIONS

(In millions)
Financial Summary                                         2008            2007            2006

Premiums and fees                                       $ 16,203        $ 15,008        $ 13,641
Net investment income                                      1,063           1,114           1,195
Mail order pharmacy revenues                               1,204           1,118           1,145
Other revenues                                               801             368             346
Realized investment gains (losses)                          (170 )            15             220

Total revenues                                            19,101          17,623          16,547
Benefits and expenses                                     18,723          15,992          14,816

Income from continuing operations before taxes               378           1,631           1,731
Income taxes                                                  90             511             572

Income from continuing operations                            288           1,120           1,159
Income (loss) from discontinued operations, net of
taxes                                                          4              (5 )            (4 )

Net income                                              $    292        $  1,115        $  1,155

Realized investment gains (losses), net of taxes        $   (110 )      $     10        $    145

Special Items
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, presented below are special items, which management
believes are not representative of the underlying results of operations.


SPECIAL ITEMS                                                      Pre-Tax          After-Tax
                                                                   Benefit           Benefit
(In millions)                                                     (Charge)          (Charge)

2008

Charges related to litigation matters                             $    (117 )      $       (76 )
Cost reduction charge                                                   (55 )              (35 )

Total                                                             $    (172 )      $      (111 )

2007

Completion of IRS examination                                     $       -        $        23

2006

Charge associated with settlement of shareholder litigation       $     (38 )      $       (25 )
Cost reduction charge                                                   (37 )              (23 )

Total                                                             $     (75 )      $       (48 )

Special items for 2008 included a cost reduction charge (see the Introduction section of the MD&A beginning on page 43), a litigation matter related to the CIGNA Pension Plan (see Note 22 to the Consolidated Financial Statements for additional information) reported in Corporate and charges related to certain other litigation matters, which are reported in the Health Care segment. The special item for 2007 consisted of previously unrecognized tax benefits resulting from the completion of the IRS examination for the 2003 and 2004 tax years.
Special items for 2006 consisted of:
• a charge associated with the settlement of the shareholder class action lawsuit brought against the Company. This charge included certain costs to defend and was net of expected insurance recoveries; and
• a charge for severance costs resulting from a review of staffing levels in the Health Care operations and in supporting areas.

Overview of 2008 Consolidated Results of Operations Income from continuing operations for the year ended December 31, 2008 declined significantly compared with 2007, as a result of the following:
• The Run-off Reinsurance segment reported substantial losses in 2008, primarily due to losses in the guaranteed minimum income benefits (GMIB) and guaranteed minimum death benefits (GMDB) businesses, reflecting the deterioration in the financial markets and also, for GMIB, the effect of adopting Statement of Financial Accounting Standards No. (SFAS No.) 157. See the Run-off Reinsurance section of the MD&A beginning on page 62 for additional information.
• The Company reported significant net realized investment losses in 2008 primarily due to impairments caused largely by the deterioration in the financial markets. These losses were partially offset by gains on the sale of real estate. See the Investment Assets section of the MD&A beginning on page 73 for more information.
• The Company's results in 2008 were also negatively affected by the special charges for litigation and cost reduction matters discussed beginning on page 46.

These factors were partially offset by higher segment earnings in each of the Company's ongoing operating segments (Health Care, Disability and Life, and International).

Overview of 2007 Consolidated Results of Operations Excluding the special items discussed above, income from continuing operations decreased in 2007, compared with 2006, principally reflecting lower realized investment gains primarily due to lower gains from sales of equity interests in real estate limited liability entities of $145 million.
These factors were partially offset by higher earnings in the Health Care (see page 54), Disability and Life (see page 59), International (see page 60) and Run-off Reinsurance (see page 62) segments. Outlook for 2009
The Company expects 2009 income from continuing operations, excluding realized investments results, the results of the GMIB business, and special items, to be higher than 2008 due to overall earnings growth in the ongoing operating segments, as well as lower losses in the Run-off Reinsurance segment. This outlook includes an assumption that results of the GMDB business will be approximately break-even for full-year 2009. This assumption reflects management's view that the long-term reserve assumptions are appropriate and that equity market conditions and volatility will return to more normal levels in 2009. The Company's outlook is subject to the factors cited in the Cautionary Statement and the sensitivities discussed in the Critical Accounting Estimates section of the MD&A on pages 49 through 53. If the unfavorable equity market and interest rate movements continue, the Company could experience additional losses related to the GMDB business.
Information is not available for management to reasonably estimate the future results of the GMIB business, realized investment gains (losses), or to identify or reasonably estimate special items in 2009. However, if unfavorable equity market and interest rate movements continue, the Company could also experience additional losses related to the GMIB business and investment impairments. Potential losses related to the GMDB and GMIB businesses, as well as investment impairments, could adversely impact the Company's consolidated results of operations and financial condition, and could reduce the capital of the Company's insurance subsidiaries as well as their dividend paying capabilities. Revenues
Total revenue increased by 8% in 2008, compared with 2007; and 7% in 2007 compared with 2006. Changes in the components of total revenue are described more fully below.
Premiums and Fees
Premiums and fees increased by 8% in 2008, compared with 2007 reflecting the impact of the acquired business, growth in the Disability and Life segment, as well as growth and rate increases in the International segment. See segment reporting discussions for additional detail and drivers.

Premiums and fees increased 10% in 2007, compared with 2006, primarily attributable to higher specialty revenues and growth in medical membership as well as strong renewal pricing on existing business in the Health Care segment and strong business growth in the Disability and Life and International segments.
Net Investment Income
Net investment income decreased 5% in 2008, compared with 2007 primarily due to lower yields driven by declines in short-term interest rates, commercial mortgage pre-payment fees, and income from security partnerships. Net investment income decreased 7% in 2007. This decrease was primarily attributable to lower average assets due to share repurchase activity and a decline in the Health Care segment average invested assets resulting from:
• a shift in business from guaranteed cost products to administrative services only (ASO) products; and
• pre-funding of Medicare Part D claims.

Mail Order Pharmacy Revenues
Mail order pharmacy revenues increased 8% in 2008, compared with 2007 due to increased script volume and rate increases.
Mail order pharmacy revenues in 2007 were comparable to 2006. Other Revenues
Excluding the impact of the futures contracts associated with the GMDB equity hedge program, Other revenues increased 17% in 2008, compared with 2007, primarily reflecting the impact of the acquired business. In 2008, the Company reported gains of $333 million associated with the GMDB equity hedge program, compared with losses of $32 million in 2007. The gains in 2008 primarily reflect the decline in stock market values.
Excluding the impact of the GMDB equity hedge program, Other revenues decreased 10% in 2007, compared with 2006 primarily due to lower revenues from the disability and workers compensation case management business reported in the Disability and Life segment. The Company reported losses on futures contracts associated with the GMDB equity hedge program of $32 million in 2007, compared with losses of $96 million in 2006. The decline in losses in 2007 primarily reflects lower stock market appreciation compared with 2006. Realized Investment Results
Realized investment results in 2008 were lower than 2007, primarily due to higher losses associated with asset write-downs and increases in valuation allowances primarily due to higher interest rates and credit losses resulting from current economic conditions. In addition, the Company had higher losses on sales of fixed maturities and equity securities. These losses were partially offset by higher gains on sales of real estate investments held in joint ventures. See Note 13 to the Consolidated Financial Statements for additional information.
Realized investment gains (losses) were lower in 2007, compared with 2006, primarily due to sales of equity interests in real estate limited liability entities in 2006.

CRITICAL ACCOUNTING ESTIMATES
The preparation of consolidated 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 consolidated 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 the Company'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 the Company'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 the Company'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 goodwill, 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 the Company's consolidated financial statements are appropriate. However, if actual experience differs from the assumptions used in estimating amounts reflected in the Company's consolidated financial statements, the resulting changes could have a material adverse effect on the Company's consolidated results of operations, and in certain situations, could have a material adverse effect on the Company's liquidity and financial condition.
See Note 2 to the Consolidated Financial Statements for further information on significant accounting policies that impact the Company.

Balance Sheet Caption /                   Assumptions / Approach Used         Effect if Different Assumptions Used
Nature of Critical Accounting Estimate

Future policy benefits -                  The Company estimates these         Current assumptions used to estimate
   Guaranteed minimum death benefits      liabilities based on assumptions    these liabilities are detailed in
                                          for lapse, partial surrender,       Note 7 to the Consolidated Financial
These liabilities are estimates of the    mortality, interest rates (mean     Statements. If an unfavorable change
present value of net amounts expected     investment performance and          were to occur to those assumptions,
to be paid, less the present value of     discount rate), and volatility.     the approximate after-tax decrease
net future premiums expected to be        These assumptions are based on      in net income would be as follows:
received. The amounts to be paid          the Company's experience and
represent the excess of the guaranteed    future expectations over the        •   10% increase in mortality rates
death benefit over the values of          long-term period. The Company       - $85 million
contractholders' accounts. The death      monitors actual experience to       •   10% decrease in lapse rates -
benefit coverage in force at              update these estimates as           $30 million
December 31, 2008 (representing the       necessary.                          •  10% increase in election rates
amount payable if all of approximately                                        for future partial surrenders -
650,000 contractholders had died as of    Lapse refers to the full            $10 million
that date) was approximately              surrender of an annuity prior to    •   50 basis point decrease in
$11 billion.                              a contractholder's death.           interest rates:
                                                                              •   Mean Investment Performance -
Liabilities for future policy benefits    Partial surrender refers to the     $35 million
for these contracts as of December 31     fact that most contractholders      •   Discount Rate - $35 million
were as follows (in millions):            have the ability to withdraw        •   10% increase in volatility -
                                          substantially all of their          $15 million
•   2008 - $1,609                         mutual fund investments while
•   2007 - $  848                         retaining any available death       As of December 31, 2008, if
                                          benefit coverage in effect at       contractholder account values
                                          the time of the withdrawal. Once    invested in underlying equity mutual
                                          a partial surrender is made, the    funds declined by 10% due to equity
                                          liability increases reflecting      market performance, the after-tax
                                          lower future assumed premiums, a    decrease in net income resulting
                                          lower likelihood of lapsation,      from an increase in the provision
                                          and a lower likelihood of           for partial surrenders would be
                                          account values recovering           approximately $25 million.
                                          sufficiently to reduce the death
                                          benefit exposure in future          As of December 31, 2008, if
                                          periods. These effects are not      contractholder account values
                                          covered by the Company's GMDB       invested in underlying bond/money
                                          equity hedge program. Market        market mutual funds declined by 10%
                                          declines could expose the           due to bond/money market
                                          Company to higher amounts of        performance, the after-tax decrease
                                          death benefit exposure that can     in net income resulting from an
                                          be retained by contractholders      increase in the provision for
                                          subsequent to a significant         partial surrenders and an increase
                                          partial surrender and to higher     in unhedged exposure would be
                                          election rates of future partial    approximately $50 million.
                                          surrenders. Thus, if equity
                                          markets decline, the Company's      The amounts would be reflected in
                                          liability for partial surrenders    the Run-off Reinsurance segment.
                                          increases and there is no
                                          corresponding offset from the
                                          hedge program. The election rate
                                          for expected future partial
                                          surrenders is updated quarterly
                                          based on emerging experience.

                                          Interest rates include both
                                          (a) the mean investment
                                          performance assumption
                                          considering the Company's GMDB
                                          equity hedge program which
                                          reflects the average short-term
                                          interest rate to be earned over
. . .