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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

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)

One Liberty Place, 1650 Market Street
Philadelphia, Pennsylvania 19192
(Address of principal executive offices) (Zip Code)

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

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

        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

As of September 30, 2002, 139,385,613 shares of the issuer’s common stock were outstanding.

CIGNA CORPORATION

INDEX

As used herein, CIGNA refers to one or more of CIGNA Corporation and its consolidated subsidiaries.

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements

CIGNA CORPORATION
CONSOLIDATED INCOME STATEMENTS
(In millions, except per share amounts)

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

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CIGNA CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)

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

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CIGNA CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND CHANGES IN
  SHAREHOLDERS’ EQUITY
(In millions)

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

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CIGNA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

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

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CIGNA CORPORATION
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

The consolidated financial statements include the accounts of CIGNA Corporation and all significant subsidiaries, 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 generally accepted accounting principles (GAAP).

The interim financial statements are unaudited but include all adjustments (consisting of normal recurring adjustments) necessary, in the opinion of management, for a fair statement of financial position and results of operations for the period reported. The interim consolidated financial statements and notes should be read in conjunction with the Consolidated Financial Statements and Notes in CIGNA’s 2001 Annual Report to Shareholders and Form 10-K for the year ended 2001.

The preparation of interim financial statements necessarily relies heavily on estimates. This and certain other factors, such as the seasonal nature of portions of the insurance business as well as competitive and other market conditions, call for caution in estimating results for the full year based on interim results of operations.

Certain reclassifications have been made to prior year amounts to conform to the 2002 presentation.

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

Goodwill and other intangible assets. As of January 1, 2002, CIGNA adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 eliminates the practice of amortizing goodwill through periodic charges to earnings and establishes a new methodology for reporting and measuring goodwill and other intangible assets.

In accordance with the standard, CIGNA ceased goodwill amortization on January 1, 2002. Although goodwill is no longer amortized, SFAS No. 142 requires goodwill to be evaluated for impairment at least annually, and written down through earnings when impaired. At implementation, CIGNA’s evaluation of its goodwill, based on discounted cash flow analyses, resulted in no impairment loss.

For comparative purposes, the following table adjusts net income and basic and diluted earnings per share for the third quarter and nine months ended September 30, 2001, as if goodwill amortization had ceased at the beginning of 2001. Goodwill amortization is attributable to the Employee Health Care, Life and Disability Benefits segment.

CIGNA’s other intangible assets are primarily purchased customer lists and provider contracts. As of January 1, 2002, the gross carrying value of CIGNA’s other intangible assets was $247 million and accumulated amortization was $91 million. These intangible assets will continue to be amortized through periodic charges to earnings.

Impairment of long-lived assets. As of January 1, 2002, CIGNA adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” At implementation, CIGNA reclassified real estate of $119 million to “held and used” that was previously “held for sale.” Adoption of SFAS No. 144 did not

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have a material effect on CIGNA’s consolidated financial statements.

Under the new standard, beginning on January 1, 2002, CIGNA accounts for real estate as follows:

Derivative instruments and hedging activities.  As of January 1, 2001, CIGNA implemented SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 133 requires companies to report derivatives on the balance sheet at fair value with changes in fair values reported in net income or accumulated other comprehensive income. SFAS No. 133 allows companies to use 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. At implementation, SFAS No. 133 had an immaterial effect on CIGNA’s consolidated financial statements.

In the third quarter of 2002, CIGNA implemented a program to substantially reduce the equity market exposures for certain specialty life reinsurance contracts by selling exchange-traded futures contracts. Under these futures contracts, CIGNA settles cash daily in the amount of the change in fair value of the contracts and fair value changes are reported in other revenues or other operating expenses. See Note 3 for further discussion.

In the third quarter of 2002, CIGNA recorded a pre-tax loss of $16 million in other operating expenses reflecting the net changes in fair value (due to stock market declines and changes in assumptions used) for certain other reinsurance contracts that guarantee minimum income benefits. See Note 12 for further discussion.

In the third quarter of 2001, CIGNA recorded a pre-tax loss of $10 million in other operating expenses reflecting the decline in fair value of forward starting swaps used to hedge a mortgage loan participation held for sale. The increase in fair value of the participation to be sold was $5 million pre-tax, reported in other revenues. CIGNA also recorded $9 million pre-tax in realized investment losses for embedded derivatives whose fair value is based on returns of underlying commercial loan pools.

The effects of other derivatives were not material to CIGNA’s consolidated results of operations, liquidity or financial condition for the third quarter or nine months of 2002 or 2001.

NOTE 3 – CHARGES FOR THE RUN-OFF REINSURANCE OPERATIONS

Losses on specialty life reinsurance contracts. In the third quarter of 2002, CIGNA recognized an after-tax charge of $720 million ($1.1 billion pre-tax) to strengthen reserves related to certain specialty life reinsurance contracts and the adoption of a program to substantially reduce equity market risks related to these 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.

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Death benefits under the annuity contracts reinsured by CIGNA are determined using various methods.

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 an annuitant’s contract 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 an annuitant’s death. Other annuity designs that CIGNA reinsured guarantee that the benefit received at death will be 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.

As a result of equity market declines and volatility early in the third quarter of 2002, CIGNA evaluated alternatives for addressing the exposures associated with these reinsurance contracts, considering the possibility of continued depressed equity market conditions, the potential effects of further 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 and, potentially, other instruments, which are expected to rise in value as the equity market declines and decline in value as the equity market rises.

The purpose of this program is to substantially reduce the adverse effects of potential future stock market declines on CIGNA’s liabilities for certain reinsurance contracts, as increases in liabilities under the reinsurance contracts from a declining market will be substantially offset by investment gains on the futures contracts. A consequence of this program is that it also substantially reduces the positive effects of potential future equity market increases, as reductions in liabilities under these contracts from improved equity market conditions will be substantially offset by investment losses on the futures contracts.

In order to achieve the objective of this program, CIGNA expects to adjust its futures contract position and possibly enter into other positions over time to reflect changing equity market levels and changes in the investment mix of the underlying variable annuity investments.

The $720 million after-tax charge consists of:

In the third quarter of 2002, CIGNA recorded a pre-tax gain of $300 million in other revenues to reflect the increase in fair value of futures contracts since the inception of the program. A corresponding expense reflecting the increase in liabilities for the specialty life reinsurance contracts is included in benefits, losses and settlement expenses.

CIGNA estimates its liabilities for this business using assumptions as to equity market returns and the volatility of the underlying equity and bond mutual fund investments, future investment yield, mortality and policy surrenders. If actual experience is different from the assumptions used in estimating these liabilities, a change in these liabilities could result. CIGNA had reserves for these liabilities of approximately $1.6 billion as of September 30, 2002, and approximately $300 million as of December 31, 2001.

As of September 30, 2002, the aggregate fair value of the underlying mutual fund investments of the

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variable annuities guaranteed by CIGNA was approximately $49 billion. The death benefit coverage in force as of that date (representing the amount that CIGNA would have to pay if all 1.5 million annuitants had died on that date) was approximately $26 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. The notional amount of the futures contract positions held by CIGNA at September 30, 2002, was $2.5 billion.

Other charges.  CIGNA also recognized an after-tax charge of $317 million ($408 million pre-tax) in the third quarter of 2002 for Unicover and other run-off reinsurance exposures, including London reinsurance business. For further information on these charges, see Note 10.

NOTE 4 – ACQUISITIONS AND DISPOSITIONS

Over the long term, CIGNA’s priorities for use of capital are internal growth, acquisitions and share repurchase. Given the capital needs of CIGNA’s principal subsidiary (Connecticut General Life Insurance Company) primarily resulting from the charges for the run-off reinsurance operations (see Note 3), CIGNA intends to retain capital and has suspended share repurchase. CIGNA conducts regular strategic and financial reviews of its businesses to ensure that its capital is used effectively. As a result of these reviews, CIGNA may acquire or dispose of assets, subsidiaries or lines of business. Significant transactions are described below.

Sale of Lovelace Health Systems. In July 2002, CIGNA entered into an agreement to sell the operations of Lovelace Health Systems, Inc., an integrated health care system located in New Mexico that includes a multi-specialty physician group practice, a hospital, family practice clinics and a health plan, for cash proceeds of approximately $235 million. Sale proceeds will be adjusted by changes in net assets through the closing for results of operations. The sale, which is subject to regulatory approval and other conditions to closing, is expected to be completed on or about January 1, 2003. The determination of the gain on sale will be affected by transaction costs and other adjustments.

In the third quarter of 2002, CIGNA increased reserves for a Medicare cost reporting matter associated with Lovelace (see Note 12) by $9 million after-tax ($14 million pre-tax).

Sales of interests in Japanese life insurance operation. In 2001, CIGNA sold portions of its interest in its Japanese life insurance operation to Yasuda Fire & Marine Insurance Company Ltd. as follows:

As a result of the January 2001 sale, CIGNA stopped consolidating the assets, liabilities, revenues and expenses of this operation and, until the November 2001 sale, accounted for its remaining interest under the equity method of accounting.

Sale of portions of U.S. life reinsurance business. In 2000, CIGNA sold its U.S. individual life, group life and accidental death reinsurance business for cash proceeds of approximately $170 million. The sale generated an after-tax gain of approximately $85 million, which was deferred because the sale was structured as an indemnity reinsurance arrangement.

In the second and third quarters of 2002 and in the second, third and fourth quarters of 2001, the acquirer entered into agreements with the reinsured parties, relieving CIGNA of any remaining obligations to those parties. As a result, CIGNA accelerated the recognition of $1 million after-tax of the deferred gain for the third quarter and $3 million after-tax for the nine months of 2002. CIGNA accelerated the recognition of $33 million after-tax for the third quarter and $55 million after-tax for the nine months of 2001. Excluding the accelerated gain recognition, CIGNA also recognized in the Run-off Reinsurance Operations segment, $2 million after-tax of the deferred gain for the third quarter and $8 million after-tax for the nine months of 2001, compared with less than $1 million after-tax for the third quarter and nine months of 2002. The remaining deferred gain as of September 30, 2002, was approximately $1 million after-tax.

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CIGNA has placed its remaining reinsurance businesses (including its accident, domestic health, international life and health, and specialty life reinsurance businesses) into run-off and has stopped underwriting new reinsurance business. See also Notes 3 and 10 for further discussions related to the Run-off Reinsurance Operations segment.

NOTE 5 - RESTRUCTURING PROGRAMS

Fourth quarter 2001 program. In the fourth quarter of 2001, CIGNA adopted a restructuring program primarily to consolidate existing health service centers into regional service centers. As a result, CIGNA recognized in operating expenses an after-tax charge of $62 million ($96 million pre-tax) in the Employee Health Care, Life and Disability Benefits segment. The after-tax charge consisted of $31 million of severance costs ($48 million pre-tax) and $31 million in real estate costs ($48 million pre-tax) related to vacating certain locations.

The severance charge reflected the expected reduction of approximately 3,100 employees. As a result of the consolidation of health service centers, CIGNA expects to hire approximately 1,100 employees, thereby resulting in a net reduction of approximately 2,000 employees under this program. As of September 30, 2002, 2,118 employees had been terminated under the program (817 employees were terminated in the third quarter of 2002). The real estate charges consisted of $37 million pre-tax related to vacating leased facilities, which are cash obligations pertaining to non-cancelable lease obligations and lease termination penalties. The charge also included $11 million pre-tax of non-cash asset write-downs. As of September 30, 2002, CIGNA paid $36 million related to severance and vacating leased facilities under this program ($13 million was paid in the third quarter of 2002).

CIGNA expects this restructuring program to be substantially completed during 2002. The table below indicates CIGNA’s restructuring activity (pre-tax) for this program:

Additional restructuring activities. In light of operational issues and current operating results, CIGNA is currently undertaking a review of its health care operations with the objective of attaining additional operational efficiencies and achieving additional cost savings. This review is not complete but is expected to result in the elimination of certain employee positions and the closing of certain offices. CIGNA has not yet finalized the amount of costs that will be incurred in connection with implementing any plans, or the amount of related cost savings, although CIGNA does not expect to incur costs in excess of $100 million after-tax. CIGNA expects to complete this review and adopt related restructuring plans prior to the end of 2002.

NOTE 6 - EVENTS OF SEPTEMBER 11, 2001

As a result of claims arising from the events of September 11, 2001, CIGNA recorded after-tax charges of $25 million in the third quarter of 2001. These charges, which are net of reinsurance, primarily related to life, accident and disability claims and, to a lesser extent, higher utilization of managed behavioral health services. These charges were reported by segment as follows: Employee Health Care, Life and Disability Benefits, $20 million; Employee Retirement Benefits and Investment Services, $3 million; and Run-off Reinsurance Operations, $2 million.

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NOTE 7 - INVESTMENTS

Realized Investment Gains and Losses

Realized gains and losses on investments, excluding policyholder share, were as follows:

Fixed Maturities and Equity Securities

Sales of available-for-sale fixed maturities and equity securities, including policyholder share, were as follows:

NOTE 8 - ACCUMULATED OTHER COMPREHENSIVE INCOME

Changes in accumulated other comprehensive income (which exclude policyholder share) were as follows:

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NOTE 9 - EARNINGS (LOSS) PER SHARE

Basic and diluted earnings (loss) per share are computed as follows:

Common shares held as Treasury shares were 133,242,342 as of September 30, 2002, and 126,237,140 as of September 30, 2001.

NOTE 10 - REINSURANCE RECOVERABLES

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.

Individual life and annuity reinsurance. CIGNA had a reinsurance recoverable of $5.6 billion at September 30, 2002, and December 31, 2001, from Lincoln National Corporation that arose from the 1998 sale of CIGNA’s individual life insurance and annuity business to Lincoln through an indemnity reinsurance arrangement.

Unicover and London reinsurance. The Run-off Reinsurance Operations include an approximate 35% share in the primary layer of a workers’ compensation reinsurance pool, which was formerly managed by Unicover Managers, Inc. The pool had obtained reinsurance for a significant portion of its exposure to claims, but disputes had arisen regarding this reinsurance (also known as retrocessional) coverage. The retrocessionaires commenced arbitration in the United States against Unicover and the pool members, seeking rescission or damages. An arbitration ruling was issued in October 2002 related to this matter.

The Run-off Reinsurance Operations also include reinsurance contracts assumed by CIGNA in the London market. CIGNA obtained reinsurance in the London market for a significant portion of the claims under these contracts. Some of these London market retrocessionaires have disputed the validity of their contracts with CIGNA and arbitration over some of these disputes has commenced.

Based on the outcome of the Unicover arbitration and a review of exposures for the run-off reinsurance operations, including an assessment of London market retrocessional disputes and exposures, CIGNA recorded an after-tax charge of $317 million ($408 million pre-tax) in the third quarter of 2002. See Note 12 for more information.

_________________

* Because of the net loss for the third quarter and nine months ended September 30, 2002, the number of shares used to compute loss per share does not reflect the dilution caused by stock options and restricted stock grants of approximately 1.1 million for the third quarter and 1.7 million for the nine months ended September 30, 2002.

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Other reinsurance. CIGNA could have losses if reinsurers fail to indemnify CIGNA on other reinsurance arrangements, whether because of reinsurer insolvencies or contract disputes. However, management does not expect charges for other unrecoverable reinsurance to have a material adverse effect on CIGNA’s consolidated results of operations, liquidity or financial condition.

Effects of reinsurance. In CIGNA’s consolidated income statements, premiums and fees were net of ceded premiums, and benefits, losses and settlement expenses were net of reinsurance recoveries, in the following amounts:

NOTE 11 - SEGMENT INFORMATION

Operating segments generally reflect groups of related products, but the International Life, Health and Employee Benefits segment is based on geography. CIGNA measures the financial results of its segments using operating income (net income excluding after-tax realized investment results).

As a result of losses on certain specialty life reinsurance contracts recognized in the third quarter of 2002 (see Note 3), CIGNA placed the run-off reinsurance operations (previously reported in Other Operations) into a separate reporting segment in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” Prior periods have been reclassified to conform to this presentation.

Summarized segment financial information was as follows:

As discussed in Note 2, CIGNA ceased goodwill amortization as of January 1, 2002, pursuant to SFAS No. 142. Goodwill amortization was $12 million after-tax for the third quarter of 2001 and $36 million after-tax for the nine months ended September 30, 2001, and was attributable to the Employee Health Care, Life and Disability Benefits segment.

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NOTE 12 - CONTINGENCIES AND OTHER MATTERS

Financial Guarantees

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 written in separate accounts. CIGNA establishes an additional liability if management believes that CIGNA will be required to make a payment under these guarantees, which include the following:

CIGNA does not expect that these guarantees will have a material adverse effect on CIGNA’s consolidated results of operations, liquidity or financial condition.

CIGNA guaranteed $42 million of industrial revenue bond issues as of September 30, 2002, and December 31, 2001, which will mature in 2007. If the issuers default, CIGNA will be required to make periodic payments based on the original terms of the bonds. Unlike many debt obligations, an event of default under these bonds will not cause the scheduled principal payments to be due immediately.

Specialty Life Reinsurance Contracts

The Run-off Reinsurance Operations include certain specialty life reinsurance contracts that guarantee minimum death benefits based on unfavorable changes in variable annuity account values. In the third quarter of 2002, CIGNA recognized an after-tax charge of $720 million ($1.1 billion pre-tax) to strengthen reserves related to these contracts and the adoption of a program to substantially reduce equity market risks related to these contracts. See Note 3 for further information.

CIGNA has also written reinsurance contracts with issuers of variable annuity contracts that provide annuitants with certain guarantees related to minimum income benefits. When annuitants elect

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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 has purchased reinsurance from third parties which covers 80% of the exposures of these contracts. CIGNA estimates the fair value of the assets and liabilities associated with these contracts using assumptions as to equity market returns, volatility of the underlying equity and bond mutual fund investments, treasury rates, future investment yield, mortality, annuity election rates and policy surrenders. As of September 30, 2002, CIGNA had liabilities of $100 million related to these contracts and amounts recoverable from reinsurers of $80 million. See Note 2 for further information.

Regulatory and Industry Developments

CIGNA’s businesses are subject to a changing social, economic, legal, legislative and regulatory environment. Some current issues that may affect CIGNA’s businesses include:

Health care regulation. Federal and state legislatures, administrative agencies and courts continue efforts to increase regulation of the health care industry and change its operational practices. Regulatory and operational changes could have an adverse effect on CIGNA’s health care operations if they reduce marketplace competition and innovation or result in increased medical or administrative costs without improving the quality of care. Debate at the federal level over “managed care reform” and “patients’ bill of rights” legislation, focusing on questions regarding liability, is expected to continue.

Privacy regulations under the Health Insurance Portability and Accountability Act (HIPAA) of 1996 cover all aspects of the health care delivery system, and address the use and disclosure of individually identifiable health care information. Compliance with the privacy regulations is required by April 2003. In addition to the privacy regulations, HIPAA establishes national electronic transaction standards, which apply to health insurers, providers and other covered entities. They are intended to improve the efficiency and effectiveness of the nation’s health care system by encouraging the widespread use of electronic data interchange. CIGNA must implement these standards by October 2003.

Other HIPAA regulations, which are expected to be issued soon, include standards to protect the security of health data as well as the assignment of a unique national identifier for each health plan and provider. Regulations requiring a unique national identifier for employer groups were issued in May 2002. CIGNA has commenced significant systems enhancements, training and administrative efforts to satisfy these requirements. Incremental technology and business-related expenses associated with CIGNA’s compliance efforts are estimated to be approximately $20 million after-tax for the fourth quarter of 2002, and approximately $60 million after-tax for fiscal 2003. There can be no assurance that the effect of these regulations or the result of CIGNA’s compliance efforts will not adversely affect CIGNA’s businesses.

Other possible regulatory changes that could have an adverse effect on CIGNA’s health care operations include:

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The health care industry is under increasing scrutiny by various state and federal government agencies and may be subject to government efforts to bring criminal actions in circumstances that would previously have given rise only to civil or administrative proceedings.

Tax benefits for corporate life insurance. In 1996, Congress passed legislation implementing a three-year phase-out period for tax deductibility of policy loan interest for most leveraged corporate life insurance products. As a result, management expects revenues and operating income associated with these products to decline. For the third quarter and nine months of 2002, revenues of $48 million and $172 million, and operating income of $12 million and $26 million were from products affected by this legislation.

Litigation and Other Legal Matters

CIGNA and several health care industry competitors were named as defendants in federal and state purported class action lawsuits. A federal court has certified a class of health care providers who allege violations under the Racketeer Influenced and Corrupt Organizations Act and ERISA. CIGNA and the other defendants have appealed that decision. The federal court denied class certification to health plan subscribers, and the subscribers have asked the court to reconsider that decision. An Illinois state court certified a class action lawsuit against CIGNA by health care providers alleging breach of contract and seeking increased reimbursements.

In the third quarter of 2002, CIGNA recognized a charge for the result of an arbitration ruling related to reinsurance (retrocessional) coverage of a workers’ compensation reinsurance pool. This charge also included a review of CIGNA’s exposures for the run-off reinsurance operations, including an assessment of London market retrocessional disputes and exposures. The underlying London market retrocessional disputes are not expected to be resolved for some time. CIGNA’s reserve balance is based on a current assessment of these matters, the outcomes of which could result in adjustments to CIGNA’s reserve. See also Note 10 for further discussion.

The U.S. Attorney’s Office for the Eastern District of Pennsylvania is investigating compliance with federal laws in connection with pharmaceutical companies’ marketing practices and their impact on prices paid by the government to pharmaceutical companies for products under federal health programs. As part of this investigation, CIGNA is responding to subpoenas concerning contractual relationships between pharmaceutical companies and CIGNA’s health care operations.

The Department of Justice and Office of Inspector General investigated the Medicare cost reporting practices of a subsidiary of CIGNA, Lovelace Health Systems, Inc., for the years 1990 through 1999. Medicare cost reports form the basis for reimbursements to Lovelace by the Centers for Medicare and Medicaid Services for Medicare-covered services Lovelace provides to eligible individuals. In the third quarter of 2002, CIGNA increased reserves for this matter by $9 million after-tax ($14 million pre-tax).

In October and November 2002, several purported class action lawsuits were filed in federal court against CIGNA and certain of its senior officers alleging securities law violations. In addition, the Securities and Exchange Commission notified CIGNA that it has opened an informal inquiry into matters relating to CIGNA.

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

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INTRODUCTION

In this filing and in other marketplace communications, CIGNA will make certain predictions relating to its operations. Generally, forward-looking statements can be identified through the use of predictive words (e.g., “Outlook for 2002 and 2003”). Actual results may differ from CIGNA’s predictions. CIGNA’s discussion of risk factors that could cause results to differ is summarized in the Cautionary Statement on page 35.

The following discussion addresses the financial condition of CIGNA as of September 30, 2002, compared with December 31, 2001, and its results of operations for the third quarter and nine months ended September 30, 2002, compared with the same periods last year. This discussion should be read in conjunction with Management’s Discussion and Analysis included in CIGNA’s 2001 Annual Report to Shareholders, to which the reader is directed for additional information.

The preparation of interim financial statements necessarily relies heavily on estimates. This and certain other factors, such as the seasonal nature of portions of the insurance business as well as competitive and other market conditions, call for caution in estimating results for the full year based on interim results of operations.

Charges for the Run-off Reinsurance Operations

In the third quarter of 2002, CIGNA recognized an after-tax charge of $720 million ($1.1 billion pre-tax) to strengthen reserves related to certain specialty life reinsurance contracts and the adoption of a program to substantially reduce equity market risks related to these contracts. CIGNA also recognized an after-tax charge of $317 million ($408 million pre-tax) in the third quarter of 2002 for Unicover and other run-off reinsurance exposures, including London reinsurance business. See the Run-off Reinsurance Operations segment beginning on page 27 for further information on these charges.

Acquisitions and Dispositions

Over the long term, CIGNA’s priorities for use of capital are internal growth, acquisitions and share repurchase. Given the capital needs of CIGNA’s principal subsidiary (Connecticut General Life Insurance Company) primarily resulting from the charges for the run-off reinsurance operations (see pages 27 through 29), CIGNA intends to retain capital and has suspended share repurchase. CIGNA conducts regular strategic and financial reviews of its businesses to ensure that its capital is used effectively. As a result of these reviews, CIGNA may acquire or dispose of assets, subsidiaries or lines of business. Significant transactions are described below.

Sale of Lovelace Health Systems. In July 2002, CIGNA entered into an agreement to sell the operations of Lovelace Health Systems, Inc., an integrated health care system located in New Mexico that includes a multi-specialty physician group practice, a hospital, family practice clinics and a health plan, for cash proceeds of approximately $235 million. Sale proceeds will be adjusted by changes in net assets through the closing for results of operations. The sale, which is subject to regulatory approval and other conditions to closing, is expected to be completed on or about January 1, 2003. The determination of the gain on

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sale will be affected by transaction costs and other adjustments.

In the third quarter of 2002, CIGNA increased reserves for a Medicare cost reporting matter associated with Lovelace (see page 20) by $9 million after-tax ($14 million pre-tax).

Sales of interests in Japanese life insurance operation. CIGNA sold a portion of its interest in its Japanese life insurance operation in January 2001 and sold its remaining interest in this operation in November 2001. See the International Life, Health and Employee Benefits section for further information.

Sale of portions of U.S. life reinsurance business. In 2000, CIGNA sold its U.S. individual life, group life and accidental death reinsurance business for cash proceeds of approximately $170 million. The sale generated an after-tax gain of approximately $85 million, which was deferred because the sale was structured as an indemnity reinsurance arrangement.

In the second and third quarters of 2002 and in the second, third and fourth quarters of 2001, the acquirer entered into agreements with the reinsured parties, relieving CIGNA of any remaining obligations to those parties. As a result, CIGNA accelerated the recognition of $1 million after-tax of the deferred gain for the third quarter and $3 million after-tax for the nine months of 2002. CIGNA accelerated the recognition of $33 million after-tax for the third quarter and $55 million after-tax for the nine months of 2001. Excluding the accelerated gain recognition, CIGNA also recognized in the Run-off Reinsurance Operations segment, $2 million after-tax of the deferred gain for the third quarter and $8 million after-tax for the nine months of 2001, compared with less than $1 million after-tax for the third quarter and nine months of 2002. The remaining deferred gain as of September 30, 2002, was approximately $1 million after-tax.

CIGNA has placed its remaining reinsurance businesses (including its accident, domestic health, international life and health, and specialty life reinsurance businesses) into run-off and has stopped underwriting new reinsurance business. See also the Run-off Reinsurance Operations segment beginning on page 27.

Restructuring Programs

Fourth quarter 2001 program. In the fourth quarter of 2001, CIGNA adopted a restructuring program primarily to consolidate existing health service centers into regional service centers. As a result, CIGNA recognized in operating expenses an after-tax charge of $62 million ($96 million pre-tax) in the Employee Health Care, Life and Disability Benefits segment. The after-tax charge consisted of $31 million of severance costs ($48 million pre-tax) and $31 million in real estate costs ($48 million pre-tax) related to vacating certain locations.

The severance charge reflected the expected reduction of approximately 3,100 employees. As a result of the consolidation of health service centers, CIGNA expects to hire approximately 1,100 employees, thereby resulting in a net reduction of approximately 2,000 employees under this program. As of September 30, 2002, 2,118 employees had been terminated under the program (817 employees were terminated in the third quarter of 2002). The real estate charges consisted of $37 million pre-tax related to vacating leased facilities, which are cash obligations pertaining to non-cancelable lease obligations and lease termination penalties. The charge also included $11 million pre-tax of non-cash asset write-downs. As of September 30, 2002, CIGNA paid $36 million related to severance and vacating leased facilities under this program ($13 million was paid in the third quarter of 2002).

CIGNA expects this restructuring program to be substantially completed during 2002. Cash outlays under this program are not expected to have a significant effect on CIGNA’s liquidity. The program is expected to result in net annual after-tax savings of $45-$55 million, reflecting the elimination of salary costs for terminated employees and lower facility costs, partially offset by salary costs for new employees in the regional service centers and higher expenses associated with technology improvement initiatives. CIGNA expects savings from the program to be fully realized beginning in 2003. As a result of additional technology enhancement expenses and other expenses associated with the restructuring program, CIGNA will not achieve significant savings in 2002 from this restructuring program.

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The table below indicates CIGNA’s restructuring activity (pre-tax) for this program:

Additional restructuring activities. In light of operational issues and current operating results, CIGNA is currently undertaking a review of its health care operations with the objective of attaining additional operational efficiencies and achieving additional cost savings (see page 23 for further discussion). This review is not complete but is expected to result in the elimination of certain employee positions and the closing of certain offices. CIGNA has not yet finalized the amount of costs that will be incurred in connection with implementing any plans, or the amount of related cost savings, although CIGNA does not expect to incur costs in excess of $100 million after-tax. CIGNA expects to complete this review and adopt related restructuring plans prior to the end of 2002.

Events of September 11, 2001

As a result of claims arising from the events of September 11, 2001, CIGNA recorded after-tax charges of $25 million in the third quarter of 2001. These charges, which are net of reinsurance, primarily related to life, accident and disability claims and, to a lesser extent, higher utilization of managed behavioral health services. These charges were reported by segment as follows: Employee Health Care, Life and Disability Benefits, $20 million; Employee Retirement Benefits and Investment Services, $3 million; and Run-off Reinsurance Operations, $2 million.

Significant Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make judgments, assumptions and estimates that affect amounts reported in the financial statements. The accounting policies considered most significant by management include CIGNA’s accounting policies pertaining to its investments, reinsurance recoverables, unpaid claims and claim expenses, and future policy benefits.

These accounting policies inherently require estimation and actual results could differ from those estimates. Also, changes in CIGNA’s financial and operating environment could influence the accounting estimates that support CIGNA’s financial statements. For a description of CIGNA’s significant accounting policies, see Management’s Discussion and Analysis and Note 2 to the Financial Statements in CIGNA’s 2001 Annual Report to Shareholders.

Regulatory and Industry Developments

CIGNA’s businesses are subject to a changing social, economic, legal, legislative and regulatory environment. Some current issues that may affect CIGNA’s businesses include:

Health care regulation. Federal and state legislatures, administrative agencies and courts continue efforts to increase regulation of the health care industry and change its operational practices. Regulatory and operational changes could have an adverse effect on CIGNA’s health care operations if they reduce marketplace competition and innovation or result in increased medical or administrative costs without improving the quality of care. Debate at the federal level over “managed care reform” and “patients’ bill of rights” legislation, focusing on questions regarding liability, is expected to continue.

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Privacy regulations under the Health Insurance Portability and Accountability Act (HIPAA) of 1996 cover all aspects of the health care delivery system, and address the use and disclosure of individually identifiable health care information. Compliance with the privacy regulations is required by April 2003. In addition to the privacy regulations, HIPAA establishes national electronic transaction standards, which apply to health insurers, providers and other covered entities. They are intended to improve the efficiency and effectiveness of the nation’s health care system by encouraging the widespread use of electronic data interchange. CIGNA must implement these standards by October 2003.

Other HIPAA regulations, which are expected to be issued soon, include standards to protect the security of health data as well as the assignment of a unique national identifier for each health plan and provider. Regulations requiring a unique national identifier for employer groups were issued in May 2002. CIGNA has commenced significant systems enhancements, training and administrative efforts to satisfy these requirements. Incremental technology and business-related expenses associated with CIGNA’s compliance efforts are estimated to be approximately $20 million after-tax for the fourth quarter of 2002, and approximately $60 million after-tax for fiscal 2003. There can be no assurance that the effect of these regulations or the result of CIGNA’s compliance efforts will not adversely affect CIGNA’s businesses.

Other possible regulatory changes that could have an adverse effect on CIGNA’s health care operations include:

The health care industry is under increasing scrutiny by various state and federal government agencies and may be subject to government efforts to bring criminal actions in circumstances that would previously have given rise only to civil or administrative proceedings.

Litigation and other legal matters. CIGNA and several health care industry competitors were named as defendants in federal and state purported class action lawsuits. A federal court has certified a class of health care providers who allege violations under the Racketeer Influenced and Corrupt Organizations Act and ERISA. CIGNA and the other defendants have appealed that decision. The federal court denied class certification to health plan subscribers, and the subscribers have asked the court to reconsider that decision. An Illinois state court certified a class action lawsuit against CIGNA by health care providers alleging breach of contract and seeking increased reimbursements.

In the third quarter of 2002, CIGNA recognized a charge for the result of an arbitration ruling related to reinsurance (retrocessional) coverage of a workers’ compensation reinsurance pool. This charge also included a review of CIGNA’s exposures for the run-off reinsurance operations, including an assessment of London market retrocessional disputes and exposures. The underlying London market retrocessional disputes are not expected to be resolved for some time. CIGNA’s reserve balance is based on a current assessment of these matters, the outcomes of which could result in adjustments to CIGNA’s reserve. See also pages 28 and 29 for further discussion.

The U. S. Attorney’s Office for the Eastern District of Pennsylvania is investigating compliance with federal laws in connection with pharmaceutical companies’marketing practices and their impact on prices paid by the government to pharmaceutical companies for products under federal health programs. As part of this investigation, CIGNA is responding to subpoenas concerning contractual relationships between

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pharmaceutical  companies and CIGNA’s health care operations.

The Department of Justice and Office of Inspector General investigated the Medicare cost reporting practices of a subsidiary of CIGNA, Lovelace Health Systems, Inc., for the years 1990 through 1999. Medicare cost reports form the basis for reimbursements to Lovelace by the Centers for Medicare and Medicaid Services for Medicare-covered services Lovelace provides to eligible individuals. In the third quarter of 2002, CIGNA increased reserves for this matter by $9 million after-tax ($14 million pre-tax).

In October and November 2002, several purported class action lawsuits were filed in federal court against CIGNA and certain of its senior officers alleging securities law violations. In addition, the Securities and Exchange Commission notified CIGNA that it has opened an informal inquiry into matters relating to CIGNA.

CIGNA is routinely involved in numerous lawsuits 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 12 to the Financial Statements.

Accounting Pronouncements

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

CONSOLIDATED RESULTS OF OPERATIONS

Operating Income (Loss)

CIGNA focuses on “operating income (loss)” to evaluate segment results. Operating income (loss) is defined as net income (loss) excluding after-tax realized investment results. Since operating income (loss) excludes the effects of realized gains and losses attributable to CIGNA’s investment portfolio, management believes it presents the underlying results of operations of CIGNA’s businesses. Operating income (loss) is not determined in accordance with GAAP and should not be viewed as a substitute for net income (loss) determined in accordance with GAAP. Other companies may define operating income (loss) differently than does CIGNA.

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The following table presents operating income (loss), as defined above, adjusted for certain nonrecurring items. These nonrecurring items are attributable to special circumstances not associated with normal operations and are identified in the table below. Management believes that results excluding these items, defined as adjusted operating income, represent an appropriate basis to assess the results of operations of CIGNA’s businesses.

As discussed in Note 2 to the Financial Statements, CIGNA adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets” and ceased goodwill amortization as of January 1, 2002. For comparative purposes, throughout this discussion CIGNA presents “adjusted operating income excluding goodwill amortization,” which adjusts 2001 adjusted operating income to exclude goodwill amortization.

Adjusted operating income excluding goodwill amortization decreased 27% for the third quarter and 10% for the nine months of 2002. These decreases were primarily attributable to:

Realized Investment Losses

The increase in realized investment losses for the third quarter of 2002 compared to the same period last year was primarily due to losses on sales of fixed maturities (compared to gains in the prior year), partially offset by lower impairments on fixed maturities, primarily collateralized debt obligations.

The increase in realized investment losses for the nine months of 2002 compared to the same period last year primarily reflects:

These losses were partially offset by lower impairments on investments in collateralized debt obligations. Further information regarding collateralized debt obligations is presented on page 33.

The weakness in certain sectors of the economy is likely to cause additional investment losses. Refer to “Investment Assets” on pages 33 and 34 for further information.

Recent Stock Market Declines

The performance of equity markets can have a significant effect on CIGNA’s businesses and recent declines in equity markets have had an adverse effect on CIGNA. See, for example, pages 27 and 28 for a discussion of the charge related to certain

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specialty life reinsurance contracts, which resulted from equity market declines. In addition, assets under management are a determinant of earnings for the retirement business, and a reduction in asset values reduces asset-based fees (see page 25).

Equity securities also comprise a key portion of the assets of CIGNA’s pension plans. CIGNA expects to increase its minimum pension liability in the fourth quarter of 2002 based on then-prevailing financial market conditions, including long-term interest rates and the value of pension plan assets. Based on recent financial market conditions, the increase in the minimum pension liability would have resulted in an after-tax charge to equity of approximately $600 million to $700 million. In addition, the reduced value of pension assets would result in an increase in annual pension expense of approximately $20 million after-tax in future years (based on the current value of pension assets).

Outlook for 2002 and 2003

Subject to the factors noted in the Cautionary Statement on page 35, management expects 2002 full year adjusted operating income to be lower than 2001 adjusted operating income of $1.1 billion. CIGNA also expects adjusted operating income in 2003 to be lower than adjusted operating income in 2002. This outlook for 2003 reflects lower earnings in the health care operations due to:

        Adjusted operating income excludes the following items:

EMPLOYEE HEALTH CARE, LIFE AND DISABILITY BENEFITS

Adjusted Operating Income

Adjusted operating income excluding goodwill amortization in 2001 decreased 26% for the third quarter and 6% for the nine months of 2002 compared with the same periods last year.

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CIGNA further separates this segment into Health Maintenance Organization (HMO) and Indemnity operations. HMO includes medical managed care and specialty health care operations such as managed behavioral health, medical cost and utilization management, managed dental, managed pharmacy programs, pharmaceutical fulfillment services and vision services. Indemnity includes medical and dental indemnity, and group disability, life and accident insurance operations.

Adjusted operating income excluding goodwill amortization in 2001 for the HMO and Indemnity operations was as follows:

HMO results excluding goodwill amortization in 2001 increased 7% for the third quarter and 4% for the nine months of 2002 primarily for two reasons:

These increases were partially offset by other factors. The most significant offset to the improvements was lower earnings in HMO alternative funding programs resulting from higher operating expenses for customer service initiatives. To a lesser extent, lower Medicare earnings and reduced investment income offset the improvements.

Indemnity results excluding goodwill amortization in 2001 decreased 67% for the third quarter and 19% for the nine months of 2002 due to the following factors:

The declines in indemnity health care operations were partially offset by increased earnings in the group life insurance business primarily due to lower expenses and, for the nine months of 2002, increased earnings in the long-term disability business primarily due to higher rates and improved claim execution.

Organizational Realignment and Cost Reduction Initiatives

CIGNA is pursuing a realignment of the organizational structure and reviewing other aspects of its health care business. The objectives of these efforts include:

As part of these initiatives, CIGNA expects to record a restructuring charge in the fourth quarter of 2002 that is not expected to exceed $100 million after-tax (see page 18).

Premiums and Fees

Premiums and fees increased 6% for the third quarter and 8% for the nine months of 2002 primarily due to rate increases.

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Alternative Funding Programs and Premium Equivalents

Under alternative funding programs (primarily Administrative Services Only business), the customer or plan sponsor, rather than CIGNA, assumes all or a portion of the responsibility for funding claims, and CIGNA provides claims processing and other services. In contrast to most other major companies in the health care industry, a significant portion of CIGNA’s health care business consists of alternative funding programs. CIGNA generally earns a lower margin on alternative funding programs than under guaranteed cost or retrospectively experience-rated programs.

Premiums and fees associated with alternative funding programs were $803 million for the third quarter and $2.4 billion for the nine months of 2002 compared to $718 million for the third quarter and $2.1 billion for the nine months of 2001. These amounts are included in the table below.

“Adjusted premiums and fees,” which consist of premiums and fees plus “premium equivalents,” is a useful measure of volume in CIGNA’s health care operations. Premium equivalents generally equal paid claims under alternative funding programs. CIGNA would have recorded the amount of these paid claims as additional premiums if these programs had been written as guaranteed cost or retrospectively experience-rated programs. Thus, premium equivalents are an indicator of business volume associated with alternative funding programs. However, premium equivalents do not represent premium and fee revenue recognized under GAAP and may not be comparable to similarly titled measures presented by other companies.

Adjusted premiums and fees for the Employee Health Care, Life and Disability Benefits segment were as follows:

The increases in premium equivalents are primarily due to higher medical costs in HMO and indemnity alternative funding programs that, in turn, increase the amount of paid claims.

Net Investment Income

Net investment income decreased 13% for the third quarter and 8% for the nine months of 2002 primarily resulting from lower yields.

Other Revenues

Other revenues increased 42% for the third quarter and 30% for the nine months of 2002 primarily due to business growth in the specialty health care operations (predominantly in pharmaceutical fulfillment services and medical cost and utilization management services).

Medical Membership

As of September 30, medical membership was as follows for the HMO and Indemnity operations:

The decline in HMO medical membership is primarily due to lower guaranteed cost HMO program membership, partially offset by growth in HMO alternative funding programs.

During the third quarter of 2002, CIGNA determined the level of indemnity membership based on a revised factor used to estimate membership levels (specifically, the number of covered lives per subscriber). This revised estimate reflects updated information resulting from recent technology enhancements. Prior period information has been revised using this updated information. There was no impact on revenues or operating income resulting from this change (revenues are derived based on the number of subscribers and the level of fees paid by those subscribers, rather than the number of members). Indemnity medical membership reflects growth in PPO membership, offset primarily by cancellations in traditional indemnity programs.

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EMPLOYEE RETIREMENT BENEFITS AND INVESTMENT SERVICES

Adjusted Operating Income

Adjusted operating income increased 4% for the third quarter and 2% for the nine months of 2002 compared with the same periods last year. These increases primarily reflect a favorable shift to higher margin products and business growth, partially offset by the negative effect of stock market declines.

Revenues

Premiums and fees are principally:

Net investment income primarily represents earnings from general account assets. Most of this net investment income is credited to customers and included in benefits and expenses.

Premiums and fees decreased 10% for the third quarter and increased 3% for the nine months of 2002 compared with the same periods last year. These changes reflect the effect of stock market declines on asset-based fees, partially offset by business growth and, to a lesser extent, a shift to higher margin products. The nine months of 2002 also reflect increased premiums from single premium group annuity business.

Assets Under Management

Assets under management are a determinant of earnings for this segment because a significant portion of this segment’s revenues is based on asset values. The following table shows assets under management and related activity, including amounts attributable to separate accounts for the nine months ended September 30. Assets under management fluctuate because of changes in the market value of fixed maturities and equity securities.

Changes in assets under management are discussed below.

Premiums and deposits. For the nine months of 2002, approximately 68% of premiums and deposits were from existing customers, and 32% were from sales to new customers and new plan sales to existing customers. For the nine months of 2001, approximately 61% of premiums and deposits were from existing customers, and 39% were from sales to new customers and new plan sales to existing customers.

Fair value of assets. The declines in fair value in 2002 and 2001 are primarily attributable to market value depreciation of equity securities in separate accounts.

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Customer withdrawals. Withdrawals were lower in 2002 due to improved customer retention in the defined contribution business.

INTERNATIONAL LIFE, HEALTH AND EMPLOYEE BENEFITS

Adjusted Operating Income

Adjusted operating income declined for the third quarter and nine months of 2002 because the same periods of last year include CIGNA’s share in the earnings of the Japanese life insurance operation ($13 million after-tax for the third quarter and $34 million after-tax for the nine months of 2001), which was fully divested in the fourth quarter of 2001.

Excluding the gain on sale of the partial interest in the Japanese life insurance operation and excluding its operating results, adjusted operating income was $2 million for the third quarter and $4 million for the nine months of 2001. On this basis, the increases in operating income for the third quarter and nine months of 2002 compared with the same periods last year were primarily due to:

Premiums and Fees

Premiums and fees increased 7% for the third quarter and 6% for the nine months of 2002 compared to the same periods last year reflecting:

Other Revenues

Other revenues for 2001 include CIGNA’s share in the earnings of the Japanese life insurance operation ($20 million pre-tax for the third quarter and $52 million pre-tax for the nine months of 2001). Other revenues for the nine months of 2001 also reflect a $12 million pre-tax gain associated with the sale of a portion of CIGNA’s interest in this operation.

Japanese Life Insurance Operation

In 2001, CIGNA sold portions of its interest in its Japanese life insurance operation to Yasuda Fire & Marine Insurance Company Ltd. as follows:

As a result of the January 2001 sale, CIGNA stopped consolidating the assets, liabilities, revenues and expenses of this operation and, until the November 2001 sale, accounted for its remaining interest under the equity method of accounting.

International Expansion

CIGNA expects to pursue international growth through acquisitions, joint ventures and other investments. Such projects inevitably involve start-up costs that could result in initial losses for those operations.

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RUN-OFF REINSURANCE OPERATIONS