NU Online News Service, Sept. 4, 6:05 p.m. – CIGNA Corp., Philadelphia, is facing skeptical reviews of its efforts to stabilize its exposure to $22 billion in minimum death benefit guarantees with a $720 million hedging program.
CIGNA reinsured the death benefit guarantees for life insurers that sold the guarantees along with variable annuities between 1994 and 1998.
CIGNA shut down the reinsurance operation in 2000.
CIGNA is describing the charge it is taking to pay for the hedging strategy as a logical response to the stock market slump.
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“Recent declines and volatility in the equity markets significantly increased the company’s exposure to future death claims,” says CIGNA Chairman H. Edward Hanway. “The actions we are taking substantially reduce the impact of future equity market declines arising from these contracts and maintain the financial strength that our customers expect.”
Standard & Poor’s, New York, agreed that the hedging program will protect the reinsurance arrangements, but it put out a statement raising questions about the effects of the program on CIGNA’s balance sheet.