Table of Contents

Cigna Corporation

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION Page       Item 1. Financial Statements (Unaudited)     Consolidated Statements of Income 1   Consolidated Statements of Comprehensive Income 2   Consolidated Balance Sheets 3   Consolidated Statements of Changes in Total Equity 4   Consolidated Statements of Cash Flows 5   Notes to the Consolidated Financial Statements 6 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 4543 Item 3. Quantitative and Qualitative Disclosures About Market Risk 6562 Item 4. Controls and Procedures 6562             PART II OTHER INFORMATION     Item 1. Legal Proceedings 6663 Item 1.A. Risk Factors 6763 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 68 Item 4. Mine Safety Disclosures 6867 Item 6. Exhibits 6968 SIGNATURE 70 INDEX TO EXHIBITS E-1     As used herein, “Cigna” or the “Company” refers to one or more of Cigna Corporation and its consolidated subsidiaries.   Table of Contents           Part I.   FINANCIAL INFORMATION             Item 1.   FINANCIAL STATEMENTS     Cigna Corporation Consolidated Statements of Income   Unaudited     Three Months Ended     March 31,     Unaudited Three Months Ended March 31,   (In millions, except per share amounts)   2017   2016     2018   2017   Revenues                     Premiums   $ 8,103   $ 7,746     $ 8,999   $ 8,151   Fees and other revenues   1,223   1,201     1,368   1,264   Net investment income   303   272     329   303   Mail order pharmacy revenues   710   697     717   710   Realized investment gains (losses):           Realized investment gains (losses)           Other-than-temporary impairments on fixed maturities   (7)   (27)     (13)   (7)   Other realized investment gains (losses), net   53   (5)   Net realized investment gains (losses)   46   (32)   Other realized investment (losses) gains, net   (20)   53   Net realized investment (losses) gains   (33)   46   TOTAL REVENUES   10,385   9,884     11,380   10,474   Benefits and Expenses           Benefits and expenses           Global Health Care medical costs   4,985   4,761     5,317   4,949   Other benefit expenses   1,367   1,368     1,455   1,367   Mail order pharmacy costs   581   574     561   581   Other operating expenses   2,530   2,321     2,802   2,655   Amortization of other acquired intangible assets, net   32   41   Amortization of other acquired intangible assets   27   32   TOTAL BENEFITS AND EXPENSES   9,495   9,065     10,162   9,584   Income before Income Taxes   890   819   Income taxes:           Income before income taxes   1,218   890   Income taxes           Current   286   294     292   286   Deferred   11   11     9   11   TOTAL INCOME TAXES   297   305     301   297   Net Income   593   514   Less: Net (Loss) Attributable to Noncontrolling Interests   (5)   (5)   Net income   917   593   Less: Net income (loss) attributable to noncontrolling interests   2   (5)   SHAREHOLDERS’ NET INCOME   $ 598   $ 519     $ 915   $ 598   Shareholders’ Net Income Per Share:           Shareholders’ net income per share               Basic   $ 2.34   $ 2.04     $ 3.78   $ 2.34   Diluted   $ 2.30   $ 2.00     $ 3.72   $ 2.30   Dividends Declared Per Share   $ 0.04   $ 0.04   Dividends declared per share   $ 0.04   $ 0.04     The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements. 1 Table of Contents Cigna Corporation Consolidated Statements of Comprehensive Income     Unaudited     Three Months Ended     March 31,     Unaudited Three Months Ended March 31,   (In millions)   2017   2016     2018   2017   Shareholders’ net income   $ 598   $ 519     $ 915   $ 598   Shareholders’ other comprehensive income, net of tax:           Net unrealized appreciation, securities   7   173   Shareholders’ other comprehensive income, net of tax           Net unrealized (depreciation) appreciation, securities   (279)   7   Net unrealized (depreciation), derivatives   (3)   (3)     (5)   (3)   Net translation of foreign currencies   112   81     45   112   Postretirement benefits liability adjustment   14   11     13   14   Shareholders’ other comprehensive income, net of tax   130   262   Shareholders’ other comprehensive (loss) income, net of tax   (226)   130   Shareholders’ comprehensive income   728   781     689   728   Comprehensive income (loss) attributable to noncontrolling interests:           Net (loss) attributable to redeemable noncontrolling interests   (2)   (1)   Comprehensive income (loss) attributable to noncontrolling interests           Net income (loss) attributable to redeemable noncontrolling interests   2   (2)   Net (loss) attributable to other noncontrolling interests   (3)   (4)     -   (3)   Other comprehensive income (loss) attributable to redeemable noncontrolling interests   (2)   3   Total comprehensive (loss) attributable to noncontrolling interests   (7)   (2)   Other comprehensive (loss) attributable to redeemable noncontrolling interests   (2)   (2)   Total comprehensive income (loss) attributable to noncontrolling interests   -   (7)   TOTAL COMPREHENSIVE INCOME   $ 721   $ 779     $ 689   $ 721   The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements. 2 Table of Contents Cigna Corporation Consolidated Balance Sheets     Unaudited     Unaudited     As of   As of     As of   As of     March 31,   December 31,     March 31,   December 31,   (In millions, except per share amounts)   2017   2016     2018   2017   Assets           Assets:           Investments:                     Fixed maturities, at fair value (amortized cost, $20,639; $19,942)   $ 21,734   $ 20,961   Equity securities, at fair value (cost, $584; $583)   574   583   Fixed maturities, at fair value (amortized cost, $23,416; $21,867)   $ 24,178   $ 23,138   Equity securities   567   588   Commercial mortgage loans   1,752   1,666     1,801   1,761   Policy loans   1,431   1,452     1,404   1,415   Other long-term investments   1,465   1,462     1,669   1,518   Short-term investments   303   691     245   199   Total investments   27,259   26,815     29,864   28,619   Cash and cash equivalents   4,155   3,185     2,771   2,972   Premiums, accounts and notes receivable, net   3,154   3,077     3,455   3,380   Reinsurance recoverables   6,386   6,478     5,945   6,046   Deferred policy acquisition costs   1,982   1,818     2,315   2,237   Property and equipment   1,519   1,536     1,552   1,563   Deferred tax assets, net   263   304     96   39   Goodwill   5,982   5,980     6,170   6,164   Other assets, including other intangibles   2,250   2,227     2,720   2,316   Separate account assets   8,197   7,940     8,253   8,423   TOTAL ASSETS   $ 61,147   $ 59,360     $ 63,141   $ 61,759   Liabilities           Liabilities:           Contractholder deposit funds   $ 8,415   $ 8,458     $ 8,153   $ 8,196   Future policy benefits   9,840   9,648     9,934   10,040   Unpaid claims and claim expenses   5,006   4,917     5,215   5,168   Global Health Care medical costs payable   2,770   2,532     2,925   2,719   Unearned premiums   1,204   634     1,291   724   Total insurance and contractholder liabilities   27,235   26,189     27,518   26,847   Accounts payable, accrued expenses and other liabilities   6,667   6,414     7,825   7,290   Short-term debt   142   276     110   240   Long-term debt   4,621   4,756     5,191   5,199   Separate account liabilities   8,197   7,940     8,253   8,423   TOTAL LIABILITIES   46,862   45,575     48,897   47,999   Contingencies — Note 16                     Redeemable noncontrolling interests   56   58     49   49   Shareholders’ Equity           Shareholders’ Equity:           Common stock (par value per share, $0.25; shares issued, 296; authorized, 600)   74   74     74   74   Additional paid-in capital   2,912   2,892     2,963   2,940   Accumulated other comprehensive (loss)   (1,252)   (1,382)     (1,547)   (1,082)   Retained earnings   14,356   13,855     16,933   15,800   Less treasury stock, at cost   (1,864)   (1,716)     (4,228)   (4,021)   TOTAL SHAREHOLDERS’ EQUITY   14,226   13,723     14,195   13,711   Other noncontrolling interests   3   4   Total equity   14,229   13,727   Total liabilities and equity   $ 61,147   $ 59,360   Total liabilities and shareholders’ equity   $ 63,141   $ 61,759   SHAREHOLDERS’ EQUITY PER SHARE   $ 55.52   $ 53.42     $ 58.36   $ 56.20     The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements. Cigna Corporation Consolidated Statements of Changes in Total Equity               Accumulated                       Redeemable   Unaudited       Additional   Other               Other Non-       Non-   For the three months ended March 31, 2018   Common   Paid-in   Comprehensive   Retained   Treasury   Shareholders’   controlling   Total   controlling   (In millions)   Stock   Capital   (Loss)   Earnings   Stock   Equity   Interests   Equity   Interests                                           Balance at December 31, 2017 as retrospectively adjusted   $ 74   $ 2,940   $ (1,082)   $ 15,800   $ (4,021)   $ 13,711   $ -   $ 13,711   $ 49   Cumulative effect of accounting for financial instruments and hedging (1)           (10)   68       58       58       Reclassification adjustment related to U.S. tax reform legislation (1)           (229)   229       -       -       Effect of issuing stock for employee benefit plans       23       (69)   68   22       22       Other comprehensive (loss)           (226)           (226)       (226)   (2)   Net income               915       915       915   2   Common dividends declared (per share: $0.04)               (10)       (10)       (10)       Repurchase of common stock                   (275)   (275)       (275)       Other transactions impacting noncontrolling interests                       -       -       BALANCE AT MARCH 31, 2018   $ 74   $ 2,963   $ (1,547)   $ 16,933   $ (4,228)   $ 14,195   $ -   $ 14,195   $ 49                                                                                                                                                                                                                                                                                                                                   For the three months ended March 31, 2017                                       Balance at December 31, 2016 as reported   $ 74   $ 2,892   $ (1,382)   $ 13,855   $ (1,716)   $ 13,723   $ 4   $ 13,727   $ 58   Cumulative effect of accounting for revenue recognition (1)               (24)       (24)       (24)       Balance at December 31, 2016 as retrospectively adjusted   74   2,892   (1,382)   13,831   (1,716)   13,699   4   13,703   58   Effect of issuing stock for employee benefit plans       23       (87)   102   38       38       Other comprehensive income (loss)           130           130       130   (2)   Net income (loss)               598       598   (3)   595   (2)   Common dividends declared (per share: $0.04)               (10)       (10)       (10)       Repurchase of common stock                   (250)   (250)       (250)       Other transactions impacting noncontrolling interests       (3)               (3)   2   (1)   2   BALANCE AT MARCH 31, 2017   $ 74   $ 2,912   $ (1,252)   $ 14,332   $ (1,864)   $ 14,202   $ 3   $ 14,205   $ 56                 Accumulated                       Redeemable   Unaudited       Additional   Other               Other non-       Non-   For the three months ended March 31, 2017   Common   Paid-in   Comprehensive   Retained   Treasury   Shareholders’   controlling   Total   controlling   (In millions)   Stock   Capital   Loss   Earnings   Stock   Equity   Interests   Equity   Interests                                           Balance at January 1, 2017   $ 74   $ 2,892   $ (1,382)   $ 13,855    $ (1,716)   $ 13,723    $ 4    $ 13,727   $ 58   Effect of issuing stock for employee benefit plans       23       (87)   102   38       38       Other comprehensive income (loss)           130           130       130   (2)   Net income (loss)               598       598   (3)   595   (2)   Common dividends declared (per share: $0.04)               (10)       (10)       (10)       Repurchase of common stock                   (250)   (250)       (250)       Other transactions impacting noncontrolling interests       (3)               (3)   2   (1)   2   BALANCE AT MARCH 31, 2017   $ 74   $ 2,912   $ (1,252)   $ 14,356    $ (1,864)   $ 14,226    $ 3    $ 14,229   $ 56                                                                                                                                                                                                                                                   For the three months ended March 31, 2016                                       Balance at January 1, 2016   $ 74   $ 2,859   $ (1,250)   $ 12,121   $ (1,769)   $ 12,035   $ 9   $ 12,044   $ 69   Effect of issuing stock for employee benefit plans       21       (89)   53   (15)       (15)       Other comprehensive (loss)           262           262       262   3   Net income (loss)               519       519   (4)   515   (1)   Common dividends declared (per share: $0.04)               (10)       (10)       (10)       Repurchase of common stock                   (110)   (110)       (110)       Other transactions impacting noncontrolling interests       (6)               (6)   4   (2)   2   BALANCE AT MARCH 31, 2016   $ 74   $ 2,874   $ (988)   $ 12,541   $ (1,826)   $ 12,675   $ 9    $ 12,684   $ 73   The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements. (1) See Note 2 for further information about adjustments resulting from the Company’s adoption of new accounting standards in 2018. Cigna Corporation Consolidated Statements of Cash Flows       Unaudited       Three Months Ended March 31,   (In millions)   2018   2017   Cash Flows from Operating Activities           Net income   $ 917   $ 593   Adjustments to reconcile net income to net cash provided by (used in) operating activities:           Depreciation and amortization   140   146   Realized investment losses (gains)   33   (46)   Deferred income taxes   9   11   Net changes in assets and liabilities, net of non-operating effects:           Premiums, accounts and notes receivable   (53)   (55)   Reinsurance recoverables   31   41   Deferred policy acquisition costs   (76)   (76)   Other assets   114   (22)   Insurance liabilities   849   868   Accounts payable, accrued expenses and other liabilities   (191)   (186)   Current income taxes   260   291   Distributions from partnership investments   34   45   Other, net   (42)   (31)   NET CASH PROVIDED BY OPERATING ACTIVITIES   2,025   1,579   Cash Flows from Investing Activities           Proceeds from investments sold:           Fixed maturities and equity securities   499   414   Investment maturities and repayments:           Fixed maturities and equity securities   297   475   Commercial mortgage loans   28   21   Other sales, maturities and repayments (primarily short-term and other long-term investments)   112   667   Investments purchased or originated:           Fixed maturities and equity securities   (2,259)   (1,240)   Commercial mortgage loans   (68)   (107)   Other (primarily short-term and other long-term investments)   (206)   (256)   Property and equipment purchases   (103)   (91)   NET CASH (USED IN) INVESTING ACTIVITIES   (1,700)   (117)   Cash Flows from Financing Activities           Deposits and interest credited to contractholder deposit funds   292   374   Withdrawals and benefit payments from contractholder deposit funds   (306)   (385)   Net change in short-term debt   (3)   (10)   Repayment of long-term debt   (131)   (250)   Repurchase of common stock   (310)   (239)   Issuance of common stock   20   38   Other, net   (92)   (43)   NET CASH (USED IN) FINANCING ACTIVITIES   (530)   (515)   Effect of foreign currency rate changes on cash and cash equivalents   4   23   Net (decrease) increase in cash and cash equivalents   (201)   970   Cash and cash equivalents, January 1,   2,972   3,185   Cash and cash equivalents, March 31,   $ 2,771   $ 4,155   Supplemental Disclosure of Cash Information:           Income taxes paid, net of refunds   $ 31   $ (8)   Interest paid   $ 46   $ 70         Unaudited       Three Months Ended March 31,   (In millions)   2017     2016   Cash Flows from Operating Activities                 Net income   $ 593     $ 514   Adjustments to reconcile net income to net cash provided by (used in) operating activities:             Depreciation and amortization   146     158   Realized investment (gains) losses   (46)     32   Deferred income taxes   11     11   Net changes in assets and liabilities, net of non-operating effects:             Premiums, accounts and notes receivable   (55)     (237)   Reinsurance recoverables   41     24   Deferred policy acquisition costs   (76)     (62)   Other assets   (22)     (57)   Insurance liabilities   868     507   Accounts payable, accrued expenses and other liabilities   (186)     (263)   Current income taxes   291     262   Distributions from partnership investments (1)   45     27   Other, net   (31)     5   NET CASH PROVIDED BY OPERATING ACTIVITIES (1)   1,579     921   Cash Flows from Investing Activities             Proceeds from investments sold:             Fixed maturities and equity securities   414     361   Investment maturities and repayments:             Fixed maturities and equity securities   475     255   Commercial mortgage loans   21     18   Other sales, maturities and repayments (primarily short-term and other long-term investments) (1)   667     75   Investments purchased or originated:             Fixed maturities and equity securities   (1,240)     (758)   Commercial mortgage loans   (107)     (1)   Other (primarily short-term and other long-term investments)   (256)     (198)   Property and equipment purchases   (91)     (112)   NET CASH (USED IN) INVESTING ACTIVITIES (1)   (117)     (360)   Cash Flows from Financing Activities             Deposits and interest credited to contractholder deposit funds   374     383   Withdrawals and benefit payments from contractholder deposit funds   (385)     (343)   Net change in short-term debt   (10)     (6)   Repayment of long-term debt   (250)     —   Repurchase of common stock   (239)     (139)   Issuance of common stock   38     10   Other, net   (43)     (51)   NET CASH (USED IN) FINANCING ACTIVITIES   (515)     (146)   Effect of foreign currency rate changes on cash and cash equivalents   23     18   Net increase in cash and cash equivalents   970     433   Cash and cash equivalents, January 1,     3,185       1,968   Cash and cash equivalents, March 31,   $ 4,155     $ 2,401   Supplemental Disclosure of Cash Information:                 Income taxes paid, net of refunds   $ (8)     $ 37   Interest paid   $ 70     $ 69   (1) As required in adopting Accounting Standard Update (“ASU”) 2016-15, the Company retrospectively reclassified $27 million of cash distributions from partnership earnings from investing to operating activities for the first quarter of 2016.  The comparable amount reported in operating activities in 2017 was $45 million.  See Note 2 for further discussion. The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements. 5 Table of Contents CIGNA CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   TABLE OF CONTENTS   Note Number Footnote Page Footnote Page         BUSINESS AND CAPITAL STRUCTURE BUSINESS AND CAPITAL STRUCTURE   BUSINESS AND CAPITAL STRUCTURE   1 Description of Business 7 Description of Business 7 2 Significant Accounting Policies 8 Significant Accounting Policies 8 3 Mergers and Acquisitions 10 Mergers and Acquisitions 12 4 Earnings Per Share 11 Earnings Per Share 13 5 Debt 12 Debt 14 INSURANCE INFORMATION INSURANCE INFORMATION   INSURANCE INFORMATION   6 Global Health Care Medical Costs Payable 13 Global Health Care Medical Costs Payable 16 7 Liabilities for Unpaid Claims and Claim Expenses 14 Liabilities for Unpaid Claims and Claim Expenses 17 8 Reinsurance 15 Reinsurance 18 INVESTMENTS INVESTMENTS   INVESTMENTS   9 Fair Value Measurements 18 Fair Value Measurements 21 10 Investments 28 Investments 27 11 Derivatives 33 Derivative Financial Instruments 31 12 Variable Interest Entities 35 Variable Interest Entities 34 13 Accumulated Other Comprehensive Income (Loss) 36 Accumulated Other Comprehensive Income (Loss) 34 WORKFORCE MANAGEMENT AND COMPENSATION WORKFORCE MANAGEMENT AND COMPENSATION   WORKFORCE MANAGEMENT AND COMPENSATION   14 Pension and Other Postretirement Benefit Plans 37 Pension and Other Postretirement Benefit Plans 36 COMPLIANCE, REGULATION AND CONTINGENCIES COMPLIANCE, REGULATION AND CONTINGENCIES   COMPLIANCE, REGULATION AND CONTINGENCIES   15 Income Taxes 37 Income Taxes 36 16 Contingencies and Other Matters 38 Contingencies and Other Matters 37 RESULTS DETAILS RESULTS DETAILS   RESULTS DETAILS   17 Segment Information 43 Segment Information 40 Note 1 – Description of Business     Cigna Corporation, together with its subsidiaries (either individually or collectively referred to as “Cigna,” the “Company,” “we,” “our” or “us”)  is a global health services organization dedicated to a mission of helping individuals improve their health, well-being and sense of security.  To execute on our mission, Cigna’s evolved strategy is to “Go Deep”Deeper”, “Go Global”Local” and “Go Individual”Beyond” with a differentiated set of medical, dental, disability, life and accident insurance and related products and services offered by our insurance and other subsidiaries.  The majority of these products are offered through employers and other groups (e.g.such as governmental and non-governmental organizations, unions and associations).associations.  Cigna also offers commercial health and dental insurance, Medicare and Medicaid products and health, life and accident insurance coverages to individuals in the U.S.United States and selected international markets.  In addition to its ongoing operations described above, Cigna also has certain run-off operations.   The financial results of the Company’s businesses are reported in the following segments:   Global Health Care aggregates the Commercial and Government operating segments due to their similar economic characteristics, products and services and regulatory environment:   · The Commercial operating segment (“Commercial segment”) encompasses both the U.S. commercial and certain international health care businesses serving employers and their employees, other groups and individuals.  Products and services include medical, dental, behavioral health, vision, and prescription drug benefit plans, health advocacy programs and other products and services to insured and self-insured customers. · ·The Commercial operating segment encompasses both the U.S. commercial and certain international health care businesses serving employers and their employees, other groups and individuals.  Products and services include medical, dental, behavioral health, vision, and prescription drug benefit plans, health advocacy programs and other products and services to insured and self-insured customers. ·The Government operating segment (“Government segment”) offers Medicare Advantage and Medicare Part D plans to seniors.  This segment also offers Medicaid plans in selected markets.   Global Supplemental Benefits includes supplemental health, life and accident insurance products offered primarily in selected international markets and in the U.S.United States.   Group Disability and Life provides group long-term and short-term disability, group life, accident and specialty insurance products and related services.   Other Operations consist of:   ·corporate-owned life insurance (“COLI”); corporate-owned life insurance (“COLI”);   ·run-off reinsurance business that is predominantly comprised of guaranteed minimum death benefit (“GMDB”) and guaranteed minimum income benefit (“GMIB”) business effectively exited through reinsurance with Berkshire Hathaway Life Insurance Company of Nebraska (“Berkshire”) in 2013; · run-off reinsurance business that is predominantly comprised of guaranteed minimum death benefit (“GMDB”) and guaranteed minimum income benefit (“GMIB”) business effectively exited through reinsurance with Berkshire Hathaway Life Insurance Company of Nebraska (“Berkshire”) in 2013;   ·deferred gains recognized from the 1998 sale of the individual life insurance and annuity business and the 2004 sale of the retirement benefits business; and deferred gains recognized from the 1998 sale of the individual life insurance and annuity business and the 2004 sale of the retirement benefits business; and   ·run-off settlement annuity business. run-off settlement annuity business.   Corporate reflects amounts not allocated to operating segments, such as net interest expense (defined as interest on corporate debt less net investment income on investments not supporting segment operations), interest on uncertain tax positions, certain litigation matters, intersegment eliminations, compensation cost for stock options and related excess tax benefits, on stock compensation, expense associated with frozen pension plans and certain litigation matters and costs for corporate projects, including overhead. Note 2 – Significant Accounting Policies     Basis of Presentation   The Consolidated Financial Statements include the accounts of Cigna Corporation and its subsidiaries.  Intercompany transactions and accounts have been eliminated in consolidation.  These Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).  Amounts recorded in the Consolidated Financial Statements necessarily reflect management’s estimates and assumptions about medical costs, investment valuation, interest rates and other factors.  Significant estimates are discussed throughout these Notes; however, actual results could differ from those estimates.  The impact of a change in estimate is generally included in earnings in the period of adjustment.  Certain reclassifications may behave been made to prior year amounts to conform to the current presentation.   These interim Consolidated Financial Statements are unaudited but include all adjustments (including normal recurring adjustments) necessary, in the opinion of management, for a fair statement of financial position and results of operations for the periods reported.  The interim Consolidated Financial Statements and Notes should be read in conjunction with the Consolidated Financial Statements and Notes included in the Company’s 20162017 Annual Report on Form 10-K (“20162017 Form 10-K”).  The preparation of interim Consolidated Financial Statements necessarily relies heavily on estimates.  This and certain other factors, including the seasonal nature of portions of the health care and related benefits business, as well as competitive and other market conditions, call for caution in estimating full yearfull-year results based on interim results of operations.   Recent Accounting Pronouncements   The Company’s 20162017 Form 10-K includes discussion of significant recent accounting pronouncements that either have impacted or may impact our financial statements in the future.   The following tables provide information about recently adopted and recently issued or changed accounting guidance (applicable to Cigna) that have occurred since the Company filed its 20162017 Form 10-K. Recently Adopted Accounting Guidance   Accounting Standard and Adoption Date     Requirements and Effects of Adopting New Guidance Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)Revenue from Contracts with Customers (Accounting Standards Update (“ASU”) 2016-15)2014-09 and related amendments)   Adopted as of January 1, 2018   Requires: Specifies how certain transactions should · Revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be classifiedentitled in exchange for those goods or services · Additional revenue-related disclosures Effects of adoption: · Applies only to the Company’s service and mail order pharmacy contracts with customers · Adopted through full retrospective restatement  · Cumulative effect adjustment of $24 million after-tax was recorded, reducing the December 31, 2016 balance of retained earnings.  Adjustment established a contract liability for service fee revenue billed that must be deferred and allocated to services performed after a customer contract terminates.  Subsequent changes in the statement of cash flows. Whilecontract liability and the standard addresses multiple types of transactions, only a changerelated impact to net income and per share amounts since adoption were immaterial. · Immaterial reclassifications were made to prior periods in the treatmentConsolidated Statements of distributionsIncome to conform to the current presentation.  The ASU and related interpretive guidance provide clarification on topics including whether all or a part of a contract is within its scope, and the definition of a customer.  Companies are required to identify and evaluate distinct performance obligations within their contracts.  These clarifications resulted in reclassifications within the Global Health Care Segment affecting premiums, fees and other revenues, Global Health Care medical costs, and other operating expenses and had no impact on recognition patterns or net income. · Prior period balances in the Company’s footnote disclosures have been updated to reflect adjustments resulting from equity method investments impacted the Company.adoption of this ASU.   Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01 and related amendments) Adopted as of January 1, 2018 Requires entities to measure equity investments at fair value in net income if they are neither consolidated nor accounted for under the equity method Effects of adoption: · Certain limited partnership interests previously carried at cost of approximately $200 million were increased to fair value of approximately $275 million on January 1, 2018.  Subsequent changes in fair value are reported in net investment income. · Changes in fair value for equity securities that have a readily determinable fair value that were previously reported in accumulated other comprehensive income are now reported in net realized investment gains. · Cumulative effect adjustment of $62 million after-tax was recorded, increasing the opening balance of retained earnings in 2018. · See Notes 9 and 10 for updated disclosures about equity securities. Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12)     Early adopted as of December 31, 2016January 1, 2018   Guidance: · Relaxes requirements for financial and nonfinancial hedging strategies to be eligible for hedge accounting and changes how companies assess effectiveness · Amends presentation and disclosure requirements to improve transparency about the uses and results of hedging programs Effects of adoption: using the nature · An immaterial amount of distribution approach, the Company reported $45 million of cash receiptsretained earnings related to distributionsthe portion of the hedging instruments that was excluded from partnership earningsthe assessment of hedge effectiveness for fair value hedges was reclassified to accumulated other comprehensive income, decreasing the opening balance in operating activities2018.  · See Note 11 for the three months ended March 31, 2017. The Company reclassified $27 million for the three months ended March 31, 2016 from investing to operating activities in the Consolidated Statements of Cash Flows.Company’s disclosures about derivatives.   Recently Issued Adopted Accounting Guidance Accounting Standard and Adoption Date Requirements and Effects of Adopting New Guidance Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02) Early adopted as of January 1, 2018 Guidance: · Allows companies to reclassify to retained earnings the tax effects stranded in accumulated other comprehensive income as a result of H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (referred to throughout this Form 10-Q as “U.S. tax reform” or “U.S. tax reform legislation”) · Requires additional disclosures of the Company’s accounting policy for releasing income tax effects from accumulated other comprehensive income · Allows companies to apply the guidance retrospectively or in the period of adoption Effects of adoption:  Accumulated other comprehensive income of $229 million was reclassified to retained earnings, increasing the opening balance in 2018.  See Note 13 for additional information including accounting policy disclosures. In addition to the standards listed above, the Company adopted the following guidance in first quarter 2018 with no material impact to our financial statements:  Intra-Entity Transfers of Assets Other than Inventory (ASU 2016-16), Clarifying the Definition of a Business (ASU 2017-01), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07), Statement of Cash Flows: Restricted Cash (ASU 2016-18), Gains and Losses from the Derecognition of Nonfinancial Assets (ASU 2017-05) and Stock Compensation Scope of Modification Accounting (ASU 2017-09). Accounting Guidance Not Yet Adopted   Accounting Standard and Effective Date Applicable for Cigna     Requirements and Expected Effects of New Guidance Not Yet Adopted Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit CostLeases (ASU 2017-07)2016-02)     Required as of January 1, 2018 Requires employers to separate the service cost component from the other components of net benefit cost.  Under the new guidance, only service cost is eligible for capitalization (either deferred policy acquisition costs or capitalized software).  The change in the capitalization rule is to be applied prospectively upon adoption.  In addition, the income statement caption(s) where each component of net benefit cost is presented must be disclosed. Expected effects: the Company expects the effect of this new guidance to be immaterial to its results of operations. Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01) Required as of January 1, 2018 2019   Requires:   · Entities to measure equity investments at fair valueBalance sheet recognition of assets and liabilities arising from leases, including leases embedded in net income if they are neither consolidated nor accounted for under the equity methodother contracts · Cumulative effect adjustment toAdditional disclosures of the beginning balanceamount, timing and uncertainty of retained earnings at adoption Expected effects: · Certain limited partnership interests carried at cost of $240 million as of March 31, 2017 will be reported at fair value at adoptioncash flows from leases · An increase to retained earnings of approximately $50 million, after-tax, if implementedModified retrospective approach for leases in effect as of March 31, 2017.  Actual cumulative effect adjustment will depend on investments held and market conditions at adoption. Revenue from Contracts with Customers (ASU 2014-09 and related amendments) Required asafter the date of January 1, 2018, with early adoption permitted as of January 1, 2017 Requires: · Companies to estimate and allocate the expected customer contract revenues among distinct goods or services based on relative standalone selling prices · Revenues to be recognized as goods or services are delivered · Extensive new disclosures including the presentation of additional categories of revenues and information about related contract assets and liabilities · Adoption through retrospective restatement with or without using certain practical expedients or adoption with a cumulative effectcumulative-effect adjustment recorded in retained earnings   Expected effects:   · Applies to the Company’s non-insurance, administrative service contracts but does not apply to certain contracts within the scope of other GAAP, such as insurance contracts · The Company currently expects to adopt the new guidance as of January 1, 2018 through retrospective restatement · The Company does not currently expect the adoption of the new guidance to have a material impact to its pattern of revenue recognition or net income · The Company is continuing to evaluate the new requirements.  Specifically,impact this standard will have on its financial statements. · While not yet quantified, the Company expects a material impact to its Consolidated Balance Sheets from recognizing additional assets and liabilities of operating leases upon adoption.  The actual increase in assets and liabilities will depend on the volume and terms of leases in place at the time of adoption. · The Company plans to elect the optional practical expedient to retain the current classification of leases, and therefore, does not anticipate a material impact to the Consolidated Statements of Income or Cash Flows. · The Company is evaluatingimplementing a new lease system and also expects that adoption of the combination of contract guidance for certain customers when the Company provides both insurance and non-insurance products, the deferral of revenue for services provided after the termination of certain administrative contracts and the Company’s status as principal or agent for certain performance obligations.new standard will require changes to internal controls over financial reporting.   Updates to Significant Accounting Policies The Company’s 2017 Form 10-K includes discussion of significant accounting policies in Note 2 or the applicable Notes to the Consolidated Financial Statements.  Updates to these policies resulting from the adoption of new accounting guidance in 2018 are provided as follows: · ASU 2016-1 (Recognition and Measurement of Financial Assets and Liabilities):  see Notes 9 and 10 · ASU 2017-12 (Targeted Improvements to Accounting for Hedging Activities):  see Note 11 · ASU 2014-09 (Revenue from Contracts with Customers), also referred to as Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers and related guidance (“ASC 606”):  see below. The majority of the Company’s revenues are not subject to the guidance in ASC 606, including premiums from insurance contracts and fees for investment-related products accounted for under insurance guidance (ASC 944).  ASC 606 applies only to the Company’s service and mail order pharmacy contracts with clients.  See Note 17 for disaggregated revenue from external customers by segment and by major product or service identified with applicable accounting guidance (ASC 944 or ASC 606). Accounting for Contracts with Customers – Service and Mail Order Pharmacy Arrangements Service Fees and Expenses The majority of the Company’s service fees are derived from administrative services only (“ASO”) arrangements that allow corporate clients to self-fund claims and assume the risk of medical or other benefit costs.  Most of the Company’s ASO arrangements are for Global Health Care medical and specialty services, including pharmacy benefits and, to a lesser extent, ASO services in its Group Disability and Life and Global Supplemental Benefits segments.  Generally, the Company’s ASO arrangements are short-term.  Contract modifications typically occur on renewal and are prospective in nature. In return for fees from these clients, the Company provides or makes available various services supporting benefit management and claims administration.  In addition, Global Health Care’s services include access to the Company’s participating provider networks, disease management, utilization management, and cost containment services. In general, the Company considers these services to be a combined performance obligation to provide cost effective administration of plan benefits over the contract period.  Fees are billed, due and recognized monthly at contracted rates based on current membership or utilization.  This recognition pattern aligns with the benefits from services provided to clients.  These revenues are reported in fees and other revenues in the Consolidated Statements of Income. For most ASO arrangements, the Company is required to perform services for a limited period after a client cancels.  If these services will not be separately billed to the client as they are performed, the Company estimates and defers a portion of compensation attributable to this service obligation received in advance.  Deferred revenue is recorded as a contract liability in accounts payable, accrued expenses and other liabilities and recognized when the related services are performed. The Company may also provide performance guarantees that provide potential refunds to clients if certain service standards, clinical outcomes or financial metrics are not met.  If these standards, outcomes and metrics are not met, the Company may be financially at risk up to a stated percentage of the contracted fee or a stated dollar amount.  The Company defers revenue and records a liability for estimated payouts associated with these guarantees within accounts payable, accrued expenses and other liabilities.  The amount of revenue deferred is estimated for each type of guarantee, using either a most likely amount or expected value method depending upon the nature of the guarantee and the information available to estimate refunds.  Estimates are refined each reporting period as additional information on the Company’s performance becomes available, and upon final reconciliation and settlement at the end of the guarantee period.  Amounts accrued and paid for performance guarantees during the reporting periods were not material. Service fees are recognized net of estimated pharmaceutical manufacturer rebates payable to ASO clients using our network of retail pharmacies.  Net rebates retained by the Company from pharmaceutical manufacturers resulting from ASO client utilization at retail pharmacies represent compensation for pharmacy services and are reflected as fee revenue.  Rebates generally represent a per script amount from the manufacturer and are determined based on scripts filled during the reporting period. Expenses associated with administrative programs and services are recognized in other operating expenses as incurred. Mail Order Pharmacy Revenues and Costs Mail order pharmacy revenues are due and recognized as each prescription is shipped.  Mail order pharmacy revenues are presented net of estimated pharmaceutical manufacturer rebates payable to ASO clients that use our mail order business.  Rebates are generally determined based on actual prescriptions filled during the reporting period. Mail order pharmacy costs are recognized as each prescription is shipped and include the cost of prescriptions sold and other costs to operate this business (including supplies, shipping and handling), net of estimated pharmaceutical rebates from manufacturers for prescriptions filled through our mail order business. Contract Balances The following table provides information about receivables and contract liabilities from service and mail order pharmacy contracts with clients.  The allowance for doubtful accounts for receivables and the Company’s contract assets were not material as of the dates presented. (In millions)   March 31, 2018   December 31, 2017   Receivables, net   $ 1,019   $ 885   Contract liabilities   $ 57   $ 54   Revenue recognized for the three months ended March 31, 2018 and March 31, 2017 that was included in the contract liability balance at the beginning of the reporting period was not material. The amount of revenue recognized for the three months ended March 31, 2018 and March 31, 2017 from performance obligations satisfied in prior periods was not material. The incremental costs of obtaining ASO and mail order pharmacy contracts (such as sales commissions) are expensed as incurred and the Company does not disclose information about remaining performance obligations for these contracts in accordance with elections made by the Company as they are generally short-term with original expected durations of one year or less. Note 3 – Mergers and Acquisitions   Proposed MergerAcquisition of Express Scripts   On July 23, 2015,March 8, 2018, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Express Scripts Holding Company (“Express Scripts”), Halfmoon Parent, Inc., a merger agreement with Anthem,direct wholly owned subsidiary of the Company (“New Cigna”), Halfmoon I, Inc., a direct wholly owned subsidiary of New Cigna (“Anthem”) and Anthem Merger Sub Corp. (“Cigna Merger Sub”), and Halfmoon II, Inc., a direct wholly-ownedwholly owned subsidiary of Anthem. The merger agreement provides (a) forNew Cigna (“Express Scripts Merger Sub”).  Subject to the terms and conditions of the Merger Agreement, the Company will acquire Express Scripts in a cash and stock transaction through (1) the merger of the Company andCigna Merger Sub with and into the Company, continuingwith the Company surviving as a direct wholly owned subsidiary of New Cigna and (2) the merger of Express Scripts Merger Sub with and into Express Scripts, with Express Scripts surviving corporation and (b) if certain tax opinions are delivered,as a direct wholly owned subsidiary of New Cigna (collectively, the “Merger”).  New Cigna will be renamed “Cigna Corporation” immediately followingafter the Merger. Upon completion of the initial merger,Merger, Cigna stockholders will receive one share of New Cigna common stock in exchange for the surviving corporation to be merged with and into Anthem, with Anthem continuing as the surviving corporation (collectively, the “merger”).  Subject to certain terms, conditions, and customary operating covenants, each share of Cigna common stock issued and outstandingheld immediately prior to the effective timeMerger, and Express Scripts stockholders will receive (1) 0.2434 of the merger would be converted intoa share of New Cigna common stock and (2) the right to receive (a) $103.40$48.75 in cash, without interest, subject to applicable withholding taxes (the “Merger Consideration”) , in exchange for each share of Express Scripts common stock held immediately prior to the Merger.  After completion of the Merger, shares of New Cigna common stock are expected to be listed for trading on the New York Stock Exchange. The Merger is subject to adoption of the Merger Agreement by the stockholders of the Company and (b) 0.5152Express Scripts and the satisfaction of customary closing conditions, including receipt of applicable regulatory approvals.  The Merger is not subject to a financing condition.  The Company intends to fund the cash portion of the Merger Consideration through a combination of cash on hand, assumed Express Scripts debt and new debt issuance.  See Note 5 for additional information about the financing of the Merger.  The Merger is expected to be completed by December 31, 2018. The Merger Agreement provides for certain termination rights and fees for both the Company and Express Scripts.  If the Merger Agreement is terminated (1) by Express Scripts because the board of directors of the Company has changed its recommendation prior to obtaining the required approval of the stockholders of the Company, (2) by Express Scripts or the Company if the board of directors of the Company has changed its recommendation and the stockholders of the Company have voted against adopting the Merger Agreement or (3) by the Company in order to enter into an alternative acquisition agreement with respect to a Parent Superior Proposal that did not result from a breach of the Company’s non-solicitation obligations, then the Company will be required to pay Express Scripts a fee equal to $1.6 billion (the “Parent Termination Fee”).  Further, if the Merger Agreement is terminated under certain circumstances and within 12 months after the date of such termination the Company enters into an agreement regarding a sale of a sharemajority of Anthem common stock.  The closing price of Anthem common stock on May 4, 2017 was $179.89.the Company’s assets or equity or consummates such a sale, then the Company will be required to pay the Parent Termination Fee prior to or contemporaneously with such entry or consummation.  Express Scripts has reciprocal obligations under specified circumstances to pay a $1.6 billion termination fee to the Company.   At special shareholders’ meetings heldAdditionally, in the event that the Merger Agreement is terminated by either the Company or Express Scripts due to (1) a legal restraint relating to a regulatory law prohibiting consummation of the Merger having become final and non-appealable or (2) the Merger not having been consummated on or prior to December 2015, Cigna shareholders approved8, 2018 (subject to an extension to June 8, 2019 if extended by the mergerCompany or Express Scripts under certain circumstances); and, Anthem shareholders approvedin the issuancecase of sharesclause (2), at the time of Anthem common stock in connection withsuch termination, all of the merger.  Completingconditions to the merger remains subjectCompany’s obligation to certain customary conditions, includingconsummate the receipt of certain necessary governmental and regulatory approvals andMerger have been satisfied other than those that relate to the absence of a legal restraint prohibiting the merger.  Completing the merger is not subjectrelating to a financing condition.regulatory law or the receipt of a regulatory approval, the Company may be required to pay Express Scripts a reverse termination fee of $2.1 billion.   On July 21, 2016, the U.S. Department of Justice (“DOJ”) and certain state attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia (the “District Court”) seeking to block the merger Transaction-related costsand, on January 4, 2017, the parties concluded the District Court trial.   On January 18, 2017,In connection with the proposed acquisition of Express Scripts, as well as other transactions including the terminated merger with Anthem, Inc. (“Anthem”), the Company received a written notice from Anthem seeking to extend the termination datehas incurred costs of the merger agreement from January 31, 2017 to April 30, 2017. On February 8, 2017, the District Court issued an order enjoining the proposed merger.  Anthem filed a notice of appeal of the District Court’s order with the U.S. Court of Appeals for the District of Columbia Circuit (the “Appeals Court”) and requested an expedited appeal. On February 14, 2017, the Company delivered a notice to Anthem terminating the merger agreement and filed suit in the Delaware Court of Chancery (the “Chancery Court”) seeking, among other things, declaratory judgment that Cigna’s termination of the merger agreement is lawful and that Anthem does not have the right to extend the merger agreement termination date.  Later that day, Anthem filed a lawsuit in the Chancery Court against the Company seeking, among other things, a temporary restraining order to enjoin Cigna from terminating the merger agreement, specific performance and damages, and, on February 15, 2017, the Chancery Court issued an order temporarily enjoining the Company from terminating the merger agreement.  This order will be subject to further review at a preliminary injunction hearing scheduled for May 8, 2017. On February 17, 2017, the Appeals Court granted Anthem’s motion for an expedited appeal.  That same day, the Company filed its notice of appeal of the District Court’s order enjoining the merger with the Appeals Court.  Oral arguments were heard on March 24, 2017.  On April 28, 2017, the Appeals Court affirmed the decision of the District Court. On May 5, 2017, Anthem filed a petition for a writ of certiorari with the United States Supreme Court seeking appeal of the U.S. Court of Appeals decision affirming the District Court’s order enjoining the merger. The merger agreement contains customary covenants, including covenants that Cigna conduct its business in the ordinary course during the period between entering into the merger agreement and closing.  In addition, Cigna’s ability to take certain actions prior to closing without Anthem’s consent is subject to certain limitations.  These limitations relate to, among other matters, the payment of dividends, capital expenditures, the payment or retirement of indebtedness or the incurrence of new indebtedness, settlement of material claims or proceedings, mergers or acquisitions, and certain employment-related matters. The Company incurred $63$60 million pre-tax ($4950 million after-tax) for the three months ended March 31, 2017 in costs directly related to the proposed merger.  Comparable merger-related2018.  Transaction-related costs for the three months ended March 31, 20162017 were $40$63 million pre-tax ($3649 million after-tax).  Since entering into this merger agreement in 2015, the Company has incurred pre-tax merger-relatedThese costs of approximately $295 million thatconsisted primarily consisted of fees for legal, advisory and other professional services.services as well as amortization of the Bridge Facility fees.  If the mergerExpress Scripts acquisition is consummated, a significant portion of these merger-relatedthe costs wouldrelated to that acquisition will not be deductible for federal income tax purposes.  If the merger is not consummated, these otherwise non-deductible costs would become tax deductible for federal income tax purposes, resulting in an incremental tax benefit of approximately $60 million. Note 4 – Earnings Per Share (“EPS”)     Basic and diluted earnings per share (“EPS”) were computed as follows:     Three Months Ended     Three Months Ended     March 31, 2017   March 31, 2016     March 31, 2018   March 31, 2017   (Shares in thousands, dollars in millions, except per share amounts)   Basic   Effect of Dilution   Diluted   Basic   Effect of Dilution   Diluted     Basic   Effect of Dilution   Diluted   Basic   Effect of Dilution   Diluted   Shareholders’ net income   $ 598       $ 598   $ 519       $ 519     $ 915       $ 915   $ 598       $ 598   Shares:                                                     Weighted average   255,680       255,680   254,822       254,822     242,179       242,179   255,680       255,680   Common stock equivalents       4,094   4,094       4,625   4,625         3,609   3,609       4,094   4,094   Total shares   255,680   4,094   259,774   254,822   4,625   259,447     242,179   3,609   245,788   255,680   4,094   259,774   EPS   $ 2.34   $ (0.04)   $ 2.30   $ 2.04   $ (0.04)   $ 2.00     $ 3.78   $ (0.06)   $ 3.72   $ 2.34   $ (0.04)   $ 2.30     The following outstanding employee stock options were not included in the computation of diluted earnings per share for the three months ended March 31, 20172018 and 20162017 because their effect was anti-dilutive.     Three Months Ended   (In millions)   March 31, 2017   March 31, 2016   Anti-dilutive options   2.5   1.3       Three Months Ended March 31,   (In millions)   2018   2017   Anti-dilutive options   0.9   2.5     The Company held 39,928,289approximately 52.9 million shares of common stock in Treasury as of March 31, 2017,2018, and 39,638,26439.9 million shares as of March 31, 2016.2017. Note 5 — Debt     The outstanding amounts of debt and capital leases were as follows:     March 31,   December 31,     March 31,   December 31,   (In millions)   2017   2016     2018   2017   Short-term:           Short-term           Commercial paper   $ 100   $ 100   Current maturities of long-term debt   $ 131   $ 250       -     131   Other, including capital leases   11   26     10   9   Total short-term debt   $ 142   $ 276     $ 110   $ 240   Long-term:           $131 million, 6.35% Notes due 2018   $ -   $ 131   Long-term           $250 million, 4.375% Notes due 2020 (1)   252   252     $ 247   $ 249   $300 million, 5.125% Notes due 2020 (1)   301   301     297   299   $78 million, 6.37% Notes due 2021   78   78     78   78   $300 million, 4.5% Notes due 2021 (1)   301   302     296   299   $750 million, 4% Notes due 2022   744   744     745   745   $100 million, 7.65% Notes due 2023   100   100     100   100   $17 million, 8.3% Notes due 2023   17   17     17   17   $900 million, 3.25% Notes due 2025   893   893     894   894   $300 million, 7.875% Debentures due 2027   299   299   $83 million, 8.3% Step Down Notes due 2033   82   82   $500 million, 6.15% Notes due 2036   498   498   $300 million, 5.875% Notes due 2041   296   296   $750 million, 5.375% Notes due 2042   743   743   $600 million, 3.05% Notes due 2027   594   594   $259 million, 7.875% Debentures due 2027   258   258   $45 million, 8.3% Step Down Notes due 2033   45   45   $191 million, 6.15% Notes due 2036   190   190   $121 million, 5.875% Notes due 2041   119   119   $317 million, 5.375% Notes due 2042   315   315   $1,000 million, 3.875% Notes due 2047   988   988   Other, including capital leases   17   20     8   9   Total long-term debt   $ 4,621   $ 4,756     $ 5,191   $ 5,199     (1) TheBridge Facility.  In March 2018, in connection with the proposed Merger, the Company hasand New Cigna entered into interest rate swap contracts hedging a portioncommitment letter (the “Commitment Letter”) with Morgan Stanley Senior Funding, Inc., The Bank of these fixed-rateTokyo-Mitsubishi UFJ, Ltd and 21 additional banks, to provide a $26.7 billion 364-day senior unsecured bridge facility (the “Bridge Facility”).  The Bridge Facility commitment will be reduced if the Company, New Cigna or, in some instances, any of their domestic subsidiaries obtains certain other debt instruments.  See Note 11financing, completes certain asset sales or certain equity issuances.  Concurrently with entry into the Term Loan Credit Agreement described below, the Bridge Facility commitment under the Commitment Letter was reduced to $23.7 billion.The proceeds of the Bridge Facility may be used to finance the Merger, repay certain existing Express Scripts debt and pay related fees and expenses. The definitive documentation related to the Bridge Facility, if drawn upon at closing of the proposed Merger, will contain customary covenants and restrictions, including a financial covenant that the Company or New Cigna may not permit its leverage ratio – which is the ratio of total consolidated debt to total consolidated capitalization on the last day of each fiscal quarter for further information about the Company’s interest rate risk management and these derivative instruments.which financial statements are delivered (or required to be delivered) – to be greater than 60%.   The Company repaid $250incurred approximately $140 million of long-term notes that matured in fees upon entering into the Commitment Letter.  The Company paid $70 million during the first quarter of 2017.2018 and expects to pay the remainder of the fees over the balance of 2018.  The fees were capitalized in other assets and will be amortized over the period the Bridge Facility is outstanding.  The Company recorded $20 million of amortization of the Bridge Facility fees during the three months ended March 31, 2018.   TheRevolving Credit Agreement.  On April 6, 2018, in connection with the proposed Merger, the Company has a five-year revolving credit and letterNew Cigna entered into the Revolving Credit and Letter of credit agreement forCredit Agreement (the “Revolving Credit Agreement”), which matures on April 6, 2023 and is diversified among 23 banks. Prior to the Merger, the Company can borrow up to $1.5 billion that permitsfor general corporate purposes, of which up to $500 million to be used for letters of credit.  This agreement extends through December 12, 2019 and is diversified among 16 banks, with three banks each having 12% of the commitment and the remainder spread among 13 banks in varying amounts.  The credit agreement includes options subject to consent by the administrative agent and the committing banks to increase the commitment amount to $2 billion and to extend the term past December 12, 2019.  The credit agreement is available for general corporate purposes, including for the issuance of letters of credit.  On and after the Merger, New Cigna can borrow up to $3.25 billion for general corporate purposes, of which up to $500 million is available for the issuance of letters of credit.  The credit agreementRevolving Credit Agreement also includes an option to increase the facility amount by up to $500 million and an option to extend the termination date for additional one year periods, subject to the consent of the banks. The Revolving Credit Agreement contains customary covenants and restrictions, including a financial covenant that the Company or New Cigna may not permit its leverage ratio – which is total consolidated debt to total consolidated capitalization (each as defined in the credit agreement) – to be greater than 0.50.50% prior to the Merger or 60% after the Merger. Term Loan Credit Agreement.  On April 6, 2018, the Company and New Cigna entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”), which is diversified among 26 banks.  The Term Loan Credit Agreement provides for a three-year unsecured term loan facility in aggregate principal amount of $3.0 billion, which will be available to finance the Merger, repay certain existing indebtedness of Express Scripts, and pay fees and expenses in connection with the Merger. The Term Loan Credit Agreement contains customary covenants and restrictions, including a financial covenant that the Company, or after the Merger, New Cigna may not permit its leverage ratio calculation excludesto be greater than 60%. Prior to the following items that are included in accumulated other comprehensive loss onMerger, the Company’s consolidated balance sheets: net unrealized appreciation on fixed maturitiesCompany is the borrower under the Bridge Facility, the Revolving Credit Agreement and the portionTerm Loan Credit Agreement. On and after the Merger, New Cigna will be the borrower under each of these agreements. In certain circumstances, certain subsidiaries of the post-retirement benefits liability adjustment attributableCompany, or after the Merger, New Cigna will be required to pension. In addition toguarantee the $4.8 billionobligations of debt outstanding as of March 31, 2017, the Company had $10.5 billion of borrowing capacity within the maximum debt coverage covenant in the credit agreement.  This additional borrowing capacity includes the $1.5 billion availableor New Cigna, as applicable, under the credit agreement.  Letters of credit outstanding as of March 31, 2017 totaled $13 million.Bridge Facility, Term Loan Credit Agreement and the Revolving Credit Agreement.   The Company was in compliance with its debt covenants as of March 31, 2017.2018. Note 6 — Global Global Health Care Medical Costs Payable     Medical costs payable for the Global Health Care segment reflects estimates of the ultimate cost of claims that have been incurred but not reported, including expected development on reported claims, those that have been reported but not yet paid (reported claims in process), and other medical care expenses and services payable that are primarily comprised of accruals for incentives and other amounts payable to health care professionals and facilities.  See Note 7 to the Consolidated Financial Statements in the Company’s 20162017 Form 10-K for further information about the assumptions and estimates used to establish this liability.   Components of the Global Health Care medical costs payable balances as of March 31 were as follows:     March 31,   March 31,   (In millions)   2017   2016   Incurred but not reported   $ 2,088   $ 1,960   Reported claims in process   542   506   Physician incentives and other medical care expenses and services payable   140   180   Global Health Care medical costs payable   $ 2,770   $ 2,646   Activity in medical costs payable was as follows:     Three Months Ended     Three Months Ended     March 31,   March 31,     March 31,   March 31,   (In millions)   2017   2016     2018   2017   Beginning balance   $ 2,532   $ 2,355     $ 2,719   $ 2,532   Less: Reinsurance and other amounts recoverable   275   243     265   275   Beginning balance, net   2,257   2,112     2,454   2,257   Incurred costs related to:                     Current year   5,161   4,825     5,447   5,125   Prior years   (176)   (64)     (130)   (176)   Total incurred   4,985   4,761     5,317   4,949   Paid costs related to:                     Current year   3,219   2,985     3,423   3,183   Prior years   1,509   1,449     1,665   1,509   Total paid   4,728   4,434     5,088   4,692   Ending balance, net   2,514   2,439     2,683   2,514   Add: Reinsurance and other amounts recoverable   256   207     242   256   Ending balance   $ 2,770   $ 2,646     $ 2,925   $ 2,770     Reinsurance and other amounts recoverable in the above table includes amounts due from reinsurers and policyholders to cover incurred but not reported and pending claims for certain business where the Company administers the plan benefits but the right of offset does not exist.  See Note 8 for additional information on reinsurance.   The total of incurred but not reported liabilities plus expected development on reported claims, including reported claims in process, was $2.8 billion at March 31, 2018 and $2.6 billion at March 31, 2017.  The remaining balance in both periods reflects amounts due for physician incentives and other medical care expenses and services payable. For the periodsperiod ended March 31, incurred costs related to prior years were attributable to the following factors:     Three Months Ended     Three Months Ended   (Dollars in millions)   March 31, 2017   March 31, 2016     March 31, 2018   March 31, 2017     $   %(1)   $   %(2)     $   %(1)   $   %(2)   Actual completion factors   $ 78   0.4%   $ 51   0.3%     $ 71   0.4   % $ 78   0.4   % Medical cost trend   98   0.5   28   0.1     50   0.2   98   0.5   Other (3)   -   -   (15)   (0.1)     9   -   -   -   Total favorable (unfavorable) variance   $ 176   0.9%   $ 64   0.3%     $ 130   0.6   % $ 176   0.9   %   (1) Percentage of current year incurred costs as reported for the year ended December 31, 2016.2017. (2) Percentage of current year incurred costs as reported for the year ended December 31, 2015.2016. (3) Other amounts in 2016 related to increased medical costs in the Government segment resulting from additional provider risk sharing. Incurred costs related to prior years in the table above, although adjusted through shareholders’ net income, do not directly correspond to an increase or decrease to shareholders’ net income.  The primary reason for this difference is that decreases to prior year incurred costs pertaining to the portion of the liability established for moderately adverse conditions are not considered as impacting shareholders’ net income if they are offset by increases in the current year provision for moderately adverse conditions. The net impact ofFavorable prior year development onincreased shareholders’ net income was a $61by $43 million increase for the three months ended March 31, 20172018 compared with a $14$61 million increase for the three months ended March 31, 2016.  F2017.  Tavorable prior yearhis development implies primarilywas attributed to both medical cost trend and completion factors resulting from lower than expected utilization of medical services.services.   Note 7 –— Liabilities for Unpaid Claims and Claim Expenses     The following information relates to the Company’s unpaid claims and claim expense liabilities that are related tofor short-duration insurance contracts.contracts other than those sold by the Global Health Care segment.  See Note 8 to the Consolidated Financial Statements in the Company’s 20162017 Form 10-K for further information about the assumptions and estimates used to establish this liability.   The liability for unpaid claims and claim expenses by segment as of March 31 is as follows:     March 31,   March 31,   (In millions)   2017   2016     March 31, 2018   March 31, 2017   Group Disability and Life   $ 4,384   $ 4,146     $ 4,549   $ 4,384   Global Supplemental Benefits   425   367     492   425   Other Operations   197   211     174   197   Unpaid claims and claim expenses   $ 5,006   $ 4,724     $ 5,215   $ 5,006     Activity in the Company’s Group Disability and Life and the Global Supplemental Benefits segments’ liabilities for unpaid claims and claim expenses areis presented in the following table.  Liabilities associated with the Company’s Other Operations segment are excluded because they pertain to obligations for long-duration insurance contracts or, if short-duration, the liabilities have been fully reinsured.     Three Months Ended     Three Months Ended   (In millions)   March 31, 2017   March 31, 2016     March 31, 2018   March 31, 2017   Beginning balance   $ 4,726   $ 4,359     $ 4,975   $ 4,726   Less: Reinsurance   121   115     137   121   Beginning balance, net   4,605   4,244     4,838   4,605   Incurred claims related to:                     Current year   1,148   988     1,230   1,148   Prior years:                     Interest accretion   43   43     38   43   All other incurred   (64)   105     (46)   (64)   Total incurred   1,127   1,136     1,222   1,127   Paid claims related to:                     Current year   371   327     430   371   Prior years   691   660     728   691   Total paid   1,062   987     1,158   1,062   Foreign currency   16   5     2   16   Ending balance, net   4,686   4,398     4,904   4,686   Add: Reinsurance   123   115     137   123   Ending balance   $ 4,809   $ 4,513     $ 5,041   $ 4,809     Reinsurance in the table above reflects amounts due from reinsurers related to unpaid claims liabilities.  The Company’s insurance subsidiaries enter into agreements with other companies primarily to limit losses from large exposures and to permit recovery of a portion of incurred losses.  See Note 8 for additional information on reinsurance. The majority of the liability for unpaid claims and claim expenses is related to disability claims with long-tailed payouts.  Interest earned on assets backing these liabilities is an integral part of pricing and reserving, and is therefore the basis for determining the rate used to discount these liabilities.  Accordingly,reserving.  Therefore, interest accreted on prior year balances is shown as a separate component of prior year incurred claims.  This interest is calculated by applying the average discount rate used in determining the liability balance to the average liability balance over the period.  The remaining prior year incurred claims amount primarily reflects updates to the Company’s liability estimates and variances between actual experience during the period relative to the assumptions and expectations reflected in determining the liability.  Assumptions reflect the Company’s expectations over the life of the book of business and will vary from actual experience in any period, both favorably and unfavorably, with variation in resolution rates being the most significant driver for the long-term disability business and variations in mortality and morbidity being the most significant factors for other business.  Favorable prior year incurred claims reported in 2017for the three months ended March 31, 2018 largely reflect improved claim resolution rates.  Unfavorablefavorable life loss ratio experience relative to expectations for claims incurred in 2017.  Favorable prior year incurred claims reported in 2016 includedfor the impact of modifications madethree months ended March 31, 2017 largely reflect favorable long-term disability resolution rate experience relative to our disability claims management process and a period of elevated life claims.expectations. Note 8 — Reinsurance     The Company’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 or assumed losses.  Reinsurance is also used in acquisition and disposition transactions when the underwriting company is not being acquired.  ReinsuranceBecause reinsurance does not relieve the originating insurer of liability.liability, such liabilities must continue to be reported along with the related reinsurance recoverables.  The Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of its credit risk.   Reinsurance Recoverables   The majority of the Company’s reinsurance recoverables resulted from acquisition and disposition transactions in which the underwriting company was not acquired.  Components of the Company’s reinsurance recoverables are presented below:   (In millions) Line of Business   Reinsurer(s)   March 31, 2017   December 31, 2016   Collateral and Other Terms at March 31, 2017                       Ongoing operations:                                       Global Health Care, Global Supplemental Benefits, Group Disability and Life   Various   $  478   $  478   Recoverables from approximately 80 reinsurers including the U.S. Government, used in the ordinary course of business. Current balances range from less than $1 million up to $93 million. Excluding the recoverable from the U.S. Government of $39 million, over 60% of the balance is from companies rated investment grade by Standard & Poor’s, and 13% is secured by assets in trusts or letters of credit.                       Total recoverables related to ongoing operations       478   478                           Acquisition, disposition or runoff activities:                                       Individual Life and Annuity (sold in 1998)   Lincoln National Life and Lincoln Life & Annuity of New York   3,551   3,586   Both companies’ ratings are sufficient to avoid triggering a contractual obligation to fully secure the outstanding balance.                       GMDB   Berkshire   1,052   1,085   100% secured by assets in a trust.                           Other   42   44   100% secured by assets in a trust or letters of credit.                       Retirement Benefits Business (sold in 2004)   Prudential Retirement Insurance and Annuity   904   921   100% secured by assets in a trust.                       Supplemental Benefits Business (2012 acquisition)   Great American Life   293   297   100% secured by assets in a trust.                       Other run-off reinsurance   Various   66   67   100% secured by assets in trusts.                       Total recoverables related to acquisition, disposition or runoff activities       5,908   6,000                                               Total reinsurance recoverables       $  6,386   $  6,478                           Line of Business   Reinsurer(s)   March 31, 2018   December 31, 2017   Collateral and Other Terms at March 31, 2018                       Ongoing operations                                       Global Health Care, Global Supplemental Benefits, Group Disability and Life, COLI   Various   $ 446   $ 454   Recoverables from approximately 85 reinsurers, used in the ordinary course of business.  Current balances range from less than $1 million up to $76 million.  Over 70% of the balance is from companies rated as investment grade by Standard & Poor’s, and 12% is secured by assets in trusts or letters of credit.                        Total recoverables related to ongoing operations       446   454                           Acquisition, disposition or runoff activities                                       Individual Life and Annuity (sold in 1998)   Lincoln National Life and Lincoln Life & Annuity of New York   3,382   3,436   Both companies’ ratings are sufficient to avoid triggering a contractual obligation to fully secure the outstanding balance.                       GMDB   Berkshire   915   928   100% secured by assets in a trust.                           Other   35   34   100% secured by assets in a trust or letters of credit.                       Retirement Benefits Business (sold in 2004)   Prudential Retirement Insurance and Annuity   832   850   100% secured by assets in a trust.                       Supplemental Benefits Business (2012 acquisition)   Great American Life   277   283   100% secured by assets in a trust.                       Other run-off reinsurance   Various   58   61   100% secured by assets in trusts.                       Total recoverables related to acquisition, disposition or runoff activities       5,499   5,592                                               Total reinsurance recoverables       $ 5,945   $ 6,046                           The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable to meet their reinsurance obligations to the Company.  The Company reviews its reinsurance arrangements and establishes reserves against the recoverables if recovery is not considered probable.  As of March 31, 2017, the Company’s recoverables were net of a reserve of approximately $3 million.   Effects of Reinsurance   In the Company’s Consolidated Statements of Income, premiums were reported net of amounts ceded to reinsurers and Global Health Care medical costs and other benefit expenses were reported net of reinsurance recoveries in the following amounts:     Three Months Ended       March 31,   (In millions)   2017   2016   Ceded premiums:           Individual life insurance and annuity business sold   $ 39   $ 41   Other   81   95   Total ceded premiums   $ 120   $ 136   Reinsurance recoveries:           Individual life insurance and annuity business sold   $ 70   $ 68   Other   29   96   Total reinsurance recoveries   $ 99   $ 164   The decrease in reinsurance recoveries in 2017 is primarily due to the ceded GMDB business.  The ceded reserves declined during the three months ended March 31, 2017 due primarily to favorable equity market conditions, while the ceded reserves increased during the three months ended March 31, 2016 due to changes in the capital market assumptions that are used to calculate the reserves.     Three Months Ended   (In millions)   March 31, 2018   March 31, 2017   Ceded premiums           Individual life insurance and annuity business sold   $ 37   $ 39   Other   98   81   Total ceded premiums   $ 135   $ 120   Reinsurance recoveries           Individual life insurance and annuity business sold   $ 57   $ 70   Other   47   29   Total reinsurance recoveries   $ 104   $ 99     Effective Exit of GMDB and GMIB Business   In 2013, the Company entered into an agreement with Berkshire to effectively exit the GMDB and GMIB business via a reinsurance transaction.  Berkshire reinsured 100% of the Company’s future claim payments inof this business, net of other reinsurance arrangements existing at that time.  The Berkshire reinsurance agreement is subject to an overall limit with approximately $3.5$3.4 billion remaining as of March 31, 2017.2018.   A discussion of each of these businesses follows.  While GMDB is accounted for as reinsurance and GMIB assets and liabilities are reported as derivatives at fair value as discussed below.  Accordingly,  GMIB assets are reported in other assets, including intangibles, and GMIB liabilities are reported in accounts payable, accrued expenses and other liabilities.   GMDB   The Company estimates the gross liability and reinsurance recoverable with an internal model based on the Company’s experience and future expectations over an extended period, consistent with the long-term nature of this product.  As a result of the reinsurance transaction, reserve increases have a corresponding increase in the recorded reinsurance recoverable, provided the increased recoverable remains within the overall Berkshire limit (including the GMIB asset presented below).  The ending net retained reserve covers ongoing administrative expenses, as well as minor claim exposure retained by the Company.   Because the product is premium deficient, the Company records an increase to the net retained reserve if it is inadequate based on the model. Activity in future policy benefit reserves for the GMDB business was as follows:     For the period ended     March 31,   December 31,   (In millions)   2017   2016   Balance at January 1   $ 1,224   $ 1,252   Add: Unpaid claims   16   18   Less: Reinsurance and other amounts recoverable   1,129   1,164   Balance at January 1, net   111   106   Add: Incurred benefits   -   4   Less: Paid benefits (recoveries)   (1)   (1)   Ending balance, net   112   111   Less: Unpaid claims   18   16   Add: Reinsurance and other amounts recoverable   1,094   1,129   Ending balance   $ 1,188   $ 1,224   Benefits paid and incurred are net of ceded amounts. The following table below presents the account value, net amount at risk and number of underlying contractholders for guarantees assumed by the Company in the event of death.  The net amount at risk is the amount that the Company would have to pay if all contractholders died as of the specified date.  Unless the Berkshire reinsurance limit is exceeded, the Company should be reimbursed in full for these payments.   (Dollars in millions, excludes impact of reinsurance ceded)   March 31, 2017   December 31, 2016     March 31, 2018   December 31, 2017   Account value   $ 10,755   $ 10,650     $ 9,762   $ 10,109   Net amount at risk   $ 2,335   $ 2,458     $ 2,120   $ 2,112   Number of contractholders   280,000   285,000     240,000   245,000     GMIB   In this business, the Company reinsured contracts with issuers of GMIB products.  The Company’s exposure represents the excess of a contractually guaranteed amount over the level of variable annuity account values.  Payment by the Company depends on the actual account value in the underlying mutual funds and the level of interest rates when the contractholders elect to receive minimum income payments that must occur within 30 days of a policy anniversary after the appropriate waiting period.  The Company has purchased retrocessional coverage (“GMIB assets”) for these contracts.   The Company reports GMIB liabilities and assets as derivatives at fair value because the cash flows of these liabilities and assets are affected by equity markets and interest rates, but are without significant life insurance risk and are settled in lump sum payments.   As of March 31, 2018 and December 31, 2017, there were three reinsurers for GMIB as follows:follows: (In millions) Line of Business   Reinsurer(s)   March 31, 2017   December 31, 2016   Collateral and Other Terms at March 31, 2017                       GMIB   Berkshire     $ 360     $ 370   100% secured by assets in a trust.       Sun Life Assurance Company of Canada   220   227           Liberty Re (Bermuda) Ltd.   197   202   100% secured by assets in a trust.                                           Total GMIB recoverables reported in other assets     $ 777     $ 799                           Line of Business   Reinsurer   March 31, 2018   December 31, 2017   Collateral and Other Terms at March 31, 2018                       GMIB   Berkshire     $ 337     $ 359   100% secured by assets in a trust.       Sun Life Assurance Company of Canada   199   221           Liberty Re (Bermuda) Ltd.   181   197   100% secured by assets in a trust.                                           Total GMIB recoverables reported in other assets     $ 717     $ 777                           Assumptions used in fair value measurement.  TheGMIB assets and liabilities are established using capital market assumptions (including market returns, interest rates and market volatilities of the underlying equity and bond mutual fund investments) and assumptions related to future annuitant behavior (including mortality, lapse, and annuity election rates).  As assumptions related to future annuitant behavior are largely unobservable, the Company estimatesclassifies GMIB assets and liabilities in Level 3 in the fair value of the assets and liabilities for GMIB contracts by calculating the results for many scenarios run through a model utilizing various assumptions.  hierarchy presented in Note 9. The only assumption expected to impact future shareholders’ net income is non-performance risk.  The non-performance risk adjustment reflects a market participant’s view of nonpayment risk by adding an additional spread to the discount rate in the fair value calculation of both (a) the GMIB liabilities to be paid by the Company, and (b) the GMIB assets to be paid by the reinsurers, after considering collateral. Other assumptions that affect GMIB assets and liabilities include capital market assumptions (including market returns, interest rates and market volatilities of the underlying equity and bond mutual fund investments) and future annuitant behavior (including mortality, lapse, and annuity election rates).  As certain assumptions used to estimate fair values for these contracts are largely unobservable (primarily related to future annuitant behavior), the Company classifies GMIB assets and liabilities in Level 3 in the fair value hierarchy presented in Note 9.   The Company regularly evaluates each of the assumptions used in establishing these assets and liabilities.  Significant decreases in assumed lapse rates or spreads used to calculate non-performance risk of the Company, or significant increases in assumed annuity election rates or spreads used to calculate the non-performance risk of the reinsurers, would result in higher fair value measurements.  A change in one of these assumptions is not necessarily accompanied by a change in another assumption.   GMIB guarantees.  Future payments are not fixed and determinable under the terms of these contracts.  Accordingly, the Company calculated the exposure, without considering any reinsurance coverage, using the following hypothetical assumptions:   ·                  no annuitants surrendered their accounts; ·                  all annuitants lived to elect their benefit; ·                  all annuitants elected to receive their benefit on the next available date (2017(2018 through 2021)2022); and ·                  all underlying mutual fund investment values remained at the March 31, 20172018 value of $818798 million with no future returns.   The Company has reinsurance coverage in place that covers the exposures on these contracts.  Using these hypothetical assumptions, the GMIB exposure is $665of $568 million which is lower than the recorded liability for GMIB calculated using fair value assumptions. Note 9 — Fair Value Measurements     The Company carries certain financial instruments at fair value in the financial statements including fixed maturities, certain equity securities, short-term investments and derivatives.  Other financial instruments are measured at fair value only under certain conditions, such as when impaired.   Fair value is defined as the price at which an asset could be exchanged in an orderly transaction between market participants at the balance sheet date.  A liability’s fair value is defined as the amount that would be paid to transfer the liability to a market participant, not the amount that would be paid to settle the liability with the creditor.   The Company’s financial assets and liabilities carried at fair value have been classified based upon a hierarchy defined by GAAP.  The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3).  An asset’s or a liability’s classification is based on the lowest level of input that is significant to its measurement.  For example, a financial asset or liability carried at fair value would be classified in Level 3 if unobservable inputs were significant to the instrument’s fair value, even though the measurement may be derived using inputs that are both observable (Levels 1 and 2) and unobservable (Level 3).   The Company estimates fair values using prices from third parties or internal pricing methods.  Fair value estimates received from third-party pricing services are based on reported trade activity and quoted market prices when available, and other market information that a market participant may use to estimate fair value.  The internal pricing methods are performed by the Company’s investment professionals and generally involve using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality, as well as other qualitative factors.  In instances where there is little or no market activity for the same or similar instruments, fair value is estimated using methods, models and assumptions that the Company believes a hypothetical market participant would use to determine a current transaction price.  These valuation techniques involve some level of estimation and judgment that becomes significant with increasingly complex instruments or pricing models. The Company is responsible for determining fair value, as well as for assigning the appropriate level within the fair value hierarchy, based on the significance of unobservable inputs.  The Company reviews methodologies, processes and controls of third-party pricing services and compares prices on a test basis to those obtained from other external pricing sources or internal estimates.  The Company performs ongoing analyses of both prices received from third-party pricing services and those developed internally to determine that they represent appropriate estimates of fair value.  The controls executed by the Company include evaluating changes in prices and monitoring for potentially stale valuations.  The Company also performs sample testing of sales values to confirm the accuracy of prior fair value estimates.  The minimal exceptions identified during these processes indicate that adjustments to prices are infrequent and do not significantly impact valuations.  Annually, we conduct an on-site visit of the most significant pricing service to review their processes, methodologies and controls.  This on-site review includes a walk-through of inputs for a sample of securities held across various asset types to validate the documented pricing process.   Financial Assets and Financial Liabilities Carried at Fair Value   The following tables providetable provides information as of March 31, 20172018 and December 31, 20162017 about the Company’s financial assets and liabilities carried at fair value.  Separate account assets that are also recorded at fair value on the Company’s Consolidated Balance Sheets are reported separately underin the heading “separate account assets”Separate Accounts section as gains and losses related to these assets generally accrue directly to policyholders.     Quoted Prices in Active Markets for Identical Assets   Significant Other Observable Inputs   Significant Unobservable Inputs     (In millions)   (Level 1)   (Level 2)   (Level 3)   Total March 31, 2017                 Financial assets at fair value:                 Fixed maturities:                 Federal government and agency   $ 372   $ 525   $ -   $ 897 State and local government   -   1,419   -   1,419 Foreign government   -   2,273   39   2,312 Corporate   -   16,144   483   16,627 Mortgage and other asset-backed   -   324   155   479 Total fixed maturities (1)   372   20,685   677   21,734 Equity securities   402   122   50   574 Subtotal   774   20,807   727   22,308 Short-term investments   -   303   -   303 GMIB assets   -   -   777   777 Other derivative assets   -   4   -   4 Total financial assets at fair value, excluding separate accounts   $ 774   $ 21,114   $ 1,504   $ 23,392 Financial liabilities at fair value:                 GMIB liabilities   $ -   $ -   $ 761   $ 761 Other derivative liabilities   -   2   -   2 Total financial liabilities at fair value   $ -   $ 2   $ 761   $ 763     Quoted Prices in Active Markets for Identical Assets (Level 1)   Significant Other Observable Inputs (Level 2)   Significant Unobservable Inputs (Level 3)   Total   (In millions)   As of March 31, 2018   As of December 31, 2017   As of March 31, 2018   As of December 31, 2017   As of March 31, 2018   As of December 31, 2017   As of March 31, 2018   As of December 31, 2017   Financial assets at fair value                                   Fixed maturities                                   Federal government and agency   $ 356   $ 253   $ 512   $ 526   $ -   $ -   $ 868   $ 779   State and local government   -   -   1,129   1,287   -   -   1,129   1,287   Foreign government   -   -   2,454   2,442   45   45   2,499   2,487   Corporate   -   -   18,802   17,658   371   430   19,173   18,088   Mortgage and other asset-backed   -   -   362   343   147   154   509   497   Total fixed maturities   356   253   23,259   22,256   563   629   24,178   23,138   Equity securities (1)   399   412   69   73   33   103   501   588   Subtotal   755   665   23,328   22,329   596   732   24,679   23,726   Short-term investments   -   -   245   199   -   -   245   199   GMIB assets   -   -   -   -   717   777   717   777   Other derivative assets   -   -   2   2   -   -   2   2   Total financial assets at fair value, excluding separate accounts and real estate funds   $ 755   $ 665   $ 23,575   $ 22,530   $ 1,313   $ 1,509   $ 25,643   $ 24,704   Real estate funds priced at NAV as a practical expedient (2)                           273   N/A   Financial liabilities at fair value                                   GMIB liabilities   $ -   $ -   $ -   $ -   $ 682   $ 762   $ 682   $ 762   Other derivative liabilities   -   -   44   25   -   -   44   25   Total financial liabilities at fair value, excluding separate accounts   $ -   $ -   $ 44   $ 25   $ 682   $ 762   $ 726   $ 787     (1) Fixed maturities includes $543Beginning in 2018, certain private equity securities are no longer carried at fair value under the policy election of ASU 2016-01 (Recognition and Measurement of Financial Assets and Financial Liabilities).  As of December 31, 2017, private equity securities of $70 million of net appreciation required to adjust future policy benefits forwere included in the run-off settlement annuity business including $14 million of appreciation for securities classified in Level 3.3 amount.  See Note 10 for additional information.information on this accounting policy change.     Quoted Prices in Active Markets for Identical Assets   Significant Other Observable Inputs   Significant Unobservable Inputs     (In millions)   (Level 1)   (Level 2)   (Level 3)   Total December 31, 2016                 Financial assets at fair value:                 Fixed maturities:                 Federal government and agency   $ 374   $ 503   $ -   $ 877 State and local government   -   1,435   -   1,435 Foreign government   -   2,066   47   2,113 Corporate   -   15,552   498   16,050 Mortgage and other asset-backed   -   329   157   486 Total fixed maturities (1)   374   19,885   702   20,961 Equity securities   396   113   74   583 Subtotal   770   19,998   776   21,544 Short-term investments   -   691   -   691 GMIB assets   -   -   799   799 Other derivative assets   -   10   -   10 Total financial assets at fair value, excluding separate accounts   $ 770   $ 20,699   $ 1,575   $ 23,044 Financial liabilities at fair value:                 GMIB liabilities   $ -   $ -   $ 780   $ 780 Other derivative liabilities   -   5   -   5 Total financial liabilities at fair value   $ -   $ 5   $ 780   $ 785 (1) Fixed maturities includes $524(2) Beginning in 2018 upon adopting ASU 2016-01, certain real estate funds are carried at fair value (previously carried at cost) based on the Company’s ownership share of the equity of the investee (Net Asset Value (“NAV”) as a practical expedient) including changes in the fair value of its underlying investments.  The funds have a quarterly redemption frequency, 45-90 day redemption notice period and $67 million of net appreciation required to adjust futurein unfunded commitments.  See Note 10 for additional information on this accounting policy benefits for run-off settlement annuity business including $14 million of appreciation for securities classifiedchange.  Prior periods are designated as not applicable (“N/A”) in Level 3.this table.   Level 1 Financial Assets   Inputs for instruments classified in Level 1 include unadjusted quoted prices for identical assets in active markets accessible at the measurement date.  Active markets provide pricing data for trades occurring at least weekly and include exchanges and dealer markets.   Assets in Level 1 include actively-traded U.S. government bonds and exchange-listed equity securities.  Given the narrow definition of Level 1 and the Company’s investment asset strategy to maximize investment returns, a relatively small portion of the Company’s investment assets are classified in this category.   Level 2 Financial Assets and Financial Liabilities   Inputs for instruments classified in Level 2 include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are market observable or can be corroborated by market data for the term of the instrument.  Such other inputs include market interest rates and volatilities, spreads and yield curves.  An instrument is classified in Level 2 if the Company determines that unobservable inputs are insignificant. Fixed maturities and equity securities.  Approximately 93% 94% of the Company’s investments in fixed maturities and equity securities are classified in Level 2 including most public and private corporate debt and hybrid equity securities, federal agency and municipal bonds, non-government mortgage-backed securities and preferred stocks.  Because many fixed maturities do not trade daily, third-party pricing services and internal valuation methods often use recent trades of securities with similar features and characteristics.  When recent trades are not available, pricing models are used to determine these prices.  These models calculate fair values by discounting future cash flows at estimated market interest rates.  Such market rates are derived by calculating the appropriate spreads over comparable U.S. Treasury securities, based on the credit quality, industry and structure of the asset.  Typical inputs and assumptions to pricing models include, but are not limited to, a combination of benchmark yields, reported trades, issuer spreads, liquidity, benchmark securities, bids, offers, reference data, and industry and economic events.  For mortgage-backed securities, inputs and assumptions may also include characteristics of the issuer, collateral attributes, prepayment speeds and credit rating.   Nearly all of these instruments are valued using recent trades or pricing models.  Less than 1% of the fair value of investments classified in Level 2 represents foreign bonds that are valued using a single unadjusted market-observable input derived by averaging multiple broker-dealer quotes, consistent with local market practice.   Short-term investments are carried at fair value which approximates cost.  On a regular basis, the Company compares market prices for these securities to recorded amounts to validate that current carrying amounts approximate exit prices.  The short-term nature of the investments and corroboration of the reported amounts over the holding period support their classification in Level 2.   Other derivatives classified in Level 2 represent over-the-counter instruments such as interest rate and foreign currency swap contracts.  Fair values for these instruments are determined using market observable inputs including forward currency and interest rate curves and widely published market observable indices.  Credit risk related to the counterparty and the Company is considered when estimating the fair values of these derivatives.  However, the Company is largely protected by collateral arrangements with counterparties and determined that no adjustment for credit risk was required as of March 31, 20172018 or December 31, 2016.  Level 2 also includes exchange-traded interest rate swap contracts.  Credit risk related to the clearinghouse counterparty and the Company is considered minimal when estimating the fair values of these derivatives because of upfront margin deposits and daily settlement requirements.2017.  The nature and use of these other derivatives are described in Note 11.   Level 3 Financial Assets and Financial Liabilities   Certain inputs for instruments classified in Level 3 are unobservable (supported by little or no market activity) and significant to their resulting fair value measurement.  Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date.   The Company classifies certain newly issued, privately-placed, complex or illiquid securities, as well as assets and liabilities relating to GMIB, in Level 3.  Approximately 3% of fixed maturities and equity securities are priced using significant unobservable inputs and classified in this category.   Fair values of mortgage and other asset-backed securities, corporate and government fixed maturities are primarily determined using pricing models that incorporate the specific characteristics of each asset and related assumptions including the investment type and structure, credit quality, industry and maturity date in comparison to current market indices, spreads and liquidity of assets with similar characteristics.  For mortgage and other asset-backed securities, inputs and assumptions for pricing may also include collateral attributes and prepayment speeds.  Recent trades in the subject security or similar securities are assessed when available, and the Company may also review published research in its evaluation, as well as the issuer’s financial statements.   Quantitative Information about Unobservable Inputs   The following tables summarizetable summarizes the fair value and significant unobservable inputs used in pricing the following securities that were developed directly by the Company as of March 31, 20172018 and December 31, 2016.2017.  The range and weighted average basis point amounts (“bps”)  for fixed maturityliquidity and credit spreads (adjustment to discount rates) and price-to-earnings multiples for equity investments reflect the Company’s best estimates of the unobservable adjustments a market participant would make to calculate these fair values. Mortgage and other asset-backed securities.  The significant unobservable inputs used to value the following mortgage and other asset-backed securities are liquidity and weighting of credit spreads.  When there is limited trading activity for the security, an adjustment for liquidity is made as of the measurement date that considers current market conditions, issuer circumstances and complexity of the security structure.  An adjustment to weight credit spreads is needed to value a more complex bond structure with multiple underlying collateral and no standard market valuation technique.  The weighting of credit spreads is primarily based on the underlying collateral’s characteristics and their proportional cash flows supporting the bond obligations.  The resulting wide range of unobservable adjustments in the table below is due to the varying liquidity and quality of the underlying collateral, ranging from high credit quality to below investment grade. Corporate and government fixed maturities.  The significant unobservable input used to value the following corporate and government fixed maturities is an adjustment for liquidity.  When there is limited trading activity for the security, an adjustment is needed to reflect current market conditions and issuer circumstances.   EquityPrivate equity securities.The significant unobservable input used to value the following private equity securities is a multiple of earnings before interest, taxes, depreciation and amortization (“EBITDA”).  These securities are comprised of private equity investments with limited trading activity and therefore a ratio of EBITDA is used to estimate value based on company circumstances and relative risk characteristics.   (Fair value in millions) Fair Value Unobservable Input Unobservable Adjustment Range (Weighted Average) As of March 31, 2017 Hybrid equity securities.  The significant unobservable input used to value the following hybrid equity securities is an adjustment for liquidity due to limited trading activity.  These cumulative preferred shares are deemed likely to exercise certain call options and the Company estimates an adjustment used to discount cash flows based on current market conditions and issuer circumstances.     Fair Value as of   Unobservable   Unobservable Adjustment Range (Weighted Average) as of   (Fair value in millions )   March 31, 2018   December 31, 2017   Input   March 31, 2018   December 31, 2017   Fixed maturities                       Mortgage and other asset-backed securities   $ 147   $ 154   Liquidity   60 - 350 (80) bps   60 - 370 (90) bps             Weighting of credit spreads   180 - 290 (230) bps   180 - 290 (230) bps   Corporate and government fixed maturities   389   446   Liquidity   70 - 930 (240) bps   70 - 1,650 (300) bps   Total fixed maturities   536   600               Equity securities                       Private equity securities (1)   N/A   70   Price-to-EBITDA multiples   N/A    5.0 - 12.0 (8.9)   Hybrid equity securities   33   33   Liquidity   205 - 205 (205) bps   270 - 270 (270) bps   Total equity securities   33   103               Subtotal   569   703               Securities not priced by the Company (2)   27   29               Total Level 3 securities   $ 596   $ 732                 Fixed maturities: Mortgage and other asset-backed securities $ 155 Liquidity 60 - 340 (90) bps Weighting of credit spreads 170 - 450 (230) bps Corporate and government fixed maturities 498 Liquidity 70 - 2,550 (340) bps Total fixed maturities 653 Equity securities 50 Price-to-EBITDA multiples 5.0 - 12.0 (8.3) Subtotal 703 Securities not priced by the Company(1) 24 Total Level 3 securities $ 727 As of December 31, 2016 Fixed maturities: Mortgage and other asset-backed securities $ 157 Liquidity 60 - 330 (90) bps Weighting of credit spreads 160 - 470 (230) bps Corporate and government fixed maturities 490 Liquidity 80 - 1,300 (340) bps Total fixed maturities 647 Equity securities 74 Price-to-EBITDA multiples 4.2 - 11.6 (8.5) Subtotal 721 Securities not priced by the Company(1) 55 Total Level 3 securities $ 776 (1) Beginning in 2018, private equity securities are no longer carried at fair value under the policy election of ASU 2016-01 (Recognition and Measurement of Financial Assets and Financial Liabilities). Current periods are designated as N/A in this table. (2) The fair values for these securities use single, unadjusted non-binding broker quotes not developed directly by the Company. Significant increases in fixed maturityliquidity or credit spreads would result in lower fair value measurements while decreases in these inputs would result in higher fair value measurements.  Significant decreases in equity price-to-EBITDA multiples would result in lower fair value measurements while increases in these inputs would result in higher fair value measurements.  Generally, the unobservable inputs are not interrelated and a change in the assumption used for one unobservable input is not accompanied by a change in the other unobservable input. GMIB contracts.  See discussion in Note 8.   Changes in Level 3 Financial Assets and Financial Liabilities Carried at Fair Value   The following tables summarizetable summarizes the changes in financial assets and financial liabilities classified in Level 3 for the three months ended March 31, 20172018 and 2016.2017.  Separate account asset changes are reported separately underin the heading “separate account assets”Separate Accounts section as the changes in fair values of these assets generally accrue directly to the policyholders.  Gains and losses reported in these tables may include net changes in fair value that are attributable to both observable and unobservable inputs.     Fixed Maturities & Equity Securities   GMIB Assets   GMIB Liabilities   (In millions)   2018   2017   2018   2017   2018   2017   Balance at January 1,   $ 732   $ 776   $ 777   $ 799   $ (762)   $ (780)   Gains (losses) included in shareholders’ net income                           GMIB fair value gain (loss)   -   -   (40)   (11)   42   11   Other   (20)   23   (3)   1   16   (4)   Total gains (losses) included in shareholders’ net income   (20)   23   (43)   (10)   58   7   Losses included in other comprehensive income   (5)   (8)   -   -   -   -   Losses required to adjust future policy benefits for settlement annuities (1)   (4)   -   -   -   -   -   Purchases, sales, settlements                           Purchases   10   25   -   -   -   -   Sales   (11)   (47)   -   -   -   -   Settlements   (2)   (27)   (17)   (12)   22   12   Total purchases, sales and settlements   (3)   (49)   (17)   (12)   22   12   Transfers into (out of) Level 3                           Transfers into Level 3   20   40   -   -   -   -   Transfers out of Level 3 (2)   (124)   (55)   -   -   -   -   Total transfers into/(out of) Level 3   (104)   (15)   -   -   -   -   Balance at March 31,   $ 596   $ 727   $ 717   $ 777   $ (682)   $ (761)   Total gains (losses) included in shareholders’ net income attributable to instruments held at the reporting date   $ (7)   $ (6)   $ (43)   $ (10)   $ (58)   $ 7     For the Three Months Ended March 31, 2017 (In millions)   Fixed Maturities & Equity Securities   GMIB Assets   GMIB Liabilities   GMIB Net   Balance at January 1, 2017       $ 776   $ 799   $ (780)   $ 19   Gains (losses) included in shareholders’ net income:                   GMIB fair value gain/(loss)   -   (11)   11   -   Other   23   1   (4)   (3)   Total gains (losses) included in shareholders’ net income   23   (10)   7   (3)   Losses included in other comprehensive income   (8)   -   -   -   Gains required to adjust future policy benefits for settlement annuities (1)   -   -   -   -   Purchases, sales and settlements:                   Purchases   25   -   -   -   Sales   (47)   -   -   -   Settlements   (27)   (12)   12   -   Total purchases, sales and settlements   (49)   (12)   12   -   Transfers into/(out of) Level 3:                   Transfers into Level 3   40   -   -   -   Transfers out of Level 3   (55)   -   -   -   Total transfers into/(out of) Level 3   (15)   -   -   -   Balance at March 31, 2017       $ 727   $ 777   $ (761)   $ 16   Total gains (losses) included in shareholders’ net income attributable to instruments held at the reporting date       $ (6)   $ (10)   $ 7   $ (3)   (1)  Amounts do not accrue to shareholders. For the Three Months Ended March 31, 2016 (In millions)   Fixed Maturities & Equity Securities   GMIB Assets   GMIB Liabilities   GMIB Net   Balance at January 1, 2016       $ 726   $ 907   $ (885)   $ 22   Gains (losses) included in shareholders’ net income:                   GMIB fair value gain/(loss)   -   61   (61)   -   Other   (25)   (1)   (5)   (6)   Total gains (losses) included in shareholders’ net income   (25)   60   (66)   (6)   Losses included in other comprehensive income   -   -   -   -   Gains required to adjust future policy benefits for settlement annuities (1)   11   -   -   -   Purchases, sales and settlements:                   Purchases   24   -   -   -   Sales   -   -   -   -   Settlements   (11)   (10)   10   -   Total purchases, sales and settlements   13   (10)   10   -   Transfers into/(out of) Level 3:                   Transfers into Level 3   128   -   -   -   Transfers out of Level 3   (61)   -   -   -   Total transfers into/(out of) Level 3   67   -   -   -   Balance at March 31, 2016       $ 792   $ 957   $ (941)   $ 16   Total gains (losses) included in shareholders’ net income attributable to instruments held at the reporting date       $ (25)   $ 60   $ (66)   $ (6)   (1)  Amounts do not accrue to shareholders.(2) Beginning in 2018, certain private equity securities are no longer carried at fair value under the policy election of ASU 2016-01 (Recognition and Measurement of Financial Assets and Financial Liabilities).  $70 million in private equity securities as of December 31, 2017 are included in the March 31, 2018 Transfers out of Level 3 amount.   As noted in the preceding tables, total gains and losses included in shareholders’ net income are reflected in the following captions in the Consolidated Statements of Income:   ·Realized investment gains (losses) and net investment income for amounts related to fixed maturities and equity securities and realized investment gains (losses) for the impact of changes in non-performance risk related to GMIB assets and liabilities; and ·Other operating expenses for amounts related to GMIB assets and liabilities (GMIB fair value gain/loss), except for the impact of changes in non-performance risk. Realized investment gains (losses) and net investment income for amounts related to fixed maturities and equity securities and realized investment gains (losses) for the impact of changes in non-performance risk related to GMIB assets and liabilities, similar to hedge ineffectiveness; and · Other operating expenses for amounts related to GMIB assets and liabilities (GMIB fair value gain/loss), except for the impact of changes in non-performance risk.   In the tables above, gains and losses included in other comprehensive income are reflected in net unrealized appreciation (depreciation) on securities in the Consolidated Statements of Comprehensive Income.   Reclassifications impacting Level 3 financial instruments are reported as transfers into or out of the Level 3 category as of the beginning of the quarter in which the transfer occurs.  Therefore gains and losses in income only reflect activity for the period the instrument was classified in Level 3.   Transfers into or out of the Level 3 category occur when unobservable inputs, such as the Company’s best estimate of what a market participant would use to determine a current transaction price, become more or less significant to the fair value measurement.  For the three months ended March 31,During 2018 and 2017, transfers between Level 2 and Level 3 primarily reflectreflected changes in liquidity and credit risk estimates for certain private placement issuers in theacross several sectors including metals, and mining, energy, electric and capital goods sectors.  For the three months ended March 31, 2016,goods.  As noted above, transfers between Level 2 andout of Level 3 primarily reflect changes in liquidity and credit risk estimates for certainduring 2018 also include $70 million of private placement issuers in the metals and mining and energy sectors.equity securities that are no longer carried at fair value. Separate account assetsAccounts   Fair values and changes in the fair values of separate account assets generally accrue directly to the policyholders and are excluded from the Company’s revenues and expenses.�� See Note 10 to the Consolidated Financial Statements contained in the Company’s 20162017 Form 10-K for additional policy information related to separate accounts. As of March 31, 20172018 and December 31, 2016,2017, separate account assets were as follows:                       Quoted Prices in Active Markets for Identical Assets (Level 1)   Significant Other Observable Inputs (Level 2)   Significant Unobservable Inputs (Level 3)   Total   March 31, 2017 (In millions)   Quoted Prices in Active Markets for Identical Assets (Level 1)   Significant Other Observable Inputs (Level 2)   Significant Unobservable Inputs (Level 3)   Total   Guaranteed separate accounts (See Note 16)   $ 245   $ 263   $ -   $ 508     March   December   March   December   March   December   March   December     31,   31,   31,   31,   31,   31,   31,   31,   (In millions)   2018   2017   2018   2017   2018   2017   2018   2017   Guaranteed separate accounts (see Note 16)   $ 206   $ 215   $ 300   $ 308   $ -   $ -   $ 506   $ 523   Non-guaranteed separate accounts (1)   1,435   5,076   330   6,841     1,506   1,536   5,197   5,298   262   292   6,965   7,126   Subtotal   $ 1,680   $ 5,339   $ 330   7,349     $ 1,712   $ 1,751   $ 5,497   $ 5,606   $ 262   $ 292   7,471   7,649   Non-guaranteed separate accounts priced at NAV as a practical expedient (1)               848                             782   774   Total separate account assets               $ 8,197                             $ 8,253   $ 8,423   December 31, 2016                   Guaranteed separate accounts (See Note 16)   $ 238   $ 262   $ -   $ 500   Non-guaranteed separate accounts (1)   1,368   4,885   331   6,584   Subtotal   $ 1,606   $ 5,147   $ 331   7,084   Non-guaranteed separate accounts priced at NAV as a practical expedient (1)               856   Total separate account assets               $ 7,940     (1)  Non-guaranteed separate accounts included $3.8 billion as of March 31, 20172018 and $3.7$3.9 billion as of December 31, 20162017 in assets supporting the Company’s pension plans, including $0.2 billion classified in Level 3 as of March 31, 2018 and $0.3 billion classified in Level 3 for both periods and $0.8 billion as of March 31, 2017 and $0.9 billion as of December 31, 2016 priced at net asset value (“NAV”) as a practical expedient.2017.   Separate account assets in Level 1 primarily include exchange-listed equity securities.  Level 2 assets primarily include:   ·corporate and structured bonds valued using recent trades of similar securities or pricing models that discount future cash flows at estimated market interest rates as described above; and ·actively-traded institutional and retail mutual fund investments. corporate and structured bonds valued using recent trades of similar securities or pricing models that discount future cash flows at estimated market interest rates as described above; and · actively-traded institutional and retail mutual fund investments and separate accounts priced using the daily net asset value that is the exit price. Separate account assets classified in Level 3 primarily support Cigna’s pension plans, and include certain newly issued, privately-placed, complex, or illiquid securities that are priced using methods discussed above, as well as commercial mortgage loans that are valued according to the methodologies discussed below.loans.  The following tables summarize the changes in separate account assets reported in Level 3 for the three months endedperiods ending March 31, 2017 and 2016.31.                   Three Months Ended     Three Months Ended         March 31,     March 31,   (In millions)           2017   2016     2018   2017   Balance, beginning of period               $ 331     $ 297     $ 292   $ 331   Policyholder gains (losses)             27     (1 ) Purchases, sales and settlements:                     Policyholder gains   45   27   Purchases, sales and settlements           Purchases             10     4     8   10   Sales           (35 )   (1 )   (72)   (35)   Settlements             (1 )   (2 )   (4)   (1)   Total purchases, sales and settlements           (26 )   1     (68)   (26)   Transfers into/(out of) Level 3:                       Transfers into (out of) Level 3           Transfers into Level 3           -     23     -   -   Transfers out of Level 3             (2 )   (3 )   (7)   (2)   Total transfers into/(out of) Level 3           (2 )   20   Total transfers into (out of) Level 3   (7)   (2)   Balance, end of period                 $ 330     $ 317     $ 262   $ 330     Separate account investments in securities partnerships, real estate, and hedge funds are generally valued based on the separate account’s ownership share of the equity of the investee (NAV as a practical expedient), including changes in the fair values of its underlying investments.  Substantially all of these assets support the Cigna Pension Plans.  The table below provides additional information on these investments.                           Fair Value as of     Unfunded   Redemption Frequency   Redemption Notice   (In millions)   March 31, 2017     December 31, 2016     Commitments   (if currently eligible) (1)   Period (1)   Security Partnerships   $ 409     $ 424     $ 340   Not applicable   Not applicable   Real Estate Funds   234     231     -   Quarterly   45-90 days   Hedge Funds   205     201     -   Up to Annually, varying by fund   30-90 days   Total   $ 848     $ 856     $ 340           (1)The attributes noted are effective as of March 31, 2017 and December 31, 2016.     Fair Value as of     Unfunded   Data as of March 31, 2018 and December 31, 2017                   Commitments as   Redemption Frequency   Redemption Notice   (In millions)   March 31, 2018     December 31, 2017     of March 31, 2018   (if currently eligible)   Period   Securities Partnerships   $ 487     $ 458     $ 315   Not applicable   Not applicable   Real Estate Funds   244     239     -   Quarterly   45-90 days   Hedge Funds   51     77     -   Up to Annually, varying by fund   30-90 days   Total   $ 782     $ 774     $ 315             Assets and Liabilities Measured at Fair Value under Certain Conditions   Some financial assets and liabilities are not carried at fair value each reporting period, but may be measured using fair value only under certain conditions, such as investments in real estate, partnership entities, and commercial mortgage loans, and certain equity securities with no readily determinable fair value when they become impaired.  There were no impaired investments in real estate, partnership entities, commercial mortgage loans, or certain equity securities with no readily determinable fair value written down to fair value for the three months ended March 31, 2018.  Impaired values for these asset types classified as Level 3 representing less than 1% of total investments, were written down to their fair values, resulting in immaterial realized investment losses of $1 million after-tax for the three months ended March 31, 2017.  There were no impaired real estate entities or commercial mortgage loans written down to fair value for the three months ended March 31, 2016. Fair Value Disclosures for Financial Instruments Not Carried at Fair Value   The following table includes the Company’s financial instruments not recorded at fair value that are subject to fair value disclosure requirements at March 31, 20172018 and December 31, 2016.2017.  In addition to universal life products and capital leases, financial instruments that are carried in the Company’s Consolidated Financial Statements at amounts that approximate fair value are excluded from the following table.                           Classification in     March 31, 2017     December 31, 2016   (In millions)   the Fair Value Hierarchy     Fair Value   Carrying Value     Fair Value   Carrying Value   Commercial mortgage loans   Level 3     $ 1,776   $ 1,752     $ 1,682   $ 1,666   Contractholder deposit funds, excluding universal life products   Level 3     $ 1,206   $ 1,203     $ 1,215   $ 1,212   Long-term debt, including current maturities, excluding capital leases   Level 2     $ 5,331   $ 4,735     $ 5,460   $ 4,991   The fair values for all financial instruments presented in the table above have been estimated using market information when available.  The following valuation methodologies and inputs are used by the Company to determine fair value. Commercial mortgage loans.  The Company estimates the fair value of commercial mortgage loans generally by discounting the contractual cash flows at estimated market interest rates that reflect the Company’s assessment of the credit quality of the loans.  Market interest rates are derived by calculating the appropriate spread over comparable U.S. Treasury rates based on the property type, quality rating and average life of the loan.  The quality ratings reflect the relative risk of the loan considering debt service coverage, the loan-to-value ratio and other factors.  Fair values of impaired mortgage loans are based on the estimated fair value of the underlying collateral generally determined using an internal discounted cash flow model.  The fair value measurements were classified in Level 3 because the cash flow models incorporate significant unobservable inputs. Contractholder deposit funds, excluding universal life products.  Generally, these funds do not have stated maturities.  Approximately 70% of these balances can be withdrawn by the customer at any time without prior notice or penalty.  The fair value for these contracts is the amount estimated to be payable to the customer as of the reporting date, which is generally the carrying value.  Most of the remaining contractholder deposit funds are reinsured by the buyers of the individual life and annuity and retirement benefits businesses.  The fair value for these contracts is determined using the fair value of these buyers’ assets supporting these reinsured contracts.  The Company had reinsurance recoverables equal to the carrying value of these reinsured contracts.  These instruments were classified in Level 3 because certain inputs are unobservable (supported by little or no market activity) and significant to their resulting fair value measurement. Long-term debt, including current maturities, excluding capital leases.  The fair value of long-term debt is based on quoted market prices for recent trades.  When quoted market prices are not available, fair value is estimated using a discounted cash flow analysis and the Company’s estimated current borrowing rate for debt of similar terms and remaining maturities.  These measurements were classified in Level 2 because the fair values are based on quoted market prices or other inputs that are market observable or can be corroborated by market data.     Classification in     March 31, 2018     December 31, 2017   (In millions)   the Fair Value Hierarchy     Fair Value   Carrying Value     Fair Value   Carrying Value   Commercial mortgage loans   Level 3     $ 1,781   $ 1,801     $ 1,766   $ 1,761   Long-term debt, including current maturities, excluding capital leases   Level 2     $ 5,289   $ 5,182     $ 5,730   $ 5,321     Fair values of off-balance sheet financial instruments were not material as of March 31, 20172018 and December 31, 2016.2017. Note 10 — Investments     Cigna’s investment portfolio consists of a broad range of investments including fixed maturities and equity securities, commercial mortgage loans, other long-term investments and short-term investments.  The sections below provide more detail regarding our investment balances, net investment income and realized investment gains and losses.  See Note 9 for information about the valuation of the Company’s investment portfolio.  See Note 11 to the Consolidated Financial Statements contained in the Company’s 20162017 Form 10-K for accounting policies for each investment type.  Updates to these policies resulting from the adoption of new accounting guidance in 2018 are provided below. A.      Investment Portfolio   Fixed Maturities and Equity Securities   The amortized cost and fair value by contractual maturity periods for fixed maturities were as follows at March 31, 2017:2018:               Amortized   Fair     Amortized   Fair   (In millions)   Cost   Value     Cost   Value   Due in one year or less        $ 1,405        $ 1,416          $ 1,604        $ 1,614   Due after one year through five years   6,717   6,976     6,798   6,923   Due after five years through ten years   8,481   8,667     10,455   10,416   Due after ten years   3,586   4,196     4,068   4,716   Mortgage and other asset-backed securities   450   479     491   509   Total fixed maturities        $ 20,639        $ 21,734          $ 23,416        $ 24,178     Actual maturities of these securities could differ from their contractual maturities used in the table above.  This could occur because issuers may have the right to call or prepay obligations, with or without penalties. Gross unrealized appreciation (depreciation) on fixed maturities by type of issuer is shown below.                             Gross   Gross           Amortized   Unrealized   Unrealized   Fair       Cost   Appreciation   Depreciation   Value   (In millions)   March 31, 2017   Federal government and agency        $ 667        $ 233        $ (3)        $ 897   State and local government   1,324   100   (5)   1,419   Foreign government   2,206   122   (16)   2,312   Corporate   15,992   744   (109)   16,627   Mortgage and other asset-backed   450   32   (3)   479   Total fixed maturities        $ 20,639        $ 1,231        $ (136)        $ 21,734                       (In millions)   December 31, 2016   Federal government and agency        $ 658        $ 223        $ (4)        $ 877   State and local government   1,342   99   (6)   1,435   Foreign government   1,998   129   (14)   2,113   Corporate   15,483   716   (149)   16,050   Mortgage and other asset-backed   461   29   (4)   486   Total fixed maturities        $ 19,942        $ 1,196        $ (177)        $ 20,961           Gross   Gross           Amortized   Unrealized   Unrealized   Fair   (In millions)   Cost   Appreciation   Depreciation   Value   As of March 31, 2018                           Federal government and agency        $ 653        $ 219        $ (4)        $ 868   State and local government   1,058   72   (1)   1,129   Foreign government   2,402   119   (22)   2,499   Corporate   18,812   610   (249)   19,173   Mortgage and other asset-backed   491   23   (5)   509   Total fixed maturities        $ 23,416        $ 1,043        $ (281)        $ 24,178   Investments supporting liabilities of the Company’s run-off settlement annuity business (included in above total) (1)        $ 2,241        $ 576        $ (9)        $ 2,808   As of December 31, 2017                           Federal government and agency        $ 541        $ 239        $ (1)        $ 779   State and local government   1,196   93   (2)   1,287   Foreign government   2,360   142   (15)   2,487   Corporate   17,301   868   (81)   18,088   Mortgage and other asset-backed   469   29   (1)   497   Total fixed maturities        $ 21,867        $ 1,371        $ (100)        $ 23,138   Investments supporting liabilities of the Company’s run-off settlement annuity business (included in above total) (1)        $ 2,200        $ 681        $ (2)        $ 2,879     The above table includes investments with a fair value of $2.7 billion at March 31, 2017 and December 31, 2016 supporting liabilities of the Company’s run-off settlement annuity business.  These investments had gross(1) Net unrealized appreciation of $555 million and gross unrealized depreciation of $12 million at March 31, 2017, compared with gross unrealized appreciation of $539 million and gross unrealized depreciation of $15 million at December 31, 2016.for these investments is excluded from accumulated other comprehensive income.   Review of declines in fair value.  Management reviews fixed maturities with a decline in fair value from cost for impairment based on criteria that include:   ·         length of time and severity of decline; ·         financial health and specific near term prospects of the issuer; ·         changes in the regulatory, economic or general market environment of the issuer’s industry or geographic region; and ·         the Company’s intent to sell or the likelihood of a required sale prior to expected recovery.   The table below summarizes fixed maturities in an unrealized loss position at March 31, 20172018 by the length of time these securities have been in an unrealized loss position.  These fixed maturities were primarily corporate securities with a decline in fair value that reflects an increase in market yields since purchase.           March 31, 2017     Fair   Amortized   Unrealized   Number (Dollars in millions)   Value   Cost   Depreciation   of Issues One year or less:                 Investment grade        $ 3,960        $ 4,067        $ (107)   870 Below investment grade        $ 619        $ 630        $ (11)   532 More than one year:                 Investment grade        $ 265        $ 276        $ (11)   47 Below investment grade        $ 116        $ 123        $ (7)   21     March 31, 2018   December 31, 2017     Fair   Amortized   Unrealized   Number   Fair   Amortized   Unrealized   Number (Dollars in millions)   Value   Cost   Depreciation   of Issues   Value   Cost   Depreciation   of Issues One year or less                                 Investment grade        $ 7,891        $ 8,062        $ (171)   1,596        $ 3,272        $ 3,309        $ (37)   797 Below investment grade        $ 1,058        $ 1,080        $ (22)   1,096        $ 543        $ 553        $ (10)   643 More than one year                                 Investment grade        $ 1,467        $ 1,545        $ (78)   398        $ 1,503        $ 1,549        $ (46)   373 Below investment grade        $ 148        $ 158        $ (10)   47        $ 155        $ 162        $ (7)   42   Equity Securities Accounting policy.  Beginning in 2018 upon adopting ASU 2016-01, changes in fair value of equity securities that have a readily determinable fair value (primarily exchange-traded funds) are reported in other realized investment gains (losses).  As of March 31, 2017,2018, the fair values of these securities were $454 million and amortized cost was $456 million.  In addition, beginning in 2018, private equity securities also included an investment of approximately $400$66 million in an exchange traded fund (“ETF”) with a gross unrealized lossas of $4 million.  There were no other available for sale equity securities with a significant unrealized loss reflected in accumulated other comprehensive income at March 31, 2017.2018, that do not have a readily determinable fair value are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes.  The amount of impairments or value changes resulting from observable price changes was not material. Equity securities also include hybrid investments consisting of preferred stock with call features that are carried at fair value with changes in fair value reported in other realized investment gains (losses) and dividends reported in net investment income.  As of March 31, 2017 and December 31, 2016,2018, fair values of these securities were $36$47 million and amortized cost was $62 million, compared with fair value of $49 million.million and amortized cost of $61 million as of December 31, 2017.   Commercial Mortgage Loans   Mortgage loans held by the Company are made exclusively to commercial borrowers and are diversified by property type, location and borrower.  Loans are generally issued at a fixed rate of interest and are secured by high quality, primarily completed and substantially leased operating properties.   Credit quality.  The Company regularly evaluates and monitors credit risk, beginning with the initial underwriting of a mortgage loan and continuing throughout the investment holding period.  Mortgage origination professionals employ an internal credit quality rating system designed to evaluate the relative risk of the transaction at origination that is then updated each year as part of the annual portfolio loan review.  The Company evaluates and monitors credit quality on an ongoing basis, classifying each loan as a loan in good standing, potential problem loan or problem loan.   Quality ratings are based on our evaluation of a number of key inputs related to the loan including real estate market-related factors such as rental rates and vacancies, and property-specific inputs such as growth rate assumptions and lease rollover statistics.  However, the two most significant contributors to the credit quality rating are the debt service coverage and loan-to-value ratios.  The debt service coverage ratio measures the amount of property cash flow available to meet annual interest and principal payments on the debt, with a ratio below 1.0 indicating that there is not enough cash flow to cover the required loan payments.  The loan-to-value ratio, commonly expressed as a percentage, compares the amount of the loan to the fair value of the underlying property collateralizing the loan.   The following tables summarizetable summarizes the credit risk profile of the Company’s commercial mortgage loan portfolio based on loan-to-value and debt service coverage ratios, as of March 31, 20172018 and December 31, 2016:2017:             Debt Service Coverage Ratio       1.30x or   1.20x to   1.10x to   1.00x to   Less than       Loan-to-Value Ratios   Greater   1.29x   1.19x   1.09x   1.00x   Total   (In millions)   March 31, 2017   Below 50%       $ 331       $ 15       $ -       $ -       $ -       $ 346   50% to 59%   516   46   42   30   -   634   60% to 69%   687   14   -   -   -   701   70% to 79%   -   -   30   -   35   65   80% to 89%   -   -   -   -   -   -   90% to 100%   -   -   -   -   6   6   Total       $ 1,534       $ 75       $ 72       $ 30       $ 41       $ 1,752           (In millions)   December 31, 2016   Below 50%       $ 335       $ 15       $ -       $ -       $ -       $ 350   50% to 59%   517   46   -   30   -   593   60% to 69%   624   14   -   -   -   638   70% to 79%   -   -   29   -   35   64   80% to 89%   -   -   -   -   -   -   90% to 100%   -   -   -   -   21   21   Total       $ 1,476       $ 75       $ 29       $ 30       $ 56       $ 1,666   (Dollars in millions)   As of March 31, 2018   As of December 31, 2017           Average Debt   Average       Average Debt   Average       Carrying   Service Coverage   Loan-to-   Carrying   Service Coverage   Loan-to-   Loan-to-Value Ratios   Value   Ratio   Value Ratio   Value   Ratio   Value Ratio   Below 60%        $  1,182         2.04            $  1,109   2.03       60% to 79%   619   2.22       652   2.24       Total        $  1,801        2.10   57%        $  1,761   2.11   57%   The Company’s annual in-depth review of its commercial mortgage loan investments is the primary mechanism for identifying emerging risks in the portfolio.  The most recent review was completed by the Company’s investment professionals in the second quarter of 20162017 and included an analysis of each underlying property’s most recentDecember 31, 2016 annual financial statements, rent rolls, operating plans and budgets for 2017, a physical inspection of the property and other pertinent factors.  Based on historical results, current leases, lease expirations and rental conditions in each market, the Company estimates the current year and future stabilized property income and fair value and categorizes the investments as loans in good standing, potential problem loans or problem loans.  The results of the 2016 review showed improvement from the prior review infor each of the key metrics and confirmed the overall strength of the portfolio.  loan. The Company will reevaluate a loan’s credit quality between annual reviews if new property information is received or an event such as delinquency or a borrower’s request for restructure causes management to believe that the Company’s estimate of financial performance, fair value or the risk profile of the underlying property has been impacted.  The portfolio’s average loan-to-value ratio remained at 57% at March 31, 2017 and the portfolio’s average debt service coverage ratio remained at 1.95 at March 31, 2017 compared with December 31, 2016. Potential problem mortgage loans are considered current (no payment is more than 59 days past due), but they exhibit certain characteristics that increase the likelihood of future default.  The characteristics management considers include, but are not limited to, the deterioration of debt service coverage below 1.0, estimated loan-to-value ratios increasing to 100% or more, downgrade in quality rating and requests from the borrower for restructuring.  In addition, loans are considered potential problems if principal or interest payments are past due by more than 30 but less than 60 days.  Problem mortgage loans are either in default by 60 days or more or have been restructured as to terms that could include concessions on interest rate, principal payment or maturity date.  The Company monitors each problem and potential problem mortgage loan on an ongoing basis, and updates the loan categorization and quality rating when warranted. Problem and potential problem mortgage loans, net of valuation reserves, totaled $6 million at March 31, 2017 and $21 million at December 31, 2016.   Impaired commercial mortgage loans.  A commercial mortgage loan is considered impaired when it is probable that the Company will not collect all amounts due according to the terms of the original loan agreement.  These loans are included in either problem or potential problem loans.  The Company monitors credit risk and assesses the impairment of loans individually and on a consistent basis for all loans in the portfolio.  Impaired loans are carried at the lower of unpaid principal balance or the fair value of the underlying real estate.  Certain commercial mortgage loans without valuation reserves are considered impaired because the Company will not collect all interest due according to the terms of the original agreements; however, the Company expects to recover the unpaid principal because it is less than the fair value of the underlying real estate.  The Company recognizes interest income on impaired mortgage loans only when payment is actually received.   The carrying valueAs of the Company’sMarch 31, 2018 and December 31, 2017, there were no impaired commercial mortgage loans and related valuation reserves were as follows:                 March 31, 2017   December 31, 2016   (In millions)   Gross   Reserves   Net   Gross   Reserves   Net   Impaired commercial mortgage loans with valuation reserves        $ 9        $ (3)        $ 6        $ 26        $ (5)        $ 21   Impaired commercial mortgage loans without valuation reserves   -   -   -   -   -   -   Total impaired commercial mortgage loans        $ 9        $ (3)        $ 6        $ 26        $ (5)        $ 21   For the three months ended March 31, 2017,loans; the average recorded investment in impaired loans decreased to $18 million in 2017 compared with $112 million for the three months ended March 31, 2016, primarily due to the foreclosure of oneand interest income on impaired loan and the full payoff of another. Changes in valuation reserves for commercial mortgage loans were not material formaterial. Other Long-Term Investments Accounting policy.  Other long-term investments include investments in unconsolidated entities.  These entities include certain limited partnerships and limited liability companies holding real estate, securities or loans.  These investments are carried at cost plus the three months ended March 31, 2017 and 2016.Company’s ownership percentage of reported income or loss in cases where the Company has significant influence.  Beginning in 2018 upon adopting ASU 2016-01, in cases when the Company does not have significant influence, the investments are carried at fair value using NAV as a practical expedient. Short-Term Investments and Cash Equivalents   Short-term investments and cash equivalents included corporate securitiesthe following types of $2.4 billion, federal government securities of $597 million and money market funds of $17 million as of March 31, 2017.  The Company’s short-term investments and cash equivalents as of December 31, 2016 included corporate securities of $2.2 billion, federal government securities of $378 million and money market funds of $11 million.issuers:     March 31,   December 31, (In millions)   2018   2017 Corporate securities ��     $ 774       $ 1,143 Federal government securities       $ 226       $ 604 Foreign government securities       $ 191       $ 159 Money market funds       $ 12       $  12   B.      Realized Investment Gains and Losses   Realized investment gains and losses are based on specifically identified assets and result from sales, investment asset write-downs, changes in the fair values of certain derivatives and equity securities and changes in valuation reserves on commercial mortgage loans.  The following realized gains and (losses) on investments exclude amounts required to adjust future policy benefits for the run-off settlement annuity business.         Three Months Ended         March 31, (In millions)           2017   2016 Fixed maturities                    $ 2        $ (18) Equity securities           33   (10) Other investments, including derivatives           11   (4) Realized investment gains (losses) before income taxes           46   (32) Less income taxes (benefits)           15   (11) Net realized investment gains (losses)                    $ 31        $ (21)     Three Months Ended     March 31, (In millions)   2018   2017 Fixed maturities       $ (20)       $ 2 Equity securities   (19)   33 Other investments, including derivatives   6   11 Realized investment (losses) gains before income taxes   (33)   46 Less income tax (benefit) expense   (10)   15 Net realized investment (losses) gains       $ (23)       $ 31   Included in thesethe realized investment gains (losses)and losses in the above table were pre-tax asset write-downs as follows:         Three Months Ended         March 31, (In millions)           2017   2016 Other-than-temporary impairments on debt securities:                       Credit-related                $ (5)        $ (18) Non credit-related (1)           (2)   (9) Total other-than-temporary impairments on debt securities           (7)   (27) Other asset write-downs (2)           (3)   (9) Total write-downs                    $ (10)        $ (36) (1) These write-downs pertain to other-than-temporary declines in fair values due to increases in market yields (widening of credit spreads) for certain below investment grade fixed maturities with an increased probability of sales activity prior to recovery of their amortized cost basis. (2) Otheron debt securities and other asset write-downs include other-than-temporary declines in fair values of $17 million for the three months ended March 31, 2018 and $10 million for the three months ended March 31, 2017.  Losses of $19 million for equity securities still held at March 31, 2018 were included in realized gains and asset write-downs related to real estate investments. losses on equity securities for the three months ended March 31, 2018.   The following table presents sales information for available-for-sale securities (fixed maturities in 2018, and fixed maturities and equity securities.securities in 2017).  Gross gains on sales and gross losses on sales exclude amounts required to adjust future policy benefits for the run-off settlement annuity business.           Three Months Ended         March 31, (In millions)           2017   2016 Proceeds from sales                    $ 414        $ 361 Gross gains on sales                $ 47        $ 12 Gross losses on sales                $ 2        $ 5     Three Months Ended     March 31, (In millions)   2018   2017 Proceeds from sales       $ 499       $ 414 Gross gains on sales       $ 5       $ 47 Gross losses on sales       $ 22       $ 2 Note 11 — Derivative Financial Instruments     The Company uses derivative financial instruments to manage the characteristics of investment assets (such as duration, yield, currency and liquidity) to meet the varying demands of the related insurance and contractholder liabilities (such as paying claims, investment returns and withdrawals).  The Company also uses derivative financial instruments to hedge the risk of changes in the net assets of certain of its foreign subsidiaries due to changes in foreign currency exchange rates, and to hedge the interest rate risk of its long-term debt.  The Company has written and purchased GMIB reinsurance contracts in its run-off reinsurance business that are accounted for as freestanding derivatives and discussed further in Note 8.  Derivatives in the Company’s separate accounts are excluded from the following discussion because associated gains and losses generally accrue directly to separate account policyholders.   Accounting policy.  During the first quarter of 2018 the Company early adopted ASU 2017-12 (Targeted Improvements to Accounting for Hedging Activities) with no material impact to its financial statements.  The Company applies hedge accounting when derivatives are designated, qualified and highly effective as hedges.  Effectiveness is formally assessed and documented at inception and each period throughout the life of a hedge using various qualitative or quantitative methods appropriate for each hedge, including regression analysis and dollar offset.hedge.  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 shareholders’ net income.  Changes in the fair value of a derivative instrument may not always equal changes in the fair value of the hedged item.  This is referred to as ‘‘hedge ineffectiveness’’“hedge ineffectiveness” and, with the adoption of ASU 2017-12, is generally recorded in realized investment gainsno longer measured and losses.  Inreported separately from the eventeffective portion of an early hedge termination, the hedge.  The Company excludes certain components of derivative instruments’ changes in fair value from the assessment of derivatives that qualified for hedge accountingeffectiveness.  With the adoption of ASU 2017-12, those excluded components are reportedinitially recorded in other comprehensive income and recognized in shareholders’ net income generallyover the life of the derivative instrument as a part of realized investment gains and losses.further discussed below.  See Note 9 for further information on our policies for determining fair value.  Derivative cash flows are generally reported in operating activities.   During the first quarter of 2018, the Company terminated its Fair Value Hedge of Long-Term Corporate Debt (notional value of $750 million as of December 31, 2017) with no material impact to the Company’s financial statements.  The following tables provide information on the Company’s other specific applications of derivative financial instruments during the periods ended March 31, 20172018 and December 31, 2016.2017. Net Investment Hedge of Certain International Subsidiaries Notional Value (in millions) Type of instrument.  Foreign currency swap contracts March 31, 2018 December 31, 2017 $ 439  $ - Purpose.  During the first quarter of 2018, the Company entered into fixed-for-fixed currency swaps to reduce the risk of changes in net assets due to changes in foreign currency spot exchange rates for hedged foreign subsidiaries that conduct their business principally in Euros. Terms of derivative instruments.  The Company receives fixed rate U.S. dollar coupon and principal payments, and pays fixed rate coupon and principal payments denominated in the functional currency of the hedged foreign subsidiary.  The notional value of hedging instruments matches the amount of subsidiary net assets being hedged.  Foreign currency swaps are denominated in Euros. Accounting.  As a net investment hedge, the fair values of the swap contracts are reported in other assets, including other intangibles, or in accounts payable, accrued expenses, and other liabilities.  The changes in fair value of these instruments are reported in other comprehensive income, specifically in translation of foreign currencies.  The portion of the change in swap fair value relating to foreign exchange spot rates will be recognized in earnings upon deconsolidation of the hedged foreign subsidiaries.  The remaining changes in swap fair value are excluded from the effectiveness assessment and recognized in other operating expenses as coupon payments are accrued.  Fair Value Hedges of Fixed Maturity Bonds Notional Value (in millions) Type of instrument.  Foreign currency swap contracts March 31, 2018 December 31, 2017 $ 400    $ 318       Purpose.  To hedge the foreign exchange related changes in fair values of certain fixed maturity foreign-denominated bonds.         Terms of derivative instruments.  The Company periodically exchanges cash flows between two currencies for both principal and interest.  Foreign currency swaps are Euros, British pounds and Australian dollars, and have terms for periods of up to thirty years.  The notional value of these derivatives matches the amortized cost of the hedged bonds.         Accounting.  Using fair value hedge accounting, swap fair values are reported in other long-term investments or in accounts payable, accrued expenses and other liabilities.  Changes in fair values attributable to foreign exchange risk of the swap contracts and the hedged bonds are reported in other realized investment gains and losses.  The portion of the swap contracts’ changes in fair value excluded from the assessment of hedge effectiveness is recorded in accumulated other comprehensive income and recognized in net investment income as coupon payments are accrued, offsetting the foreign exchange coupons received on the designated bonds.  Prior to adopting ASU 2017-12, changes in fair value of excluded components of the swap contracts were recognized immediately in realized investment gains and losses.   32 Table of Contents   Fair Value Hedge of Long-Term Corporate Debt Notional Value (in millions) Type of instrument.  Interest rate swap contracts March 31, 2017 December 31, 2016 $ 750    $ 750       Purpose.  To convert a portion of the interest rate exposure on the Company’s long-term debt from fixed to variable rates.  This more closely aligns the Company’s interest expense with the interest income received on its cash equivalent and short-term investment balances.  The variable rates are benchmarked to LIBOR.         Terms of derivative instruments.  The Company provides upfront margin and settles fair value changes and net interest between variable and fixed rates daily with a central clearinghouse.         Accounting.  Using fair value hedge accounting, the fair values of the swap contracts are reported in other assets, including other intangibles, or accounts payable, accrued expenses, and other liabilities.  The critical terms of these swaps match those of the long-term debt being hedged.  As a result, the carrying value of the hedged debt is adjusted to reflect changes in its fair value driven by LIBOR.  The effects of those adjustments on other operating expenses are offset by the effects of corresponding changes in the swaps’ fair value.  The net impact from the hedge reported in other operating expenses reflects interest expense on the hedged debt at the variable interest rate.   Cash Flow Hedges of Fixed Maturity Bonds Notional Value (in millions) Type of instrument.  Foreign currency swap contracts March 31, 2017 December 31, 2016 $ 31    $ 55       Purpose.  To hedge the foreign currency cash flows of its fixed maturity bonds to match associated insurance liabilities.         Terms of derivative instruments.  The Company periodically exchanges cash flows between two currencies for both principal and interest.  Foreign currency swaps are Canadian dollars and Japanese yen and have terms for periods of up to four years.         Accounting.  Using cash flow hedge accounting, fair values are reported in other long-term investments or accounts payable, accrued expenses, and other liabilities.  Changes in fair values are reported in accumulated other comprehensive income and amortized into net investment income or other realized investment gains and losses as interest or principal payments are received.   Economic Hedges of a Fixed Maturity Bond Portfolio Notional Value (in millions) Type of instrument.  Foreign currency forward contracts March 31, 2018 December 31, 2017 $ 309   $ 255       Purpose.  To hedge the foreign exchange related changes in fair values of a U.S. dollar-denominated fixed maturity bond portfolio to reflect the local currency for the Company’s foreign subsidiary in South Korea.         Terms of derivative instruments.  The Company agrees to purchase South Korean won in exchange for U.S. dollars at a future date, generally within three months from the contracts’ trade dates.  The notional value of hedging instruments generally aligns with the fair value of the hedged bond portfolio.         Accounting.  As these arrangements were not designated as accounting hedges, fair values are reported in short-term investments or accounts payable, accrued expenses, and other liabilities, and changes in fair values are reported in other realized investment gains and losses.     Fair Value Hedges of Fixed Maturity Bonds Notional Value (in millions) Type of instrument.  Foreign currency swap contracts March 31, 2017 December 31, 2016 $ 87    $ 78       Purpose.  To hedge the foreign exchange related changes in fair values of the Company’s fixed maturity bonds.         Terms of derivative instruments.  The Company periodically exchanges cash flows between two currencies for both principal and interest.  Foreign currency swaps are Euros and British pounds and have terms for periods of up to nine years.         Accounting.  Using fair value hedge accounting, fair values are reported in other long-term investments or accounts payable, accrued expenses, and other liabilities.  Changes in fair values of the swap contracts, as well as changes in the fair values of the hedged bonds attributable to the hedged risk are reported in other realized investment gains and losses.   Economic Hedges of a Fixed Maturity Bond Portfolio Notional Value (in millions) Type of instrument.  Foreign currency forward contracts March 31, 2017 December 31, 2016 $ 150    $ 149       Purpose.  To hedge the foreign exchange related changes in fair values of a U.S. dollar-denominated fixed maturity bond portfolio to reflect the local currency for one of the Company’s foreign subsidiaries.         Terms of derivative instruments.  The Company agrees to purchase South Korean won in exchange for U.S. dollars at a future date, generally within three months from the contracts’ trade dates.         Accounting.  As these arrangements were not designated as accounting hedges, fair values are reported in short-term investments or accounts payable, accrued expenses, and other liabilities, and changes in fair values are reported in other realized investment gains and losses.   As of March 31, 20172018 and December 31, 2016,2017, and for the three months ended March 31, 20172018 and 2016,2017, the effects of these derivative instruments on the Consolidated Financial Statements were not material, including the amounts excluded from the assessment of hedge effectiveness, as well as the associated gains or losses reclassified from accumulated other comprehensive income into shareholders’ net income, were not material.  No material amounts were excluded from the assessment of hedge effectiveness and no significant gains or losses were recognized due to hedge ineffectiveness.income.   Collateral and termination features.  The Company routinely monitors exposure to credit risk associated with derivatives and diversifies the portfolio among approved dealers of high credit quality to minimize this risk.  As of March 31, 2017, the Company had $13 million in cash on deposit representing the upfront margin required for the Company’s centrally-cleared derivative instruments.  Certain of the Company’s over-the-counter derivative instruments contain provisions requiring either the Company or the counterparty to post collateral or demand immediate payment depending on the amount of the net liability position and predefined financial strength or credit rating thresholds.  Collateral posting requirements vary by counterparty.  The net asset or liability positions of these derivatives were not material as of March 31, 20172018 or December 31, 2016.2017. Note 12 — Variable Interest Entities     When the Company becomes involved with a variable interest entity, as well as when there is a change in the Company’s involvement with an entity, the Company evaluates the following tomust determine if it is the primary beneficiary and must consolidate the entity:entity.  The Company would be considered the primary beneficiary if it has the power to direct the entity’s most significant economic activities or has the right to receive benefits or obligation to absorb losses that could be significant to the entity.  The Company evaluates the following criteria:   · the structure and purpose of the entity; · the risks and rewards created by and shared through the entity; and · the Company’s ability to direct its activities, receive its benefits and absorb its losses relative to the other parties involved with the entity including its sponsors, equity holders, guarantors, creditors and servicers.   The Company determined it was not a primary beneficiary in any material variable interest entities as of March 31, 2018 or December 31, 2017.  The Company’s involvement in variable interest entities where it is not the primary beneficiary is described below. Securities limited partnerships and real estate limited partnerships.  The Company owns interests in securitysecurities limited partnerships and real estate limited partnerships defined as variable interest entities that invest in the equity or mezzanine debt of privately held companies and real estate properties.  General partners unaffiliated with the Company control decisions that most significantly impact the partnership’sthese partnerships’ operations and the limited partners do not have substantive kick-out or participating rights.  The Company’s maximum exposure to these entities of $2.2$2.5 billion across approximately 100120 limited partnerships as of March 31, 20172018 includes $1.1$1.3 billion reported in other long-term investments and commitments to contribute an additional $1.1$1.2 billion.  The Company’s non-controlling interest in each of these limited partnerships is generally less than 10% of the partnership ownership interests.   Other asset-backed and corporate securities.In the normal course of its investing activities, the Company also makes passive investments in certain asset-backed and corporate securities that are issued by variable interest entities whose sponsors or issuers are unaffiliated with the Company.  The Company receives fixed-rate cash flows from these investments and the maximum potential exposure to loss is limited to theits carrying amount of $0.5$0.6 billion as of March 31, 2017,2018, that is reported in fixed maturities.  The Company’s combined ownership interests are insignificant relative to the total principal amounts issued by these entities.   The Company is also involved in real estate joint ventures, with carrying values of $0.2 billion where all decisions significantly affecting the entities’ economic performance are subject to unanimous approval by the equity holders.  As a result, the Company determined that the power over these entities is shared equally, and there is no primary beneficiary.  The Company’s maximum exposure to loss was approximately equal to its carrying value that is reported in other long-term investments. To provide certain services to its Medicare Advantage customers, the Company contracts with independent physician associations (“IPAs”) and a joint venture in India that are variable interest entities.  Physicians provide health care services to Medicare Advantage customersThe carrying values and the Company provides medical management and administrative services to the IPAs.  The Company’s maximum exposure to loss related to the IPAexposures associated with these arrangements is limited to their liability for incurred but not reported medical costs for the Company’s Medicare Advantage customers.  These liabilities are not material and are generally secured by deposits maintained by the IPAs. The Company is not the primary beneficiary of any of the variable interest entities described above and does not consolidate these entities because either: ·         it has no power to direct the activities that most significantly impact the entities’ economic performance; or ·         it has neither the right to receive benefits nor the obligation to absorb losses that could be significant to these variable interest entities.immaterial.   The Company has not provided, and does not intend to provide, financial support to theseany of the above entities that it is not contractually required to provide.  The Company performs ongoing qualitative analyses of its involvement with these variable interest entities to determine if consolidation is required. Note 13 — Accumulated Other Comprehensive Income (Loss) (“AOCI”)     Accumulated other comprehensive income (loss)AOCI includes the Company’s share from entities accounted for using the equity method.  AOCI excludes amounts required to adjust future policy benefits for the run-off settlement annuity business and a portion of deferred acquisition costs associated with the corporate ownedcorporate-owned life insurance business.  Generally, tax effects in AOCI are established at the currently enacted tax rate and reclassified to net income in the same period that the related pre-tax AOCI reclassifications are recognized.  As discussed in Note 2, effective January 1, 2018, the Company early adopted ASU 2018-02 and $229 million of stranded tax effects resulting from U.S. tax reform legislation enacted in 2017 were reclassified from AOCI to retained earnings.  Changes in the components of accumulated other comprehensive income (loss)AOCI, including the reclassification of the stranded tax effects, were as follows:         Tax             (Expense)   After- (In millions)   Pre-Tax   Benefit   Tax Three Months Ended March 31,             2017             Net unrealized appreciation, securities, January 1,       $ 542       $ (180)       $ 362 Unrealized appreciation on securities arising during the period   53   (24)   29 Reclassification adjustment for (gains) included in shareholders’ net income (realized investment gains)   (35)   13   (22) Net unrealized appreciation, securities arising during the period   18   (11)   7 Net unrealized appreciation, securities, March 31,       $ 560       $ (191)       $ 369 Net unrealized appreciation, derivatives, January 1,       $ 4       $ (1)       $ 3 Reclassification adjustment for (gains) included in shareholders’ net income (net realized investment gains)   (4)   1   (3) Net unrealized appreciation, derivatives, March 31,       $ -       $ -       $ - Net translation of foreign currencies, January 1,       $ (390)       $ 21       $ (369) Net translation of foreign currencies arising during the period     111     1     112 Net translation of foreign currencies, March 31,       $ (279)       $ 22       $ (257) Postretirement benefits liability adjustment, January 1,       $ (2,120)       $ 742       $ (1,378) Reclassification adjustment for amortization of net losses from past experience and prior service costs (other operating expenses)     15     (5)     10 Reclassification adjustment for settlement loss (other operating expenses)     6     (2)     4 Net postretirement benefits liability adjustment arising during the period     21     (7)     14 Postretirement benefits liability adjustment, March 31,       $ (2,099)       $ 735       $ (1,364)                     2016                   Net unrealized appreciation, securities, January 1,       $ 612       $ (194)       $ 418 Unrealized appreciation on securities arising during the period     227     (72)     155 Reclassification adjustment for losses included in shareholders’ net income (realized investment gains)   28   (10)     18 Net unrealized appreciation, securities arising during the period   255   (82)     173 Net unrealized appreciation, securities, March 31,       $ 867       $ (276)       $ 591 Net unrealized appreciation, derivatives, January 1,       $ 10       $ (3)       $ 7 Unrealized (depreciation), derivatives arising during the period     (4)     1     (3) Net unrealized appreciation, derivatives, March 31,       $ 6       $ (2)       $ 4 Net translation of foreign currencies, January 1,       $ (295)       $ 21       $ (274) Net translation of foreign currencies arising during the period     83     (2)        81 Net translation of foreign currencies, March 31,       $ (212)       $ 19       $ (193) Postretirement benefits liability adjustment, January 1,       $ (2,155)       $ 754       $ (1,401) Reclassification adjustment for amortization of net losses from past experience and prior service costs (other operating expenses)     16     (5)     11 Postretirement benefits liability adjustment, March 31,       $ (2,139)       $ 749       $ (1,390)     Three Months Ended     March 31, (in millions)   2018     2017   Securities             Beginning balance   $ 328     $ 362   Reclassification adjustment to retained earnings related to U.S. tax reform legislation(1)   65     -   Reclassification adjustment to retained earnings related to new financial instruments guidance(1)   (4)     -   Adjusted beginning balance   389     362   (Depreciation) appreciation on securities   (379)     53   Tax benefit (expense)   76     (24)   Net (depreciation) appreciation on securities   (303)     29   Reclassification adjustment for losses (gains) included in shareholders’ net income (net realized investment gains)   30     (35)   Tax (expense) benefit   (6)     13   Net losses (gains) reclassified from AOCI to net income   24     (22)   Other comprehensive (loss) income, net of tax   (279)     7   Ending balance   $ 110     $ 369                 Derivatives             Beginning balance   $ -     $ 3   Reclassification adjustment from retained earnings related to new hedging guidance(1)   (6)     -   Adjusted beginning balance   (6)     3   (Depreciation) on derivatives   (6)     -   Tax benefit   1     -   Net (depreciation) on derivatives   (5)     -   Reclassification adjustment for (gains) included in shareholders’ net income (net realized investment gains)   -     (4)   Tax benefit   -     1   Net (gains) reclassified from AOCI to net income   -     (3)   Other comprehensive (loss), net of tax   (5)     (3)   Ending balance   $ (11)     $ -                 Translation of foreign currencies             Beginning balance   $ (65)     $ (369)   Reclassification adjustment to retained earnings related to U.S. tax reform legislation(1)   (4)     -   Adjusted beginning balance   (69)     (369)   Translation of foreign currencies   46     111   Tax (expense) benefit   (1)     1   Net translation of foreign currencies   45     112   Ending balance   $ (24)     $ (257)                 Postretirement benefits liability             Beginning balance   $ (1,345)     $ (1,378)   Reclassification adjustment to retained earnings related to U.S. tax reform legislation(1)   (290)     -   Adjusted beginning balance   (1,635)     (1,378)   Reclassification adjustment for amortization of net losses from past experience and prior service costs (other operating expenses)   17     15   Reclassification adjustment for settlement (other operating expenses)   -     6   Tax (expense)   (4)     (7)   Other comprehensive income, net of tax   13     14   Ending balance   $ (1,622)     $ (1,364)   (1) See Note 2 for further information about adjustments resulting from the Company’s adoption of new accounting standards in 2018. Note 14— Pension and Other Postretirement Benefit Plans   The Company and certain of its subsidiaries provide pension, health care and life insurance defined benefits to eligible retired employees, spouses and other eligible dependents through various domestic and foreign plans.  The effect of its foreign pension and other postretirement benefit plans is immaterial to the Company’s results of operations, liquidity and financial position.  The Company froze its defined benefit postretirement medical plan in 2013 and its primary domestic pension plans in 2009.   As further discussed in Note 16, the CompanyCigna Corporation and the Cigna Pension Plan are defendants in a class action lawsuit that has yetrelated to be resolved.the Plan’s conversion of certain employees from an annuity to a cash balance benefit in 1997.  When the parties agree on a finalrequired plan amendment related to this litigation is adopted, the pension benefit obligation will be updated to reflect additional benefits resulting from this litigation. For the three months ended March 31, 2017, the Company’s unrecognized actuarial losses and prior service costs (reported in accumulated other comprehensive income) decreased by $21 million pre-tax in the aggregate ($14 million after-tax) resulting in an increase in shareholders’ equity.  This change was primarily the result of amortization.   Pension and Other Postretirement Benefits.  Components of net pension and net other postretirement benefit costs were as follows:     Pension Benefits   Other Postretirement Benefits     Pension Benefits   Other Postretirement Benefits     Three Months Ended   Three Months Ended     Three Months Ended March 31,   Three Months Ended March 31,     March 31,   March 31,   (In millions)   2017   2016   2017   2016     2018   2017   2018   2017   Service cost   $ 1   $ -   $ -   $ -   Interest cost   $  48   $  50   $  3   $  3     42   48   2   3   Expected long-term return on plan assets   (65)   (62)   -   -     (64)   (65)   -   -   Amortization of:                                     Net loss from past experience   16   17   -   -     17   16   -   -   Prior service cost   -   -   (1)   (1)     -   -   -   (1)   Settlement loss   6   -   -   -     -   6   -   -   Net cost   $ 5   $  5   $  2   $  2     $ (4)   $ 5   $ 2   $ 2     All components of pension and other postretirement benefit costs are reported in operating expenses.  The Company funds its domestic qualified pension plans at least at the minimum amount required by the Employee Retirement Income Security Act of 1974 and the Pension Protection Act of 2006.  DuringThe Company did not make any pension contributions during the three months ended March 31, 2017, the Company made a voluntary2018, and does not expect to make any pension contribution of $150 million.  No additional contributions are required for the remainder of 2017.2018.   Note 15 — — Income Taxes   A.  Income Tax Expense   The consolidated effective tax rate decreased to 24.7% for the three months ended March 31, 2018 compared with 33.4% for the three months ended March 31, 2017 compared with 37.2%2017.  The significantly lower effective tax rate for 2018 was attributable to the lower U.S. tax rate effective January 1, 2018 resulting from the recently enacted U.S. tax reform legislation.  This favorable effect was partially offset by the reinstatement of the non-deductible health insurance industry tax in 2018.  For the three months ended 2016 dueMarch 31, 2018, there were no adjustments to the moratoriumprovisional amounts first recognized in 2017 onas a result of U.S. tax reform legislation.  In accordance with guidance of the health insurance industrystaff of the Securities and Exchange Commission, the Company’s accounting for these amounts will be evaluated and adjusted, if needed, until we file our 2017 U.S. tax return later in 2018.  In addition, the Company has evaluated the global intangible low-taxed income (“GILTI”) provisions of U.S. tax reform that is not deductible for federal incomebecame effective January 1, 2018.  For the three months ended March 31, 2018, the GILTI tax purposes. impact was immaterial.  The Company maintains a capital management strategywill continue to retain overseasevaluate these provisions in future periods as further guidance emerges.  It is the Company’s policy to recognize any GILTI taxes as period costs when incurred. The Company’s foreign operations continue to maintain a significant portion of thetheir earnings from its foreign operations.  As of March 31, 2017, undistributed earnings were approximately $2.7 billion.overseas.  These undistributed earnings are deployed outside of the U.S.United States predominantly in support of the liquidity and regulatory capital requirements of our foreign operations.operations as well as to support growth initiatives overseas.  The Company does not intend to repatriate these earnings to the U.S. and as a result, income taxes are provided using the respective foreign jurisdictions’ tax rate.United States.  If the Company had intended to repatriate these foreign earnings to the U.S.,United States, the Company’s Consolidated Balance SheetsCompany would have included anrecorded additional $362 million of deferred tax liabilities of approximately $150 million for foreign withholding taxes as of March 31, 2017.2018.  A portion of these taxes may be eligible for credit against the Company’s U.S. tax liability.   B.  Unrecognized Tax Benefits   Changes in unrecognized tax benefits were immaterial for the three months ended March 31, 2017.2018. Note 16 — Contingencies and Other Matters   The Company, through its subsidiaries, is contingently liable for various guarantees provided in the ordinary course of business.   A. Financial Guarantees:  Retiree and Life Insurance Benefits   Separate account assets are contractholder funds maintained in accounts with specific investment objectives.  The Company records separate account liabilities equal to separate account assets.  In certain cases, the Company guarantees a minimum level of benefits for retirement and insurance contracts written in separate accounts.  The Companyaccounts and establishes an additional liability if management believes that the Company will be required to make a payment under these guarantees.   The Company guarantees that separate account assets will be sufficient to pay certain life insurance or retiree benefits.  The sponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these benefits and are required to maintain assets that exceed a certain percentage of benefit obligations.  This percentage varies depending on the asset class within a sponsoring employer’s portfolio (for example, a bond fund would require a lower percentage than a riskier equity fund) and thus will vary as the composition of the portfolio changes.  If employers fail to do not maintain the required levels of separate account assets,so, the Company or an affiliate of the buyer of the retirement benefits business (Prudential Retirement Insurance and Annuity Company)Company or “Prudential”) has the right to redirect the management of the related assets to provide for benefit payments.  As of March 31, 2017,2018 employers maintained assets that exceeded the benefit obligations.  Benefit obligations under these arrangements were $488 million as of March 31, 2017 and approximately 13%$460 million.  Approximately 12% of these are reinsured by an affiliate of the buyer of the retirement benefits business.Prudential.  The remaining guarantees are provided by the Company with minimal reinsurance from third parties.  There were no additional liabilities required for these guarantees as of March 31, 2017.2018.  Separate account assets supporting these guarantees are classified in Levels 1 and 2 of the GAAP fair value hierarchy.  Seehierarchy (see Note 9 for further information on the fair value hierarchy.9).   The Company does not expect that these financial guarantees will have a material effect on the Company’s consolidated results of operations, liquidity or financial condition.   B.GMIB Contracts   See Note 8 for discussion.   C. Certain Other Guarantees   The Company had financial guarantees and indemnification obligations to lendersa lender of approximately $153$90 million as of March 31, 2017,2018, related to borrowingsa borrowing by a certain real estate joint venturesventure that the Company either records as an investment or consolidates.  These borrowings, that are both recourseinvestment.  This borrowing (a nonrecourse obligation of the Company) matures in 2021 and nonrecourse to the Company, areis secured by the joint ventures’venture’s real estate propertiesproperty with a fair valuesvalue in excess of the loan amounts and mature at various dates beginning in 2018 through 2021.amount.  The Company’s indemnification obligationsobligation would require payment to lendersthe lender for any actual damages resulting from certain acts such as unauthorized ownership transfers, misappropriation of rental payments by others or environmental damages.  Based on initial and ongoing reviews of property management and operations, the Company does not expect that payments will be required under these financial guarantees orthis indemnification obligations.obligation.  Any paymentspayment that might be required could be recovered through a refinancing or sale of the assets.  In some cases, theThe Company also has recourse to partnersthe partner for their proportionate share of amounts paid.  There were no liabilities required for these financial guarantees andthis indemnification obligationsobligation as of March 31, 2017. As of March 31, 2017, the Company guaranteed that it would compensate the lessors for a shortfall of up to $32 million in the market value of certain leased equipment at the end of its leases.  Guarantees of $25 million expire in 2022 and $7 million expire in 2026.  The Company had liabilities for these guarantees of $3 million as of March 31, 2017. The Company does not expect that these guarantees will have a material adverse effect on the Company’s consolidated results of operations, financial condition or liquidity.2018. The Company had indemnification obligations as of March 31, 20172018 in connection with acquisition and disposition transactions.  These indemnification obligations are triggered by the breach of representations or covenants provided by the Company, such as representations for the presentation of financial statements, the filing of tax returns, compliance with law or the identification of outstanding litigation.  These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation.  In some cases, the maximum potential amount due is subject to contractual limitations based on a percentage of the transaction purchase price, while in other cases limitations are not specified or applicable.  The Company does not believe that it is possible to determine the maximum potential amount due under these obligations, because not all amounts due under these indemnification obligations are subject to limitation.  There were no liabilities required for these indemnification obligations as of March 31, 2017.2018.   D. Guaranty Fund Assessments   The Company operates in a regulatory environment that may require its participation in assessments under state insurance guaranty association laws.  The Company’s exposure to assessments for certain obligations of insolvent insurance companies to policyholders and claimants is based on its share of business written in the relevant jurisdictions.   On March 1,In first quarter 2017, the Commonwealth Court of Pennsylvania entered an order of liquidation of Penn Treaty Network America Insurance Company, together with its subsidiary American Network Insurance Company (collectively “Penn Treaty”, a long-term care insurance carrier), triggering guaranty fund coverage and accruala charge of a liability.  For the three months ended March 31, 2017, the Company recorded in operating expenses $129approximately $130 million pre-taxbefore-tax ($83 million after-tax), representing its estimate of future assessments on a discounted basis.  Amounts recorded by segment were:  Global Health Care, $106 million pre-tax ($68 million after-tax) and Group Disability and Life, $23 million pre-tax ($1585 million after-tax).  These estimates include small reductionsAs of March 31, 2018, the recorded liability for premium tax refunds for insurance contracts currently written.  Thisthis assessment is expectedwas approximately $43 million.  Updates to be updated in future periods for changes in the estimateamount of the insolvency.  In addition, aPenn Treaty assessment were not material in 2018.  A portion of this assessment is expected to be offset in the future by premium tax credits that will be recognized in the period received.   E.Legal and Regulatory Matters   The Company is routinely involved in numerous claims, lawsuits, regulatory audits, investigations and other legal matters arising, for the most part, in the ordinary course of managing a global health services business.  These actions may include benefit disputes, breach of contract claims, tort claims, provider disputes, disputes regarding reinsurance arrangements, employment and employment discrimination-related suits, employee benefit claims, wage and hour claims, privacy, claims arising from consumer protection laws, intellectual property claims and real estate-related disputes.  There are currently, and may be inExcept for the future, attempts to bring class action lawsuits against the industry.  The Company also is regularly engaged in Internal Revenue Service (“IRS”) audits and may be subject to examinations by various state and foreign taxing authorities.  Disputed income taxspecific matters arising from these examinations, including those resulting in litigation, are accounted for under GAAP guidance for uncertain tax positions.  Further information on income tax matters can be found in Note 15. The business of administering and insuring health services programs, particularly health care and group insurance programs, is heavily regulated by federal and state laws and administrative agencies, such as state departments of insurance and the U.S. Departments of Health and Human Services, Treasury, Labor and Justice, as well as the courts.  Health care regulation and legislation in its various forms, including the Health Care Reform Act, other regulatory reform initiatives, such as those relating to Medicare programs, or additional changes in existing laws or regulations or their interpretations, could have a material adverse effect on the Company’s business, results of operations and financial condition. In addition, there is heightened review by federal and state regulators of the health care, disability and life insurance industry business and related reporting practices.  Cigna is frequently the subject of regulatory market conduct reviews and other examinations of its business and reporting practices, audits and investigations by state insurance and health and welfare departments, state attorneys general, the Centers for Medicare and Medicaid Services (“CMS”) and the Office of Inspector General (“OIG”).  With respect to Cigna’s Medicare Advantage business, CMS and OIG perform audits to determine a health plan’s compliance with federal regulations and contractual obligations, including compliance with proper coding practices (sometimes referred to as Risk Adjustment Data Validation audits or RADV audits), that may result in retrospective adjustments to payments made to health plans.  Regulatory actions can result in assessments, civil or criminal fines or penalties or other sanctions, including loss of licensing or exclusion from participating in government programs. In December 2016, the Company received a Civil Investigative Demand from the Civil Division of the U.S. Department of Justice relating to our Medicare Part C and D risk adjustment compliance activities and business processes, particularly as they relate to our review of medical records conducted as part of our data and payment accuracy compliance efforts.  We believe that this request for information is in connection with a broader review of Medicare Risk Adjustment generally that includes a number of Medicare Advantage plans, providers and vendors.  We intend to cooperate with and voluntarily respond to the information request. As a global company, Cigna is also subject to the laws, regulations and rules of the foreign jurisdictions in which it conducts business.  Foreign laws and rules, and regulatory audit and investigation practices, may differ from or be more stringent than, similar requirements in the U.S. Regulation, legislation and judicial decisions have resulted in changes to industry and the Company’s business practices, financial liability or other sanctions and will continue to do so in the future. When the Company (in the course of its regular review of pending litigation and legal or regulatory matters) has determined that a material loss is reasonably possible, the matter is disclosed.  Such matters are described below.  In accordance with GAAP, when litigation and regulatory matters present loss contingencies that are both probable and estimable, the Company accrues the estimated loss by a charge to shareholders’ net income.  The amount accrued represents the Company’s best estimate of the probable loss at the time.  If only a range of estimated losses can be determined, the Company accrues an amount within the range that, in the Company’s judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, the Company accrues the minimum amount of the range.  In cases when the Company has accrued an estimated loss, the accrued amount may differ materially from the ultimate amount of the loss.  In many proceedings, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount or range of any loss.  The Company provides disclosure in the aggregate for material pending litigation and legal or regulatory matters, including accruals, range of loss, or a statement that such information cannot be estimated.  As a litigation or regulatory matter develops, the Company monitors the matter for further developments that could affect the amount previously accrued, if any, and updates such amount accrued or disclosures previously provided as appropriate. The outcome of litigation and other legal or regulatory matters is always uncertain, and unfavorable outcomes that are not justified by the evidence or existing law can occur.  The Company believes that it has valid defenses to the matters pending against it and is defending itself vigorously.  Except as otherwise noted below, the Company believes that the legal actions, regulatory matters, proceedings and investigations currently pending against it should not have a material adverse effect on the Company’s results of operations, financial condition or liquidity based upon our current knowledge and taking into consideration current accruals.  Disputed tax matters arising from audits by the Internal Revenue Service (“IRS”) or other state and foreign jurisdictions, including those resulting in litigation, are accounted for under GAAP guidance for uncertain tax positions.  Further information on income tax matters can be found in Note 15. Pending litigation and legal or regulatory matters that the Company has identified with a reasonably possible material loss are described below.  When litigation and regulatory matters present loss contingencies that are both probable and estimable, the Company accrues the estimated loss by a charge to shareholders’ net income.  The estimated loss is the Company’s best estimate of the probable loss at the time or an amount within a range of estimated losses reflecting the most likely outcome or the minimum amount of the range (if no amount is better than any other estimated amount in the range.)  The Company had pre-tax reserves asprovides disclosure in the aggregate for material pending litigation and legal or regulatory matters, including accruals, range of March 31, 2017 of approximately $190 million ($125 million after-tax) for the matters discussed below under “Litigation Matters.”  loss, or a statement that such information cannot be estimated.  Due to numerous uncertain factors presented in these cases, it is not possible to estimate an aggregate range of loss (if any) for these matters at this time.  In light of the uncertainties involved in these matters, there is no assurance that their ultimate resolution will not exceed the amounts currently accrued by the Company.  An adverse outcome in one or more of these matters could be material to the Company’s results of operations, financial condition or liquidity for any particular period.  The Company had pre-tax reserves as of March 31, 2018 of $195 million ($155 million after-tax) for the matters discussed below under “Litigation Matters.”   Litigation Matters   Amara cash balance pension plan litigation.  In December 2001, Janice Amara filed a class action lawsuit in the U.S. District Court for the District of Connecticut against Cigna Corporation and the Cigna Pension Plan (the “Plan”) on behalf of herself and other similarly situated Plan participants affected by the 1998 conversion to a cash balance formula.  The plaintiffs allege various violations of the Employee Retirement Income Security Act of 1974 (“ERISA”), including that the Plan’s cash balance formula discriminates against older employees; that the conversion resulted in a wear-away period (when the pre-conversion accrued benefit exceeded the post-conversion benefit); and that the Plan communications contained inaccurate or inadequate disclosures about these conditions. In 2008, the District Court (1) affirmed the Company’s right to convert to a cash balance plan prospectively beginning in 1998; (2) found for plaintiffs on the disclosure claim only; and (3) required the Company to pay pre-1998 benefits under the pre-conversion traditional annuity formula and post-1997 benefits under the post-conversion cash balance formula.  The Second Circuit upheld this decision.  From 2008 through the present,2015, this case has undergone a series of court proceedings that resulted in the original District Court order being largely upheld.  In 2015, the Company submitted to the District Court its proposed method for calculating the additional pension benefits due to class members and plaintiffs responded in August 2015. In January 2016, the District Court ordered the method of calculating the additional pension benefits due to class members.  The court order left several aspects of the calculation of additional plan benefits open to interpretation.  During 2016,From that time through the Company submitted its interpretationpresent, both parties have disputed various aspects of the Court OrderCourt’s interpretation and the plaintiffs filed various objections.Court has attempted to clarify.  On January 10,July 14, 2017, the District Court issued an additionala ruling regardingclarifying certain aspects of the calculationJanuary 2016 order.  The Plaintiffs filed a motion for reconsideration of additional plan benefits.the July 14, 2017 ruling that was denied by the Court on November 7, 2017.  The Company’s reserve for this litigation remains reasonableis adequate at March 31, 20172018, based on calculations consistent with the Company’s interpretation of the updatedlatest guidance from the Court.  However, certain aspectsDue to the continuing inability of the ruling will need further clarification fromparties to agree on the Court beforedetails of calculating the pension benefits, the final plan benefits can be determined.  As a result, the timing of the resolution of this matter remains uncertain.  Once these issues are resolved, the Plan will be amended to comply with the final interpretation of the District Court’s orderorders and the benefits will begin to be paid.   Ingenix.  In April 2004, the Company was sued in a number of putative nationwide class actions alleging that the Company improperly underpaid claims for out-of-network providers through the use of data provided by Ingenix, Inc., a subsidiary of one of the Company’s competitors.  These actions were consolidated into Franco v. Connecticut General Life Insurance Company, et al., pending in the U.S. District Court for the District of New Jersey.  The consolidated amended complaint, filed in 2009 on behalf of subscribers, health care providers and various medical associations, asserted claims related to benefits and disclosure under ERISA, the Racketeer Influenced and Corrupt Organizations (“RICO”) Act, the Sherman Antitrust Act and New Jersey state law and seeks recovery for alleged underpayments from 1998 through the present.  Other major health insurers have been the subject of, or have settled, similar litigation.   In September 2011, the District Court (1) dismissed all claims by the health care provider and medical association plaintiffs for lack of standing; and (2) dismissed the antitrust claims, the New Jersey state law claims and the ERISA disclosure claim.  In January 2013 and again in April 2014, the District Court denied separate motions by the plaintiffs to certify a nationwide class of subscriber plaintiffs.  The Third Circuit denied plaintiffs’ request for an immediate appeal of the January 2013 ruling.  As a result, the case is proceeding on behalf of the named plaintiffs only.  In June 2014, the District Court granted the Company’s motion for summary judgment to terminate all claims, and denied the plaintiffs’ partial motion for summary judgment.  In July 2014, the plaintiffs appealed all of the District Court’s decisions in favor of the Company, including the class certification decision, to the Third Circuit.  On May 2, 2016, the Third Circuit affirmed the District Court’s decisions denying class certification for the claims asserted by members, the granting of summary judgment on the individual plaintiffs’ claims, as well as the dismissal of the antitrust claims.  However, the Third Circuit also reversed the earlier dismissal of the providers’ ERISA claims.  The Company will continue to vigorously defend its position.   Regulatory Matters   CMS actions.Civil Investigative Demand.    In January 2016, CMS issued a NoticeThe U.S. Department of ImpositionJustice (“DOJ”) is conducting an industry review of Immediate Intermediate Sanctions (the “Notice”) to the Company.  The Notice required us to suspend certain enrollment and marketing activities for Medicare Advantage-Prescription Drug andAdvantage organizations’ risk adjustment practices under Medicare Part D Plans.  The sanctions do not impact the right of current enrollees to remain covered by our Medicare Advantage-Prescription Drug or Medicare Part D Plans. CMS imposed sanctions based on its findings of deficiencies with the Company’s operations of its Parts C and D, appealsincluding medical chart reviews and grievances, Part D formulary and benefit administration and compliance program.  Managementhealth exams.  The Company is working towards having these sanctions lifted in timecurrently responding to participate ininformation requests (civil investigative demands) received from the 2018 annual enrollment period.  For the three months ended March 31, 2017, Medicare enrollment and consolidated revenues were materially impacted due to our inability to participate in 2017 annual enrollment, and management expects that trend to continueDOJ (U.S. Attorney’s Offices for the remainderEastern District of 2017.  However, management anticipates that full-year 2017 shareholders’ net incomePennsylvania and the Southern District of New York).  We will not be materially affected because we expect the margin impact of the revenue losscontinue to be offset by 2017 remediation costs that are significantly lower than the $100 million after-tax amount reported in 2016 and other operational efficiencies to improve 2017 results. On October 12, 2016, CMS announced Medicare Star Quality Ratings (“Star Ratings”) for 2017.  While Star Ratings are based on a number of plan performance measures that are evaluated each year, the projected Star Ratings for our plans included certain reductions that are primarily attributable to our CMS audit discussed above.  Under these revised Star Ratings, approximately 20% of our Medicare Advantage customers are expected to be in a 4 Stars or greater plan.  The Company does not believe that these Star Ratings reflect the quality offerings Cigna-HealthSpring provides to beneficiaries. The Company filed a Reconsideration request with CMS, which was denied, and will work fully with CMS through their process as well as consider additional alternativescooperate with the objective that the final Star Ratings more accurately reflect our performance under the Star Ratings measures.  The Company remains committed to our partnership with CMS and to delivering quality products and services to seniors, while working to mitigate the impact these Star Ratings could have on our offerings in 2018.  If we are unsuccessful in restoring at least some of the Star Ratings, modifying our product offerings or implementing operational efficiencies in the Government business, the effect in 2018 could be material to shareholders’ net income.  There is no financial impact in 2017 because these ratings apply to plans for the 2018 payment year.DOJ’s investigation.   Disability claims regulatory matter.  During the second quarter of 2013, the Company finalized an agreement with the Departments of Insurance for Maine, Massachusetts, Pennsylvania, Connecticut and California (together, the “monitoring states”) related to the Company’s long-term disability claims handling practices.  The agreement requires primarily:  (1) enhanced procedures related to documentation and disposition and (2) a two-year monitoring period followed by a re-examination that began in the second quarter of 2016.  Management believes the Company has addressed the requirements of the agreement.  If the monitoring states find material non-compliance with the agreement upon re-examination, the Company may be subject to additional costs and penalties or requests to change its business practices that could negatively impact future earnings for this business. Other Legal Matters   Antitrust Litigation.  On July 21, 2016, the DOJ and certain state attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia (the “District Court”) seeking to block the merger and, on January 4, 2017, the parties concluded the District Court trial.  On February 8, 2017, the District Court issued an order enjoining the proposed merger.  Anthem filed a notice of appeal of the District Court’s order with the U.S. Court of Appeals for the District of Columbia Circuit (the “Appeals Court”) and requested an expedited appeal.  On February 17, 2017, the Appeals Court granted Anthem’s motion for an expedited appeal.  That same day, the Company filed its notice of appeal of the District Court’s order with the Appeals Court.  Oral arguments were heard on March 24, 2017.  On April 28, 2017, the Appeals Court affirmed the decision of the District Court. On May 5, 2017, Anthem filed a petition for a writ of certiorari with the United States Supreme Court seeking appeal of the U.S. Court of Appeals decision affirming the District Court’s order enjoining the merger. Litigation with Anthem.  On  In February 14, 2017, the Company delivered a notice to Anthem terminating the 2015 merger agreement, and notifying Anthem that it must pay the Company the $1.85 billion reverse termination fee pursuant to the terms of the merger agreement.  Also onin February 14, 2017, the Company filed suit against Anthem in the Delaware Court of Chancery (the “Chancery Court”).  The complaint sought seeking declaratory judgments that the Company’s termination of the merger agreement was valid and that Anthem was not permitted to extend the termination date.  The complaint also sought payment of the reverse termination fee and additional damages in an amount exceeding $13 billion, which includesincluding the lost premium value to the Company’s shareholders caused by Anthem’s willful breaches of the merger agreement.   Also onin February 14, 2017, Anthem filed a lawsuit in the Chancery Court against the Company seeking (i) a temporary restraining order to enjoin Cigna from terminating and taking any action contrary to the terms of the merger agreement, (ii) specific performance compelling Cigna to comply with the merger agreement and (iii) damages. On February 15, 2017, the Chancery Court granted Anthem’s motion for a temporary restraining order and issued an order temporarily enjoiningenjoined the Company from terminating the merger agreement.  This isIn May 2017, the Chancery Court denied Anthem’s motion for a preliminary injunction to enjoin Cigna from terminating the merger agreement but stayed its ruling pending Anthem’s determination as to whether to seek an appeal.  Anthem subsequently notified Cigna and the Chancery Court that it did not a decision on the merits of the case, but rather an orderintend to ensure irrevocable actions do not take place beforeappeal the Chancery Court’s substantive review of the issues.  The Company will continue to abide by terms ofdecision.  As a result, the merger agreement untilwas terminated. The litigation between the expiration or lifting of the Chancery Court’s order and any further review of the case by the Chancery Court.  This order will be subject to review by the Chancery Court at a preliminary injunction hearingparties remains pending.  Trial is scheduled for May 8, 2017. 2019.  We believe in the merits of our claims and dispute Anthem’s claims, and we intend to vigorously defend ourselves and pursue our claims.  The outcomes of lawsuits are inherently unpredictable, and we may be unsuccessful in the ongoing litigation or any future claims or litigation. Shareholder Litigation.  Following announcement of the Company’s merger agreement with Anthem as discussed in Note 3, putative class action complaints (collectively the “complaints” or “Cigna Merger Litigation”) were filed by purported Cigna shareholders on behalf of a purported class of Cigna shareholders.  Additional lawsuits arising out of or relating to the merger agreement or the merger may be filed in the future.   Cigna, members of the Cigna board of directors, Anthem and Anthem Merger Sub Corp (“Merger Sub”) have been named as defendants.  The plaintiffs generally assert that the members of the Cigna board of directors breached their fiduciary duties to the Cigna shareholders during merger negotiations and by entering into the merger agreement and approving the merger, and that Cigna, Anthem and Merger Sub aided and abetted such breaches of fiduciary duties.  The allegations include, among other things, that (1) the merger consideration undervalues Cigna, (2) the sales process leading up to the merger was flawed due to purported conflicts of interest of members of the Cigna board of directors and (3) certain provisions of the merger agreement inappropriately favor Anthem and inhibit competing bids.  Plaintiffs seek, among other things, injunctive relief enjoining the merger, rescission of the merger agreement to the extent already implemented, and costs and damages. Effective November 24, 2015, solely to avoid the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, the Company, the Company’s directors, Anthem and Merger Sub entered into a Memorandum of Understanding (“MOU”) to settle the Cigna Merger Litigation.  Subject to approval by the Connecticut Superior Court, Judicial District of Hartford and further definitive documentation in a settlement agreement that will be subject to customary conditions, the MOU resolved the Cigna Merger Litigation and provided that the Company would make certain additional disclosures related to the merger.  If the Court approves the settlement, the Cigna Merger Litigation will be dismissed with prejudice and all claims that were or could have been brought in any actions challenging any aspect of the merger, the merger agreement and any related disclosures will be released.  In connection with the settlement, subject to the ultimate determination of the Court, plaintiffs’ counsel may receive an award of reasonable fees.  There can be no assurance that the parties will ultimately enter into a settlement agreement, or that the Court will approve the settlement even if the parties were to enter into such agreement.  The MOU may terminate, if, among other reasons, the Court does not approve the settlement or the merger is not consummated for any reason. Note 17 — Segment Information   See Note 1 for a description of the Company’s reporting segments.   In the Company’s segment disclosures, we present “operating revenues,” defined as total revenues excluding realized investment results.  Beginning in 2018, realized investment results from the Company’s equity method joint ventures in the Global Supplemental Benefits segment are also excluded due to the potential increased volatility in investment results after adopting ASU 2016-01.  The Company excludes realized investment results from this measure because its portfolio managers may sell investments based on factors largely unrelated to the underlying business purposes of each segment.  As a result, gains or losses created in this process may not be indicative of the past or future underlying performance of the business.   The Company uses “adjusted income (loss) from operations” as its principal financial measure of segment operating performance because management believes it best reflects the underlying results of business operations and permits analysis of trends in underlying revenue, expenses and profitability.  Adjusted income from operations is defined as shareholders’ net income (loss) excluding after-tax realized investment gains and losses, net amortization of other acquired intangible assets and special items.  Income or expense amounts are excluded from adjusted income from operations for the following reasons:   ·      Realized investment results are excluded because, as noted above, the Company’s portfolio managers may sell investments based on factors largely unrelated to the underlying business purposes of each segment.  As discussed above, beginning in 2018, realized investment results from the Company’s equity method joint ventures in the Global Supplemental Benefits segment are also excluded.   ·      Net amortizationAmortization of other intangible assets is excluded because it relates to costs incurred for acquisitions and, as a result, it does not relate to the core performance of the Company’s business operations.   ·      Special items, if any, are excluded because management believes they are not representative of the underlying results of operations.  This is generally because the nature and size of these matters are not indicative of our ongoing business operations.  Further context about these items is provided in the footnotes listed in the table below.       Three Months Ended March 31, 2017   Three Months Ended March 31, 2016   (In millions)   Before-tax impact   After-tax impact   Before-tax impact   After-tax impact   Long-term care guaranty fund assessment - see Note 16 (D)   $ 129   $  83   $  -   $  -   Merger-related transaction costs - see Note 3   63   49   40   36   Total impact from special items   $  192   $  132   $  40   $  36       Three Months Ended       March 31, 2018   March 31, 2017       Before-tax   After-tax   Before-tax   After-tax   Transaction-related costs - see Note 3   $ 60   $ 50   $ 63   $ 49   Long-term care guaranty fund assessment - see Note 16(D)     -     -     129     83   Total impact from special items   $ 60   $ 50   $ 192   $ 132   Summarized segment financial information was as follows:   (In millions)   Global Health Care   Global Supplemental Benefits   Group Disability and Life   Other Operations   Corporate   Total   Three Months Ended March 31, 2017                           Premiums, fees and other revenues and mail order pharmacy revenues     $ 8,106   $ 881   $ 1,032   $ 30   $ (13)   $  10,036    Net investment income   92   28   89   86   8   303   Operating revenues     $ 8,198   $ 909   $ 1,121   $ 116   $ (5)   $ 10,339   Total revenues     $ 8,224   $ 922   $ 1,129   $ 115   $ (5)   $ 10,385   Shareholders’ net income (loss)     $ 544   $ 77   $ 59   $ 20   $ (102)   $ 598   After-tax adjustments to reconcile to adjusted income from operations:                           Net realized investment (gains)   (16)   (9)   (6)   -   -   (31)   Amortization of other acquired intangible assets, net   14   6   -   -   -   20   Special Items:                           Long-term care guaranty fund assessment   68   -   15   -   -   83   Merger-related transaction costs   -   -   -   -   49   49   Adjusted income (loss) from operations     $ 610   $ 74   $ 68   $ 20   $  (53)   $ 719                               Three Months Ended March 31, 2016                           Premiums, fees and other revenues and mail order pharmacy revenues     $ 7,812   $ 780   $ 1,029   $ 27   $ (4)   $ 9,644   Net investment income   72   26   80   90   4   272   Operating revenues     $ 7,884   $ 806   $ 1,109   $ 117   $ -   $ 9,916   Total revenues     $ 7,867   $ 804   $ 1,106   $ 107   $ -   $ 9,884   Shareholders’ net income (loss)     $ 514   $ 59   $ 13   $ 14   $ (81)   $ 519   After-tax adjustments to reconcile to adjusted income from operations:                           Net realized investment losses   12   1   2   6   -   21   Amortization of other acquired intangible assets, net   18   7   -   -   -   25   Special Item:                           Merger-related transaction costs   -   -   -   -   36   36   Adjusted income (loss) from operations     $ 544   $ 67   $ 15   $ 20   $ (45)   $ 601   (In millions)   Global Health Care   Global Supplemental Benefits   Group Disability and Life   Other Operations   Corporate   Total   Three Months Ended March 31, 2018                           Premiums, fees and other revenues and mail order pharmacy revenues(1)   $ 8,974   $ 1,066   $ 1,026   $ 31   $ (13)   $ 11,084   Net investment income   115   34   90   85   5   329   Less net realized investment (losses) on equity method subsidiaries   -   (2)   -   -   -   (2)   Operating revenues   $ 9,089   $ 1,102   $ 1,116   $ 116   $ (8)   $ 11,415   Total revenues   $ 9,069   $ 1,100   $ 1,100   $ 120   $ (9)   $ 11,380   Shareholders’ net income (loss)   $ 842   $ 105   $ 54   $ 29   $ (115)   $ 915   After-tax adjustments to reconcile to adjusted income from operations                           Net realized investment (gains) losses(2)   15   1   13   (5)   1   25   Amortization of other acquired intangible assets   14   6   -   -   -   20   Special items                           Transaction-related costs   -   -   -   -   50   50   Adjusted income (loss) from operations   $ 871   $ 112   $ 67   $ 24   $ (64)   $ 1,010   (1) Includes the Company’s share of the earnings of its joint ventures in China and India in the Global Supplemental Benefits segment. (2) Beginning in 2018, includes net realized investment results from the Company’s equity method joint ventures in the Global Supplemental Benefits segment. (In millions)   Global Health Care   Global Supplemental Benefits   Group Disability and Life   Other Operations   Corporate   Total   Three Months Ended March 31, 2017                           Premiums, fees and other revenues and mail order pharmacy revenues (1)   $ 8,195   $ 881   $ 1,032   $ 30   $ (13)   $ 10,125   Net investment income   92   28   89   86   8   303   Operating revenues   $ 8,287   $ 909   $ 1,121   $ 116   $ (5)   $ 10,428   Total revenues   $ 8,313   $ 922   $ 1,129   $ 115   $ (5)   $ 10,474   Shareholders’ net income (loss)   $ 544   $ 77   $ 59   $ 20   $ (102)   $ 598   After-tax adjustments to reconcile to adjusted income from operations                           Net realized investment (gains)   (16)   (9)   (6)   —   —   (31)   Amortization of other acquired intangible assets   14   6   —   —   —   20   Special items                           Transaction-related costs   —   —   —   —   49   49   Long-term care guaranty fund assessment   68   —   15   —   —   83   Total special items   68   —   15   —   49   132   Adjusted income (loss) from operations   $ 610   $ 74   $ 68   $ 20   $ (53)   $ 719   (1) Includes the Company’s share of the earnings of its joint ventures in China and India in the Global Supplemental Benefits segment. Revenue from external customers includes premiums, fees and other revenues and mail order pharmacy revenues.  The following table presents these revenues by product type for the periods ended March 31:     Three Months Ended       March 31,   (In millions)   2018   2017   Premiums by product (ASC 944 - insurance activities)           Global Health Care           Commercial           Guaranteed cost   $ 1,999   $ 1,543   Experience-rated   739   727   Stop loss   980   852   International health care   513   475   Dental   479   441   Other   258   246   Government           Medicare   1,498   1,461   Medicaid   235   280   Medicare Part D   228   234   Total Global Health Care   6,929   6,259   Disability   505   501   Life, Accident and Supplemental Health   1,539   1,367   Total premiums from ongoing operations   8,973   8,127   Fees (ASC 606 - service activities)           Global Health Care   1,326   1,220   Global Supplemental Benefits   7   5   Group Disability and Life   25   27   Total fees from ongoing operations   1,358   1,252   Mail order pharmacy (ASC 606 - service activities)   717   710   Other   36   36   Total revenues from external customers   $ 11,084   $ 10,125     The Company had net receivables from CMSthe Centers for Medicare and Medicaid Services (“CMS”) of $0.5$0.3 billion as of March 31, 20172018 and $0.6$0.5 billion as of December 31, 2016.2017.  These amounts were included in the Consolidated Balance Sheets in premiums, accounts and notes receivable and reinsurance recoverables.  Premiums from CMS were 18% of consolidated revenues for the three months ended March 31, 20172018 and 21% for the three months ended March 31, 2016.2017.  These amounts were reported in the Global Health Care segment. Item 2.                                Management’s Discussion and Analysis of Financial Condition and Results of Operations   INDEX   Cautionary Statement 4644 Executive Overview 4745 Liquidity and Capital Resources 5350 Critical Accounting Estimates 5653 Segment Reporting 5653 Global Health Care 5754 Global Supplemental Benefits 5856 Group Disability and Life 5957 Other Operations 6057 Corporate 6158 Investment Assets 6158 Market Risk 6461   Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist you in better understanding and evaluating our financial condition as of March 31, 20172018 compared with December 31, 20162017 and our results of operations for the three months ended March 31, 20172018 compared with the same period last year.  We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 20162017 (“20162017 Form 10-K”), in particular the “Risk Factors” contained in Part I, Item 1A of that form.   Unless otherwise indicated, financial information in the MD&A is presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  See Note 2 to the Consolidated Financial Statements in our 20162017 Form 10-K for additional information regarding our significant accounting policies.policies and Note 2 to these Consolidated Financial Statements in this Form 10-Q for updates to those accounting policies resulting from adopting new accounting guidance.  The preparation of interim consolidated financial statements necessarily relies heavily on estimates.  This and certain other factors, such as the seasonal nature of portions of the health care and related benefits business, as well as competitive and other market conditions, call for caution in estimating full yearfull-year results based on interim results of operations.  In some of our financial tables in this MD&A, we present percentage changes or “N/M” when those changes are so large as to become not meaningful.  Changes in percentages are expressed in basis points (“bps”).   In this MD&A, our consolidated measures “operating revenues” and “adjusted income from operations” are not determined in accordance with GAAP and should not be viewed as substitutes for the most directly comparable GAAP measures “total revenues” and “shareholders’ net income.”   We define operating revenues as total revenues excluding realized investment results.  Beginning in 2018, realized investment results from our equity method joint ventures in the Global Supplemental Benefits segment are also excluded due to the potential increased volatility in investment results after adopting Accounting Standards Update (“ASU”) 2016-01.  We exclude realized investment results from this measure because our portfolio managers may sell investments based on factors largely unrelated to the underlying business purposes of each segment.  As a result, gains or losses created in this process may not be indicative of the past or future underlying performance of the business.   We use adjusted income (loss) from operations as our principal financial measure of operating performance because management believes it best reflects the underlying results of our business operations and permits analysis of trends in underlying revenue, expenses and profitability.  We define adjusted income from operations as shareholders’ net income (loss) excluding after-tax realized investment gains and losses, net amortization of other acquired intangible assets and special items.  Income or expense amounts are excluded from adjusted income from operations for the following reasons:   ·                  Realized investment results are excluded because, as noted above, our portfolio managers may sell investments based on factors largely unrelated to the underlying business purposes of each segment.  As discussed above, beginning in 2018, realized investment results from our equity method joint ventures in the Global Supplemental Benefits segment are also excluded.   ·                  Net amortizationAmortization of other intangible assets is excluded because it relates to costs incurred for acquisitions and, as a result, it does not relate to the core performance of our business operations. ·                  Special items, if any, are excluded because management believes they are not representative of the underlying results of operations.  See Note 17 to the Consolidated Financial Statements for descriptions of special items.   Cautionary Note Regarding Forward-Looking Statements   This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are based on Cigna’s current expectations and projections about future trends, events and uncertainties.  These statements are not historical facts.  Forward-looking statements may include, among others, statements concerning future financial or operating performance, including our ability to deliver personalized and innovative solutions for our customers and clients andclients; future growth, business strategy, strategic or operational initiatives; economic, regulatory or competitive environments, particularly with respect to the pace and extent of change in these areas; financing or capital deployment plans and amounts available for future deployment; our prospects for growth in the coming years; statements regarding the proposed merger between Cigna and Anthem, Inc. (“Anthem”with Express Scripts (the “Merger”) and the litigation related thereto; statements regarding the timing of resolution of the issues raised by the Centers for Medicare and Medicaid Services (“CMS”);, and other statements regarding Cigna’s or Express Script’s future beliefs, expectations, plans, intentions, financial condition or performance.  You may identify forward-looking statements by the use of words such as “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “may,” “should,” “will” or other words or expressions of similar meaning, although not all forward-looking statements contain such terms.   Forward-looking statements are subject to risks and uncertainties, both known and unknown, that could cause actual results to differ materially from those expressed or implied in forward-looking statements.  Such risks and uncertainties include, but are not limited to:  our ability to achieve our financial, strategic and operational plans or initiatives; our ability to predict and manage medical costs and price effectively and develop and maintain good relationships with physicians, hospitals and other health care providers; the impact of modifications to our operations and processes, including those in our disability business;processes; our ability to identify potential strategic acquisitions or transactions and realize the expected benefits of such transactions;transactions, including with respect to the Merger; the substantial level of government regulation over our business and the potential effects of new laws or regulations or changes in existing laws or regulations; the outcome of litigation, regulatory audits, including the CMS review and sanctions, investigations, actions and/or guaranty fund assessments; uncertainties surrounding participation in government-sponsored programs such as Medicare; the effectiveness and security of our information technology and other business systems; unfavorable industry, economic or political conditions, including foreign currency movements; acts of war, terrorism, natural disasters or pandemics; any ongoing litigation with respectour ability to obtain shareholder or regulatory approvals required for the rulingMerger or the requirement to accept conditions that could reduce the anticipated benefits of the District Court enjoiningMerger as a condition to obtaining regulatory approvals; a longer time than anticipated to consummate the merger andproposed Merger; problems regarding the U.S. Court of Appeals’ decision affirming that ruling; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcementsuccessful integration of the ruling enjoiningbusinesses of Express Scripts and Cigna; unexpected costs regarding the merger; uncertainty as to litigation with respect toproposed Merger; diversion of management’s attention from ongoing business operations and opportunities during the terminationpendency of the merger agreement,Merger; potential litigation associated with the reverse termination fee, declaratory judgments with respect toproposed Merger; the foregoing and/or contract and non-contract damages for claims filed against Anthem; the risk that a government entity or court of competent jurisdiction, in any litigation, arbitration or other forum, finds in any binding or non-binding decision that Cigna has not complied, in full or in part, with its obligations under the merger agreement or that Cigna is liable for any breach, willful or otherwise, of the merger agreement; uncertainty as to whether and, if so, when Anthem will pay the reverse termination fee; uncertainty as to litigation with respect to the suit initiated by Anthem against Cigna, including for damages with respect to the transactions contemplated in the merger agreement; competitive responses to the ruling; the inabilityability to retain key personnel; the timing and likelihoodavailability of completion offinancing, including relating to the proposed merger, includingMerger; effects on the timing, receipt and terms and conditionsbusinesses as a result of any required governmental and regulatory approvals foruncertainty surrounding the proposed merger that could reduce anticipated benefits or cause the parties to abandon the transaction; if the merger is completed, the possibility that the expected synergies and value creation from the proposed merger will not be realized or will not be realized within the expected time period; if the merger is completed, the risk that the businesses of Cigna and Anthem will not be integrated successfully; disruption from the proposed merger making it more difficult to maintain business and operational relationships; the risk that unexpected costs will be incurred; the possibility that the proposed merger does not close, including due to the failure to satisfy the closing conditions; the risk that financing for the proposed merger may not be available on favorable terms,Merger; as well as more specific risks and uncertainties discussed in Part I, Item 1A – Risk Factors and Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 20162017 Form 10-K, Part II, Item 1A of this Quarterly Report on Form 10-Q and as described from time to time in our future reports filed with the Securities and Exchange Commission (“SEC”(the “SEC”) as well as the risks and uncertainties described in Anthem’sExpress Scripts’ most recent report on Form 10-K and subsequent reports filed with the SEC.   You should not place undue reliance on forward-looking statements that speak only as of the date they are made, are not guarantees of future performance or results, and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify.  Cigna undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law. EXECUTIVE OVERVIEW   Cigna Corporation, together with its subsidiaries (either individually or collectively referred to as “Cigna,” the “Company,” “we,” “our” or “us”)  is a global health services organization dedicated to a mission of helping individuals improve their health, well-being and sense of security.  To execute on our mission, Cigna’sour evolved strategy is to “Go Deep,”Deeper”, “Go Global”Local” and “Go Individual”Beyond” with a differentiated set of medical, dental, disability, life and accident insurance and related products and services offered by our subsidiaries.  In addition to our ongoing operations, we also have certain run-off operations.   For further information on our business and strategy, please see Part 1, Item 1, “Business” in our 20162017 Form 10-K.   Summarized below are key measures of our performance by reporting segment for the three months ended March 31, 20172018 and 2016:2017:   Financial highlights by segment     Three Months Ended         Three Months Ended March 31,         March 31,       (Dollars in millions, except per share amounts) (Dollars in millions, except per share amounts)   2017   2016   % Change     2018   2017   % Change   Total revenues   $ 10,385   $  9,884   5 % Total revenues (1)   $ 11,380   $ 10,474   9 % Operating revenues (1) Operating revenues (1)                             Global Health Care Global Health Care   $  8,198   $  7,884   4 %   $ 9,089   $ 8,287   10 % Global Supplemental Benefits Global Supplemental Benefits   909   806   13     1,102   909   21   Group Disability and Life Group Disability and Life   1,121   1,109   1     1,116   1,121   -   Other Operations Other Operations   116   117   (1)     116   116   -   Corporate Corporate   (5)   -   N/M     (8)   (5)   (60)   Consolidated operating revenues Consolidated operating revenues   $  10,339   $  9,916   4 %   $ 11,415   $ 10,428   9 % Shareholders’ net income (1) Shareholders’ net income (1)   $  598   $  519   15 %   $ 915   $ 598   53 % Adjusted income (loss) from operations (1) Adjusted income (loss) from operations (1)                             Global Health Care Global Health Care   $  610   $  544   12 %   $ 871   $ 610   43 % Global Supplemental Benefits Global Supplemental Benefits   74   67   10     112   74   51   Group Disability and Life Group Disability and Life   68   15   N/M     67   68   (1)   Other Operations Other Operations   20   20   -     24   20   20   Corporate Corporate   (53)   (45)   (18)     (64)   (53)   (21)   Total adjusted income from operations Total adjusted income from operations   $  719   $  601   20 %   $ 1,010   $ 719   40 % Earnings per share (diluted):               Earnings per share (diluted)               Shareholders’ net income (1) Shareholders’ net income (1)   $  2.30   $  2.00   15 %   $ 3.72   $ 2.30   62 % Adjusted income from operations (1) Adjusted income from operations (1)   $  2.77   $  2.32   19 %   $ 4.11   $ 2.77   48 %                                               As of March 31,         As of March 31,                     2017    2016         2018   2017       Global medical customers (in thousands)               15,734   15,129   4 %   16,234   15,734   3 %   (1) See page 4846 for reconciliations of consolidated operating revenues to consolidated total revenues and adjusted income from operations to shareholders’ net income.   See Note 1 to the Consolidated Financial Statements for a description of our reporting segments.  For further analysis and explanation of individual segment results, see the “Segment Reporting” section of this MD&A beginning on page 56.53. Consolidated results of operations (GAAP basis)     Three Months Ended         Three Months Ended March 31,         March 31,       (In millions)   2017   2016   % Change     2018   2017   % Change   Premiums   $ 8,103   $ 7,746   5 %   $ 8,999   $ 8,151   10 % Fees and other revenues   1,223   1,201   2     1,368   1,264   8   Net investment income   303   272   11     329   303   9   Mail order pharmacy revenues   710   697   2     717   710   1   Net realized investment (losses) gains   (33)   46   (172)   Total revenues   11,380   10,474   9   Less: net realized investment (losses) gains   (33)   46   (172)   Less: net realized investment (losses) from equity method subsidiaries (1)   (2)   -   N/M   Consolidated operating revenues   10,339   9,916   4     11,415   10,428   9   Net realized investment gains (losses)   46   (32)   244   Total revenues   10,385   9,884   5   Global Health Care medical costs   4,985   4,761   5     5,317   4,949   7   Other benefit expenses   1,367   1,368   -     1,455   1,367   6   Mail order pharmacy costs   581   574   1     561   581   (3)   Operating expenses   2,530   2,321   9     2,802   2,655   6   Amortization of other acquired intangible assets, net   32   41   (22)   Amortization of other acquired intangible assets   27   32   (16)   Total benefits and expenses   9,495   9,065   5     10,162   9,584   6   Income before income taxes   890   819   9     1,218   890   37   Income taxes   297   305   (3)     301   297   1   Net income   593   514   15     917   593   55   Less: net (loss) attributable to noncontrolling interests   (5)   (5)   -   Less: net income (loss) attributable to noncontrolling interests   2   (5)   140   Shareholders’ net income   $ 598   $ 519   15 %   $ 915   $ 598   53 %               Reconciliation of shareholders’ net income to adjusted income from operations                               Three Months Ended   Change     March 31,   Favorable   (In millions)   2018   2017   (Unfavorable)   Shareholders’ net income   $ 915   $ 598   53 % After-tax adjustments required to reconcile to adjusted income from operations               Net realized investment losses (gains) (1)   25   (31)       Amortization of other acquired intangible assets   20   20       Special items               Transaction-related costs   50   49       Long-term care guaranty fund assessment   -   83       Total special items   50   132       Adjusted income from operations   $ 1,010   $ 719   40 %               Other key consolidated financial data                               Three Months Ended   Change     March 31,   Favorable   (In millions)   2018   2017   (Unfavorable)   Earnings per share (diluted)               Shareholders’ net income   $ 3.72   $ 2.30   62 % After-tax adjustments required to reconcile to adjusted income from operations               Net realized investment losses (gains) (1)   0.10   (0.12)       Amortization of other acquired intangible assets   0.08   0.08       Special items               Transaction-related costs   0.21   0.19       Long-term care guaranty fund assessment   -   0.32       Adjusted income from operations   $ 4.11   $ 2.77   48 % Effective tax rate   24.7 % 33.4 % 870 bps   Reconciliation(1) Beginning in 2018, the Company’s share of shareholders’ net income tothe realized investment results of our equity method joint ventures in the Global Supplemental Benefits segment that is reported in other revenues is excluded from operating revenues and adjusted income from operationsoperations.     Three Months Ended   Change       March 31,   Favorable   (In millions)   2017   2016   (Unfavorable)   Shareholders’ net income   $ 598   $ 519   15 % After-tax adjustments required to reconcile to adjusted income from operations:               Net realized investment (gains) losses   (31)   21       Amortization of other acquired intangible assets, net   20   25       Special items:               Long-term care guaranty fund assessment   83   -       Merger-related transaction costs   49   36       Total special items   132   36       Adjusted income from operations   $ 719   $ 601   20 % Other key consolidated financial data     Three Months Ended March 31,   Change Favorable   (In millions)   2017   2016   (Unfavorable)   Earnings per share (diluted):               Shareholders’ net income   $ 2.30   $ 2.00   15 % After-tax adjustments required to reconcile to adjusted income from operations:               Net realized investment (gains) losses   (0.12)   0.08       Amortization of other acquired intangible assets, net   0.08   0.10       Special items:               Long-term care guaranty fund assessment   0.32   -       Merger-related transaction costs   0.19   0.14       Adjusted income from operations   $ 2.77   $ 2.32   19 % Effective tax rate   33.4 % 37.2 % 380 bps Earnings, Revenue and Medical Customer Commentary   Shareholders’ net income increased for the three months ended March 31, 2017 compared with the same period in 2016 primarily due to higher adjusted income from operations and realized investment results, partially offset by the impact of the long-term care guaranty fund assessment charge reported as a special item. Adjusted income from operations increased for the three months ended March 31, 20172018 compared with the same period in 20162017 primarily due to higher earnings in each of our ongoing reportable segments: Global Health Care, Global Supplemental Benefits and Group Disability and Life.  These increases were driven primarily by customer growth and increased contributionsadjusted income from specialty businesses in Global Health Care, as well as significantly improved disability claim experience in Group Disability and Life.operations.   RevenuesAdjusted income from operations increased for the three months ended March 31, 2017 increased2018 compared with 2016 primarily due to businessthe same period in 2017, driven in part by the impact of the lower U.S. tax rate effective January 1, 2018 resulting from the recently enacted U.S. tax reform legislation.  Margin improvement and customer growth in our Global Health Care and Global Supplemental Benefits.Benefits segments, together with increased contributions from specialty products in our Commercial segment also contributed to the increase. Revenues for the three months ended March 31, 2018 increased compared with the same period in 2017 primarily resulting from business growth in our Global Health Care and Global Supplemental Benefits segments.  Components of the revenue increases were as follows:   ·Premiums increased, primarily reflecting customer growth in the Commercial segment and in Global Supplemental Benefits.  Rate increases in our Commercial segment to recover underlying medical cost trend, the government’s suspension of cost share reduction subsidies and the resumption of the health insurance industry tax also contributed to the increase. ·Fees and other revenues also increased, primarily due to growth in our specialty businesses and an increased customer base for our administrative services only business. ·Net investment income was higher, reflecting growth in average assets resulting from strong operating cash flows. ·Realized investment results for the three months ended March 31, 2018 reflected losses on sales, credit impairments on fixed maturities and mark-to-market adjustments on equity securities reported in net income as required by ASU 2016-01 beginning in 2018.  Compared with the same period in 2017, the decline in realized investment results also reflected the absence of gains on sales of alternative investments reported in the first quarter of 2017. Premiums increased, primarily reflecting customer growth in all of our markets in the Commercial segment and in certain markets in Global Supplemental Benefits, primarily South Korea. Expected decreases in Government segment premiums due to Medicare disenrollment partially offset these increases. See the Health Care Industry Developments starting on page 51 for additional discussion of our Medicare business. · Fees and other revenues. The increase was largely the result of growth in our specialty businesses and an increased customer base for our administrative services only business. · Net investment income was higher, reflecting growth in average invested assets partially offset by lower yields. · Mail order pharmacy revenues. The modest increase primarily reflects price increases and a change in the types of medications being prescribed. · Realized investment results increased for the three months ended March 31, 2017 compared with the same period in 2016 due primarily to a gain on the sale of an alternative investment and lower impairment losses.   Global medical customers.  Our medical customer base increased as of March 31, 20172018 compared with March 31, 2016, including2017, reflecting growth across all of our Commercial market segments, partially offset by the expected disenrollmentprimarily in our Medicare Advantage business.select and middle market segments.   Commentary on Other Components of Consolidated Results of Operations   ·Global Health Care medical costs.  The increase for the three months ended March 31, 2018 compared with the same period in 2017 was primarily due to customer growth in the Commercial segment and medical cost trend. Global Health Care medical costs. The increase for the three months ended March 31, 2017 compared with the same period in 2016 was due primarily to customer growth and medical cost inflation, partially offset by favorable prior year reserve development. · Other benefit expenses for the three months ended March 31, 2017 were flat compared with the same period in 2016 as improvements in our disability claims experience were offset by customer growth in Global Supplemental Benefits. · Mail order pharmacy costs. The modest increase for the three months ended March 31, 2017 compared with the same period in 2016 primarily reflects price increases and a change in the types of medications being prescribed. · Operating expenses. The increase for the three months ended March 31, 2017 compared with the same period in 2016 was primarily the result of increases in special items and additional volume-based expenses in Global Health Care. The absence of the health insurance industry tax in 2017 partially offset these increases. See the Health Care Industry Developments starting on page 51 for discussion of the health insurance industry tax.   49· Table of ContentsOther benefit expenses increased for the three months ended March 31, 2018 compared with the same period in 2017, driven by customer growth in Global Supplemental Benefits.   ·Mail order pharmacy costs decreased, primarily reflecting lower oral medication volumes. ·Operating expenses increased for the three months ended March 31, 2018 compared with the same period in 2017 driven by the resumption of the health insurance industry tax in 2018, volume-based expenses reflecting business growth and spending on business initiatives.  The absence of the long-term care guaranty fund assessment recorded in the first quarter of 2017 partially offset the increase. ·Effective tax rate.  The decrease in our effective tax rate for the three months ended March 31, 2018 compared with the same period in 2017 was primarily due to the lower U.S. tax rate effective January 1, 2018 resulting from the recently enacted U.S. tax reform legislation.  This favorable effect was partially offset by the resumption of the non-deductible health insurance industry tax in 2018. Key Transactions and Developments Special items. Special items charges were higher for the three months ended March 31, 2017 compared with the same period in 2016 primarily due to the long-term care guaranty fund assessment. See Note 17 to the Consolidated Financial Statements for additional details about special items. · Effective tax rate. The decrease in our effective tax rate for the three months ended March 31, 2017 compared with the same period in 2016 was primarily due to the moratorium on the health insurance industry tax in 2017.   Proposed Merger with Anthem, Inc. (“Anthem”)Acquisition of Express Scripts   On July 23, 2015, weMarch 8, 2018, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Express Scripts Holding Company (“Express Scripts”), Halfmoon Parent, Inc., a definitive agreement to merge with Anthem, subject to certain terms, conditions and customary operating covenants, with Anthem continuing as the surviving company.  At special shareholders’ meetings in December 2015, Cigna shareholders approved the merger with Anthem and Anthem shareholders voted to approve the issuance of shares of Anthem common stock according to the merger agreement.  Upon closing, our shareholders would receive $103.40 in cash and 0.5152 of a share of Anthem common stock for each common sharedirect wholly owned subsidiary of the Company.  The closing priceCompany (“New Cigna”), Halfmoon I, Inc., a direct wholly owned subsidiary of Anthem stock on May 4, 2017 was $179.89. ConsummationNew Cigna (“Cigna Merger Sub”), and Halfmoon II, Inc., a direct wholly owned subsidiary of the merger is subject to certain customary conditions, including the receipt of certain necessary governmental and regulatory approvals, and the absence of a legal restraint prohibiting the consummation of the merger.  On July 21, 2016, the U.S. Department of Justice (‘‘DOJ’’) and certain state attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia (the ‘‘District Court’’) seeking to block the merger and, on January 4, 2017, the parties concluded the District Court trial.  On February 8, 2017, the District Court issued an order enjoining the proposed merger.  Anthem appealed this ruling to the U.S. Court of Appeals for the District of Columbia Circuit (the ‘‘Appeals Court’’New Cigna (“Express Scripts Merger Sub”).  Additionally, Cigna appealed the District Court ruling following the Chancery Court ruling described below.  Oral arguments were heard in the Appeals Court on March 24, 2017.  On April 28, 2017, the Appeals Court affirmed the decision of the District Court. On May 5, 2017, Anthem filed a petition for a writ of certiorari with the United States Supreme Court seeking appeal of the U.S. Court of Appeals decision affirming the District Court’s order enjoining the merger. On February 14, 2017, Cigna delivered a notice to Anthem terminating the merger agreement and filed suit in the Delaware Court of Chancery (the ‘‘Chancery Court’’) seeking, among other things, declaratory judgment that Cigna’s termination of the merger agreement is lawful and that Anthem does not have the right to extend the merger agreement termination date.  Later that day, Anthem filed a lawsuit in the Chancery Court against us seeking, among other things, a temporary restraining order to enjoin Cigna from terminating the merger agreement, specific performance and damages, and, on February 15, 2017, the Chancery Court issued an order temporarily enjoining us from terminating the merger agreement.  This order will be subject to further review at a preliminary injunction hearing currently scheduled for May 8, 2017. See Note 3 to the Consolidated Financial Statements for additional details.details of our proposed acquisition of Express Scripts (the “Merger”).  We expect to incur material costs related to this proposed acquisition in 2018.  These costs are being reported in “transaction-related costs” as a special item and excluded from adjusted income from operations.  See the “Liquidity and Capital Resources” section of the MD&A for further discussion of the financing for the proposed acquisition. U.S. Tax Reform Legislation Major U.S. tax reform legislation was enacted in December 2017.  The legislation is highlighted by a reduction in the corporate income tax rate to 21% effective January 1, 2018.  As further discussed in Note 15 to the Consolidated Financial Statements, our effective tax rate declined significantly for the three months ended March 31, 2018 compared with the same period in 2017, contributing to a material increase in shareholders’ net income.  We would expect that trend to continue in 2018.  For the three months ended March 31, 2018, there were no adjustments to the provisional amounts first recognized in 2017 as a result of U.S. tax reform legislation.  In accordance with guidance of the staff of the SEC, our accounting for these amounts is not complete and is expected to be evaluated and adjusted, as needed, until we file our 2017 U.S. tax return later in 2018.  In addition, see Item 1A. – Risk Factorswe have evaluated the global intangible low-taxed income (“GILTI”) provisions of U.S. tax reform that became effective January 1, 2018.  For the three months ended March 31, 2018, the GILTI tax impact was immaterial.  We will continue to evaluate these provisions in future periods as further guidance emerges.  It is our 2016 Form 10-K for riskspolicy to our business due to the proposed merger. 50 Table of Contentsrecognize any GILTI taxes as period costs when incurred.   Health Care Industry Developments and Other Matters Affecting Our Global Health Care Segment   Our 20162017 Form 10-K provides a detailed description of The Patient Protection and Affordable Care Act (“the Health Care Reform Act” or(the “ACA”) provisions and other legislative initiatives that impact our health care business, including regulations issued by the Centers for Medicare and& Medicaid Services (“CMS”) and the Departments of the Treasury and Health and Human Services (“HHS”).  Discussions on the ACA continue in the U.S. Congress.  The table presented below provides an update of the impact of these items and other matters affecting our Global Health Care segment as of March 31, 2017.2018.           Item     Description         Medicare Advantage (“MA”)     CMS sanctions:  As further discussed in Note 16(E) to the Consolidated Financial Statements,  in January 2016, CMS imposed sanctions that required us to suspend certain enrollment and marketing activities on our Medicare Advantage-Prescription Drug and Medicare Part D Plans. We are working towards having these sanctions lifted in time to participate in the 2018 annual enrollment period. For the three months ended March 31, 2017, Medicare enrollment and consolidated revenues were materially impacted due to our inability to participate in 2017 annual enrollment, and management expects that trend to continue for the remainder of 2017.  However, management anticipates that full-year 2017 shareholders’ net income will not be materially affected because we expect the margin impact of the revenue loss to be offset by 2017 remediation costs that are significantly lower than the $100 million after-tax amount reported in 2016 and other operational efficiencies to improve 2017 results. The impact of disenrollment was not material to 2016 consolidated revenues and earnings. Medicare Star Quality Ratings (“Star Ratings”): During 2016,  Medicare Advantage plans must have a Star Rating of four Stars or higher to qualify for bonus payments.  Approximately 60% of our Medicare Advantage customers are in a four Star or greater plan for bonus payments to be received in 2018.  In October 2017, CMS took actions related to our announced Star Ratings scheduled to take effect in 2018. These actions are discussed further in Note 16(E) to the Consolidated Financial Statements. We are working to mitigate the impact these Star Ratings could have on our offerings in 2018.  If we are unsuccessful in restoring at least some of the Star Ratings, modifying our product offerings or implementing operational efficiencies in the Government business, the effect could be material to shareholders’ net income in 2018. There is no financial impact in 2017 because these ratings apply tofor plans for the 20182019 payment year, indicating that approximately 40% of our Medicare Advantage customers will be in a four Star or greater plan for bonus payments to be received in 2019.  Management continues to evaluate various actions to improve the Company’s Star Ratings for the 2019 payment year.   20182019 MA Rates:  Final MA reimbursement rates for 20182019 were published by CMS in April 2017.2018.  We do not expect the new rates to have a material impact on our consolidated results of operations in 2018. 2019.   Health Care Reform Act Taxes and Fees Industry Tax Health Insurance Industry Tax:  From 2014-2016, this non-deductible tax was levied based on a ratio of an insurer’s net health insurance premiums written for the previous calendar year compared to the U.S. health insurance industry total.  In December 2015, federal appropriations legislation imposed a one-year moratorium on the industry tax for 2017, with reinstatement expected in 2018 under the currently enacted legislation.  The amount of the tax was approximately $310 million in 2016, and we recognized approximately $80 million in operating expenses for the three months ended March 31, 2016.  Because this tax is not deductible for federal income tax purposes, it negatively impacted our effective tax rate in 2016. Our pricing actions in 2017 reflected the moratorium on the industry tax, whereas in 2016 we included this tax in our premium rates (primarily for Commercial business).  Given the current health care legislative proposals being discussed by the federal government, the future of this industry tax remains uncertain beyond 2017. Reinsurance Fee Reinsurance Fee:  This fee was applicable only for 2014-2016.  For our insured business, the amount of the fee was approximately $45 million in 2016, and we recognized approximately $10 million for the three months ended March 31, 2016. 51 Table of Contents         Item     Description         Health Care Reform Act Taxes and Fees Health Insurance Industry Tax:  Federal legislation imposed a moratorium on the health insurance industry tax for 2017 and 2019.  The industry tax is being assessed in 2018 and, under current law, will return again in 2020.  The industry tax for Cigna in 2018 is expected to approximate $390 million ($260 million for Commercial and $130 million for Government).  For the three months ended March 31, 2018, we recorded $97 million.  For our Commercial business, the tax is reflected in our 2018 premium rates, and did not have a material effect on shareholders’ net income for the three months ended March 31, 2018.  For our Medicare business, the earnings impact was more significant than in our Commercial business; however, the earnings impact in 2018 resulting from this renewed tax was somewhat offset with benefit and pricing changes.  Because this tax is not deductible for federal income tax purposes, it negatively impacted our effective tax rate for the three months ended March 31, 2018, and we expect this negative effect to continue throughout 2018. In 2017, premium rates in our Commercial business reflected the moratorium on the health insurance industry tax and we expect our rates to reflect the moratorium in 2019. Public Health Exchanges     Public Health Exchanges:Market Participation:  For 2017,2018, we offer individual coverage on sevensix public health insurance exchanges in the following states:  Colorado, Illinois, Maryland, Missouri, North Carolina, Tennessee and Virginia. Cost Sharing Reduction Subsidies:  The ACA provides for cost sharing reductions that lower the amount that qualifying customers pay for deductibles, copayments and coinsurance.  The federal government had provided funding for the cost sharing reduction subsidies to the qualifying customer’s insurer.  In October 2017, the federal government stopped payment of these subsidies to insurers effective immediately.  The attorneys general of 18 states and the District of Columbia have sued the Trump administration, seeking to require the administration to continue paying these subsidies.  On October 25, 2017, the court denied the attorney generals’ request for an injunction, allowing the government to cease providing the cost sharing reduction payments to insurers during the pendency of the matter.  Discussions in the U.S. Congress are ongoing regarding the potential funding of these subsidies.  We will continue to monitor developments.  Our premium rates for the 2018 plan year reflect the government’s decision to stop paying these subsidies.   Risk Mitigation Programs   See Note 2(K) to the Consolidated Financial Statements in our 20162017 Form 10-K for a description of these programs that commenced in 2014 and our related accounting policy.  The risk corridor and reinsurance programs ended as of December 31, 2016. The following table presentsamounts due to us net of allowances as of March 31, 2018 and the after-tax impact toon shareholders’ net income of these programs for the three months ended March 31, 2017 and 2016 and our net receivable balances as of March 31, 2017 and December 31, 2016.                       Net Receivable (Payable) Balance (2)   After-tax Impact on Shareholders’ Net Income             Three Months Ended     March 31,   December 31,   March 31, (In millions)   2017   2016   2017   2016 Risk Corridor (1)                 Risk corridor (gross)      $ 124      $ 124      $ -      $ (4) Risk corridor allowance   (124 ) (124 ) -   -  Net risk corridor   -   -   -   (4) Reinsurance   39   63   (4 ) 2  Risk Adjustment   (31 ) 1   (18 ) (3) Total      $ 8      $ 64      $ (22 )    $ (5) (1) See discussion below of the risk corridor balance. (2) For the reinsurance program, receivables are reported in reinsurance recoverables.  Receivables, net of allowances, for the risk adjustment and risk corridor programs are reported in premiums, accounts and notes receivable.  Payables for the risk adjustment program of $112 million as of March 31, 2017 and $51 million as of December 31, 2016 are netted in the balance presented above, but are reported in accounts payable, accrued expenses and other liabilities in the Consolidated Balance Sheets.2018 were not material.   See the MD&A in our 20162017 Form 10-K for discussion ofan update on our decision to record an allowance for the balance of our risk corridor receivable.  As of March 31, 2017, we continue to carry an2018, this allowance on our risk corridor receivableremains based on the current status of court decisions.  However, we continue to believe that the government has a binding obligation to satisfy the risk corridor receivable.   52 TableThe following table presents our balances associated with the risk adjustment program as of ContentsMarch 31, 2018 and December 31, 2017.       Receivable (Payable) Balance     March 31,   December 31, (In millions)   2018   2017 Risk Adjustment         Receivables (1)   $ 78   $ 69 Payables (2)   (335)   (250) Net risk adjustment   $ (257)   $ (181) (1) Receivables, net of allowances, are reported in premiums, accounts and notes receivable in the Consolidated Balance Sheets. (2) Payables are reported in accounts payable, accrued expenses and other liabilities in the Consolidated Balance Sheets. For the three months ended March 31, 2018, after-tax charges for the risk adjustment program were $60 million compared with $18 million for the same period in 2017. LIQUIDITY AND CAPITAL RESOURCES   Liquidity   We maintain liquidity at two levels:  the subsidiary level and the parent company level.   Liquidity requirements at the subsidiary level generally consist of:   ·                  medical costs and benefit payments to policyholders; and   ·                  operating                  expense requirements, primarily for employee compensation and benefits, information technology and facilities costs; and   ·                  income taxes.   Our subsidiaries normally meet their operating requirements by:   ·                  maintaining appropriate levels of cash, cash equivalents and short-term investments;   ·                  using cash flows from operating activities;   ·                  selling investments;   ·                  matching investment durations to those estimated for the related insurance and contractholder liabilities; and   ·                  borrowing from affiliates, subject to applicable regulatory limits.   Liquidity requirements at the parent company level generally consist of:   ·                  debt service and dividend payments to shareholders;   ·                  pension plan funding; and   ·                  repurchases of common stock.   The parent company normally meets its liquidity requirements by:   ·                  maintaining appropriate levels of cash and various types of marketable investments;   ·                  collecting dividends from its subsidiaries;   ·                  using proceeds from issuance of debt and equity securities; and   ·                  borrowing from its subsidiaries.subsidiaries, subject to applicable regulatory limits.   Cash flows for the three months ended March 31, were as follows:   (In millions)   2017   2016     2018   2017   Operating activities (1)      $ 1,579    $ 921        $ 2,025   $ 1,579   Investing activities (1)      $ (117)   $ (360 )      $ (1,700 ) $ (117 ) Financing activities      $ (515)   $ (146 )      $ (530 ) $ (515 )   (1) As required in adopting Accounting Standards Update (“ASU”) 2016-15, we retrospectively reclassified $27 million of cash distributions from partnership earnings from investing to operating Operating activities for the first quarter of 2016.  The comparable amount reported in operating activities in 2017 was $45 million.  See Note 2 to the Consolidated Financial Statements for further discussion.   Cash flows from operating activities consist of cash receipts and disbursements for premiums, fees and other revenues, mail order pharmacy, investment income, taxes and benefits and expenses.  Because certain income and expense transactions do not generate cash, and because cash transactions related to revenues and expenses may occur in periods different from when those revenues and expenses are recognized in shareholders’ net income, cash flows from operating activities can significantly differ from shareholders’ net income.   Cash provided by operating activities increased for the three months ended March 31, 2018 compared with the same period in 2017, primarily driven by higher net income.  Both periods included early receipt of April payments from CMS of approximately $730 million. Investing activities Cash flows from investing activities generally consist of net investment purchases or sales and net purchases of property and equipment including capitalized internal-use software, as well as cash used to acquire businesses. Cash used in investing activities increased for the three months ended March 31, 2018 compared with the same period in 2017, primarily due to higher fixed maturity investment purchases. Financing activities   Cash flows from financing activities are generally comprised of issuances and re-payment of debt, proceeds on the issuance of common stock resulting from stock option exercises, and stock repurchases.  In addition, the subsidiaries report net deposits and withdrawals to and from contractholder deposit fund liabilities (that include universal life insurance liabilities) because such liabilities are considered financing activities with policyholders.   53 Table of Contents Operating activities Cash provided by operatingused in financing activities increased slightly for the three months ended March 31, 20172018 compared with the same period in 2016, primarily driven by early receipt of the April monthly payment from CMS of approximately $730 million for our Medicare Advantage and Part D businesses, partially offset by a voluntary pension contribution of $150 million. Investing activities Cash used in investing activities decreased for the three months ended March 31, 2017, compared with the same period in 2016, primarily due to higher proceeds from salesstock repurchases and maturitiesbridge financing fees, offset by lower repayments of short-term investments.long-term debt.   Financing activities Cash used in financing activities increased for the three months ended March 31, 2017 compared with the same period in 2016, primarily due to repayment of long-term debt and higher share repurchases. We maintain a share repurchase program, authorized by our Board of Directors.  Under this program, we may repurchase shares from time to time, depending on market conditions and alternate uses of capital.  The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternate uses of capital.  The share repurchase program may be effected through open market purchases or privately negotiated transactions in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, including through Rule 10b5-1 trading plans.  The program may be suspended or discontinued at any time.   ThroughYear to date through May 4, 2017,2, 2018, we had repurchased 2.31.3 million shares for approximately $340$275 million.  The total remainingWe do not expect to conduct additional share repurchase authorization asrepurchases prior to closing of May 4, 2017 was $3.4 billion, and we are limited to a repurchase pace of $250 million per quarter, consistent with the merger agreement limitations.Express Scripts combination.   Interest Expense   Interest expense on long-term debt, short-term debt and capital leases was as follows:     Three Months Ended         Three Months Ended     March 31,         March 31,   (In millions)   2017   2016             2018   2017   Interest expense   ��  $ 62   $ 63                    $ 59      $ 62     Capital Resources   Our capital resources (primarily retained earnings and the proceeds from the issuance ofissuing debt and equity securities) provide protection for policyholders, furnish the financial strength to underwrite insurance risks and facilitate continued business growth.   Management, guided by regulatory requirements and rating agency capital guidelines, determines the amount of capital resources that we maintain.  Management allocates resources to new long-term business commitments when returns, considering the risks, look promising and when the resources available to support existing business are adequate. We prioritize our use of capital resources to:   ·      provide the capital necessary to support growth and maintain or improve the financial strength ratings of subsidiaries;   ·      consider acquisitions that are strategically and economically advantageous; and   ·      return capital to investors through share repurchase.   See Note 3 to the Consolidated Financial Statements for information regarding capital restrictions imposed by our merger agreement with Anthem.  The availability of capital resources will be impacted by equity and credit market conditions.  Extreme volatility in credit or equity market conditions may reduce our ability to issue debt or equity securities. Liquidity and Capital Resources Outlook   TheThe availability of resources at the parent company level is partially dependent on dividends from our subsidiaries, most of which are subject to regulatory restrictions and rating agency capital guidelines, and partially dependent on the availability of liquidity from the issuance of debt or equity securities.   At March 31, 2017,2018, there was $2.7$1.0 billion in cash and marketable investments available at the parent company level.  For the remainder of 2017,2018, the parent company’s cash obligations are approximately $190$375 million, primarily for interest payments.  Wepayments and incurred but unpaid bridge financing fees.  In the first quarter of 2018, we repaid $250$131 million of long-term debt and made a voluntary pension contribution of $150 million in first quarter of 2017.debt.   We expect to have sufficient liquidity to meet the obligations discussed above, based on the parent company’s current cash position and current projections for subsidiary dividends.  In addition, we actively monitor our debt obligations and engage in issuance or redemption activities as needed in accordance with our capital management strategy.   Our cash projections may not be realized and the demand for funds could exceed available cash if our ongoing businesses experience unexpected shortfalls in earnings, or we experience material adverse effects from one or more risks or uncertainties described more fully in the Risk Factors section of the 20162017 Form 10-K.10-K and in Part II, Item 1 of this Form 10-Q.  In those cases, we expect to have the flexibility to satisfy liquidity needs through a variety of measures including intercompany borrowings and sales of liquid investments.borrowings.  The parent company may borrow up to $1.3 billion from its insurance subsidiaries without additional state approval.  As of March 31, 2017, the parent company had approximately $162 million of net intercompany loans payable to its insurance subsidiaries.  Alternatively, to satisfy parent companyWe have additional liquidity requirements we may useavailable through short-term borrowings, such as the commercial paper program and the committed revolving credit and letter of credit agreement of up to $1.5 billion, subject to the maximum debt leverage covenant in the credit agreement.  As of March 31, 2017, short-term borrowing capacity of $1.5 billion under the credit agreement was available to us.  Including this $1.5 billion, we have borrowing capacity of $10.5 billion within the maximum debt leverage covenant in the credit agreement described in Note 5 to the Consolidated Financial Statements, in addition to the $4.8 billion of debt outstanding.borrowings.   Though we believeManagement believes we have adequate sources of liquidity to meet our operating requirements absent significant transactions.  However, disruption or volatility in the capital and credit markets could affect our ability to access those markets for additional borrowings or could increase costs associated with borrowing funds.   In March 2018, we announced we had entered into an agreement to acquire Express Scripts.  This transaction is expected to be financed as follows: ·Stock.  Express Scripts shareholders will receive 0.2434 of a share of common stock of New Cigna for every one share of Express Scripts.  Based on the number of Express Scripts shares outstanding at the date of the Merger Agreement, we expect to issue approximately 140 million additional shares to Express Scripts shareholders.  Cigna shareholders will receive one share of New Cigna for each Cigna common share. ·Debt.  In March 2018, we entered into a $26.7 billion Bridge Facility commitment letter to finance a portion of the acquisition.  On April 6, 2018, we entered into a $3.0 billion 3-year Term Loan Credit Agreement.  Concurrent with entry into the Term Loan Credit Agreement, the Bridge Facility commitment was reduced to $23.7 billion.  The state of Illinois is operating without a budget for its second fiscal year.  It is unclear when or ifavailable commitment under the state’s budget difficultiesBridge Facility will be resolved.  These budget difficulties have contributedfurther reduced to the stateextent we obtain certain other debt financing, complete certain asset sales or certain equity issuance.  See Note 5 to the Consolidated Financial Statements for further information. ·Assumption of Illinois being delinquentExpress Scripts debt.  This debt will be paid upon its scheduled maturities in processingthe normal course of business. Upon closing of the transaction, we expect that our pro forma debt-to-capitalization ratio will be approximately 49%.  We expect to deleverage to a range of 35-40% within 18 to 24 months after the closing.  Based on current interest rates, the additional debt financing is expected to increase annual interest payments by approximately $900 million. On April 6, 2018, in connection with the proposed Merger, the Company and New Cigna entered into the Revolving Credit and Letter of Credit Agreement (the “Revolving Credit Agreement”), which extends through April 5, 2023 and is diversified among 23 banks.  Prior to the Merger, the Company will be the borrower under the Revolving Credit Agreement.  On and after the Merger, New Cigna will be the borrower under the Revolving Credit Agreement. Prior to the Merger, the Company can borrow up to $1.5 billion for premiumsgeneral corporate purposes, of which up to $500 million is available for the issuance of letters of credit.  On and fees. Atafter the Merger, New Cigna can borrow up to $3.25 billion for general corporate purposes, of which up to $500 million can be used for letters of credit.  The Revolving Credit Agreement also includes an option to increase the facility amount by up to $500 million and an option to extend the termination date for additional one year periods, subject to consent by the banks. The Revolving Credit Agreement contains customary covenants and restrictions, including a financial covenant that the Company or New Cigna may not permit its leverage ratio – which is the ratio of total consolidated debt to total consolidated capitalization (each as defined in the Revolving Credit Agreement) – to be greater than 50% prior to the Merger or 60% after the Merger. In certain circumstances, certain subsidiaries of the Company or New Cigna will be required to guarantee the obligations of Cigna or New Cigna under the Revolving Credit Agreement and the Term Loan Credit Agreement.  See Note 5 to the Consolidated Financial Statements for further information. The Company had $10 million of letters of credit outstanding as of March 31, 2017, the total amount due was approximately $90 million.  We continue to monitor our receivable balances and work with the state on the timing of payments.2018.   Overseas earnings.  We continue to maintain a capital management strategy to retain overseas a significant portion of the earnings from our foreign operations.  As of March 31, 2017, undistributed earnings were approximately $2.7 billion.  These undistributed earnings are deployed outside of the U.S.United States predominantly in support of the liquidity and regulatory capital requirements of our foreign operations.  Approximately $290 million of cash and cash equivalents held overseasoperations as of March 31, 2017 would be subject to additional tax expense representing the difference between the U.S. and foreign tax rates, if repatriated.  We continue to expect most of the undistributed earnings and future earnings to be reinvestedwell as to support growth initiatives overseas.  This strategy does not materially limit our ability to meet our liquidity and capital needs in the U.S.United States. Guarantees and Contractual Obligations   We are contingently liable for various contractual obligations entered into during the ordinary course of business.  See Note 16 to the Consolidated Financial Statements for additional information.   Contractual obligations.  During the three months ended March 31, 2017, there wereThere are no material changes updates to the contractual obligations reportedpreviously provided in the Company’s 2016our 2017 Form 10-K.   CRITICAL ACCOUNTING ESTIMATES   The preparation of Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures in the Consolidated Financial Statements.  We consider 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 our consolidated results of operations or financial condition.   We have discussed the development and selection of our critical accounting estimates and reviewed the disclosures presented in our 2016 2017 Form 10-K with the Audit Committee of our Board of Directors.  We regularly evaluate items that may impact critical accounting estimates.  Our most critical accounting estimates, as well as the effects of hypothetical changes in material assumptions used to develop each estimate, are described in the 20162017 Form 10-K.  As of March 31, 2017,2018, there arewere no significant changes to the critical accounting estimates from what was reported in our 20162017 Form 10-K. Management believes the current assumptions used to estimate amounts reflected in our Consolidated Financial Statements are appropriate.  However, if actual experience differs from the assumptions used in estimating amounts reflected in our Consolidated Financial Statements, the resulting changes could have a material adverse effect on our consolidated results of operations, and in certain situations, could have a material adverse effect on liquidity and our financial condition.   SEGMENT REPORTING   The following section of this MD&A discusses the results of each of our reporting segments.  In these segment discussions, we present “operating revenues,” defined as total revenues excluding realized investment results and “adjusted income from operations,” defined as shareholders’ net income (loss) excluding after-tax realized investment results, net amortization of other acquired intangible assets and special items.  Ratios presented in this segment discussion exclude the same items as adjusted income from operations.  See Note 17 to the Consolidated Financial Statements for additional discussion of these metrics.   In these segment discussions, we also present “adjusted margin,” defined as adjusted income from operations divided by operating revenues.   See the MD&A Executive Overview beginning on page 4745 for summarized financial results of each of our reporting segments. Global Health Care Segment   As described in the Segment Reporting introduction on page 56,above, the performance of the Global Health Care segment is measured using adjusted income from operations as presented in the table below.  The key factors affecting adjusted income from operations for this segment are:   ·customer growth;   ·sales of specialty products;   ·operating expenses as a percentage of operating revenues (operating expense ratio); and ·medical costs as a percentage of premiums (medical care ratio or “MCR”) for our commercialCommercial and government businesses.Government businesses; and ·operating expenses as a percentage of operating revenues (operating expense ratio) Effective January 1, 2018, we adopted amended accounting guidance for revenue recognition.  For the Global Health Care segment, prior year operating revenues along with adjusted margin and both the medical care and operating expense ratios have been retrospectively adjusted to conform to this new basis of accounting.  See Note 2 to the Consolidated Financial Statements for additional information.   Results of Operations   Global Health Care segment financial summary   Three Months Ended March 31,   Change               Favorable   (In millions)   2017   2016    (Unfavorable)   Operating revenues     $ 8,198     $ 7,884   4 % Adjusted income from operations     $ 610     $ 544   12 % Adjusted margin   7.4 % 6.9 % 50bps   Medical Care Ratios:               Commercial   77.6 % 75.8 % (180)bps   Government   85.9 % 86.2 % 30bps   Consolidated Global Health Care   80.3 % 80.0 % (30)bps   Operating expense ratio   20.5 % 21.0 % 50bps                       As of March 31,       (In thousands)   2017   2016   % Change   Customers:               Total commercial risk   2,927   2,510   17 % Total government   502   615   (18)   Total risk   3,429   3,125   10   Service   12,305   12,004   3   Total medical customers   15,734   15,129   4 %                     As of       (In millions)   March 31, 2017   December 31, 2016   % Change   Global Health Care medical costs payable     $ 2,770     $ 2,532   9 %     Three Months Ended       Global Health Care segment financial summary   March 31,   Change   (In millions)   2018   2017   Favorable (Unfavorable)   Operating revenues     $ 9,089     $ 8,287   10 % Adjusted income from operations     $ 871     $ 610   43 % Adjusted margin   9.6 % 7.4 % 220bps   Medical Care Ratios               Commercial   73.7 % 76.0 % 230bps   Government   84.5 % 85.9 % 140bps   Consolidated Global Health Care   76.7 % 79.1 % 240bps   Operating expense ratio   22.7 % 21.8 % (90)bps   Adjusted income from operations for the three months ended March 31, 2017 included favorable prior year reserve development of $61 million, compared with $14 million for the same period in 2016.  In addition, the increase also reflected growth in our Commercial segment including increased contributions from our specialty products and higher margins in our U.S. Individual business, partially offset by lower customer volumes in our Government business.     As of March 31,       (In thousands)   2018   2017   % Change   Customers               Total Commercial risk   3,153   2,927   8 % Total Government   484   502   (4 ) Total risk   3,637   3,429   6   Service   12,597   12,305   2   Total medical customers   16,234   15,734   3 %     As of       (In millions)   March 31, 2018   December 31, 2017   % Change   Global Health Care medical costs payable     $ 2,925     $ 2,719   8 %   Operating revenues.  The increase for the three months ended March 31, 20172018 compared with the same period in 20162017 was primarily due to customer growth in our Commercial risk business, partially offset by lower customer volumesbusiness.  Rate increases in our Government segment.Commercial segment to recover underlying medical cost trend, the government’s suspension of cost share reduction subsidies, and the resumption of the health insurance industry tax also contributed to the increase.   Medical care ratiosAdjusted income from operations .  Forincreased for the three months ended March 31, 20172018 compared with the same period in 2016,2017 reflecting the favorable effect of the lower U.S. tax rate in 2018 resulting from U.S. tax reform and strong ongoing performance in our Commercial business, including improved margins in our U.S. individual business and increased contributions from specialty products. Medical care ratios.  The Commercial medical care ratio increased,decreased for the three months ended March 31, 2018 compared with the same period in 2017, reflecting strong ongoing medical cost performance in our Commercial business, including favorable claim experience in the moratorium onU.S. individual business.  The pricing impact of the resumption of the health insurance industry tax.tax also contributed to the decline.   ForThe Government medical care ratio decreased for the three months ended March 31, 20172018 compared with the same period in 2016, the Government2017, primarily reflecting increased premium rates and lower medical care ratio decreased, reflecting morecosts in our Medicare business, partially offset by less favorable prior year reserve development partially offset by unfavorable 2017 claim experience.development.   Operating expense ratio.  The operating expense ratio decreasedincreased for the three months ended March 31, 2017,2018, compared to the same period in 2016,2017, primarily reflecting the moratorium onresumption of the health insurance industry tax.tax in 2018.  Excluding the impact of this tax, the operating expense ratio was flat, reflecting business initiative investments offset by higher revenues.   Other Items Affecting Health Care Results   Medical Customers   A medical customer is defined as a person meeting any one of the following criteria:   ·is covered under an insurance policy, managed care arrangement, or service agreement issued by us;   ·has access to our provider network for covered services under their medical plan; or   ·has medical claims and services that are administered by us.   Our medical customer base as ofwas higher at March 31, 2017 was higher than2018 compared to the same period in 2016,2017, primarily driven byreflecting growth across all market segments in our Commercial businesses, partially offset by declines in our Medicare Advantage business.middle market and select market segments.   Global Health Care Medical Costs Payable   Medical costs payable was higher at March 31, 20172018 compared to December 31, 2016,2017, primarily due to customer growth and seasonality in our commercial risk and stop loss products.  (SeeSee Note 6 to the Consolidated Financial Statements for additional information.) Global Supplemental Benefits Segment   As described in the Segment Reporting introduction on page 56,53, the performance of the Global Supplemental Benefits segment is measured using adjusted income from operations.  The key factors affecting adjusted income from operations for this segment are:   ·premium growth, including new business and customer retention; ·benefit expenses as a percentage of premiums (loss ratio); ·operating expenses and acquisition expenses as a percentage of operating revenues (expense ratio and acquisition cost ratio); and ·the impact of foreign currency movements.   Throughout this discussion and in the table presented below, prior period currency adjusted income from operations revenues, and benefits and expensesoperating revenues are calculated by applying the current period’s exchange rates to reported results in the prior period.  A strengthening U.S. Dollardollar against foreign currencies decreases these measures, while a weakening U.S. Dollardollar produces the opposite effect. Results of Operations   Global Supplemental Benefits segment financial summary   Three Months Ended           March 31,   Change   (In millions)   2017   2016   Favorable (Unfavorable)   Operating revenues     $ 909      $ 806   13 % Adjusted income from operations     $ 74      $ 67   10 % Operating revenues, using 2017 currency exchange rates     $ 909      $ 818   11 % Adjusted income from operations, using 2017 currency exchange rates     $ 74      $ 69   7 % Adjusted margin   8.1 % 8.3 % (20)bps   Loss ratio   58.4 % 56.2 % (220)bps   Acquisition cost ratio   17.2 % 18.4 % 120bps   Expense ratio (excluding acquisition costs)   17.2 % 18.2 % 100bps   Adjusted income from operations.  Results for the three months ended March 31, 2017 increased compared with the same period in 2016 reflecting business growth, primarily in South Korea.  Lower acquisition and operating cost ratios also contributed to the favorable results, partially offset by higher claims in the U.S.     Three Months Ended       Global Supplemental Benefits segment financial summary   March 31,   Change   (In millions)   2018   2017   Favorable (Unfavorable)   Operating revenues     $ 1,102     $ 909   21 % Adjusted income from operations     $ 112     $ 74   51 % Operating revenues, using 2018 currency exchange rates     $ 1,102     $ 955   15 % Adjusted income from operations, using 2018 currency exchange rates     $ 112     $ 81   38 % Adjusted margin   10.2 % 8.1 % 210bps   Loss ratio   56.2 % 58.4 % 220bps   Acquisition cost ratio   16.9 % 17.2 % 30bps   Expense ratio (excluding acquisition costs)   14.8 % 17.2 % 240bps     Operating revenues increased for the three months ended March 31, 20172018 compared with the same period in 20162017, primarily due to business growth, particularly in the United States and South Korea. Adjusted income from operations increased for the three months ended March 31, 2018 compared with the same period in 2017, reflecting business growth, primarily in South Korea and the U.S.  The impact of foreign currency movements also modestly contributed to the favorable results.United States, and lower acquisition cost and operating expense ratios, partially offset by higher taxes, primarily in South Korea.   The segment’s loss ratio increased decreased for the three months ended March 31, 20172018 compared with the same period in 2016,2017, primarily due to higher claims in the U.S. and a change in business mix toward products with higher loss ratios, primarily in South Korea and the U.S., partially offset by favorable claims experience in South Korea.experience.   The acquisition cost ratio decreased for the three months ended March 31, 2018 compared with the same period in 2017 due to lower spending in certain markets and a shift toward higher premium markets with lower acquisition costs, primarily in South Korea and the U.S.United States.   Operating expense ratio.  The operating expense ratio (excluding acquisition costs) decreased for the three months ended March 31, 20172018 compared with the same period in 20162017 reflecting strong operating expense management.   Other Items Affecting Global Supplemental Benefits Results   For our Global Supplemental Benefits segment, South Korea is the single largest geographic market.  South Korea generated 51%49% of the segment’s operating revenues and 95%85% of the segment’s adjusted income from operations for the three months ended March 31, 2017.  For2018.  On a consolidated basis, our operations in South Korea represented 5% of our operating revenues and 9% of adjusted income from operations for the three months ended March 31, 20172018, our Global Supplemental Benefits segment operations in South Korea represented 4% of our total consolidated operating revenues and 10% of consolidated adjusted income from operations.. As a global company, our business is exposed to risks inherent in foreign operations.  While we continue to monitor and evaluate the impacts of the U.K. vote to exit the European Union, the political unrest in Turkey and tensions in the Korean Peninsula, we do not expect these events to materially impact the results of the Global Supplemental Benefits segment in 2017 or 2018. Group Disability and Life Segment   As described in the Segment Reporting introduction on page 56,53, the performance of the Group Disability and Life segment is measured using adjusted income from operations.  The key factors affecting adjusted income from operations for this segment are:   ·                 premium growth, including new business and customer retention; ·                 net investment income; ·                 benefit expenses as a percentage of premiums (loss ratio); and ·                 operating expenses as a percentage of premiums and fees and other revenues (expense ratio). Results of Operations     Three Months Ended       Group Disability and Life segment financial summary   Three Months Ended         March 31,   Change     March 31,   Change   (In millions)   2017   2016   Favorable (Unfavorable)     2018   2017   Favorable (Unfavorable)   Operating revenues     $ 1,121      $ 1,109   1%       $ 1,116     $ 1,121   -%   Adjusted income from operations     $ 68      $ 15   N/M       $ 67     $ 68   (1)%   Adjusted margin   6.1 % 1.4 % N/M     6.0 % 6.1 % (10)bps   Loss ratio   78.2 % 85.4 % N/M     79.1 % 78.2 % (90)bps   Expense ratio   22.7 % 22.4 % (30)bps     23.5 % 22.7 % (80)bps   Operating revenues were relatively flat for the three months ended March 31, 2018 compared with the same period in 2017 due to slightly lower premium and fees, mostly offset by higher investment income.   Adjusted income from operations.  ResultsThe slight decrease for the three months ended March 31, 2017 increased2018 compared with the same period in 2016.  We implemented modifications to our disability claims management process in the first quarter of 2016 that temporarily extended the claims processing cycle and significantly lowered our claim resolution rate.  As our modified claims management process has matured in recent periods, we have seen our claim resolution rate improve, driving comparably favorable disability results.  Earnings in the period also reflected favorable life claims experience and higher investment income compared with the same period in 2016. Operating revenues increased compared with the same period in 2016 due primarily to higher investment income2017 was driven by unfavorable life results and a higher average assets and higher yields.overall expense ratio, mostly offset by a lower tax rate.   The segment’s loss ratio decreased increased for the three months ended March 31, 2018 compared with the same period in 20162017 due primarily to improvementhigher life claim sizes for claims incurred in the disability claim resolution rate as noted above, lower disability new claim incidence and favorable life results.2018.   Operating expense ratio.  The operating expense ratio increased slightlyfor the three months ended March 31, 2018 compared with the same period in 20162017 due primarily to higher selling expenses.claims management costs.   Other Operations   As described in the Segment Reporting introduction on page 56,53, the performance of the Other Operations segment is measured using adjusted income from operations.  Cigna’s corporate-owned life insurance (“COLI”) business contributes the majority of earnings in Other Operations.  Other Operations also includes the results from the run-off reinsurance and settlement annuity businesses, as well as the remaining deferred gains recognized from the sale of the individual life insurance and annuity and retirement benefits businesses.   Results of Operations     Three Months Ended       Other Operations segment financial summary   Three Months Ended         March 31,   Change     March 31,   Change   (In millions)   2017   2016   Favorable (Unfavorable)     2018   2017   Favorable (Unfavorable)   Operating revenues     $ 116      $ 117   (1)%     $ 116   $ 116   - % Adjusted income from operations     $ 20      $ 20   -%     $ 24   $ 20   20 % Adjusted margin   17.2 % 17.1 % 10bps     20.7 % 17.2 % 350bps   Operating revenues for the three months ended March 31, 2018 were consistent when compared with the same period in 2017.   Adjusted income from operations was flat for the three months ended March 31, 20172018 increased when compared with the same period in 2016.2017 and reflects a lower tax rate in the COLI business in 2018 as a result of U.S. tax reform legislation.   Operating revenues decreased for the three months ended March 31, 2017 compared with the same period in 2016 primarily due to lower investment income yields partially offset by lower ceded premiums. Corporate   Description   Corporate reflects amounts not allocated to operating segments, such as net interest expense (defined as interest on corporate debt less net investment income on investments not supporting segment operations), interest on uncertain tax positions, certain litigation matters, intersegment eliminations, compensation cost for stock options and related excess tax benefits, on stock compensation, expense associated with our frozen pension plans and certain litigation matters, overhead and project costs.   Corporate financial summary   Three Months Ended           March 31,       (In millions)   2017   2016   % Change   Adjusted (loss) from operations     $ (53)      $ (45)   (18) % Corporate financial summary             Three Months Ended                     March 31,       (In millions)                 2018   2017   % Change   Adjusted (loss) from operations                 $ (64)   $ (53)   (21) %   Corporate’sadjusted loss from operations was higherincreased for the three months ended March 31, 2017 2018 compared with the same period in 2016, mainly2017, primarily due to higher operating expenses partiallylower excess tax benefits on stock compensation and the impact of the lower U.S. tax rate effective in 2018 resulting from U.S. tax reform legislation, offset by higher net investment income.lower operating expenses.   INVESTMENT ASSETS   The following table presents our investment asset portfolio, excluding separate account assets, as of March 31, 20172018 and December 31, 20162017.  Additional information regarding our investment assets and related accounting policies is included in Notes 9, 10, 11, 12 and 13 to the Consolidated Financial Statements.     March 31,     December 31,     March 31,   December 31,   (In millions)   2017     2016     2018   2017   Fixed maturities     $ 21,734       $ 20,961     $ 24,178   $ 23,138   Equity securities   574     583     567   588   Commercial mortgage loans   1,752     1,666     1,801   1,761   Policy loans   1,431     1,452     1,404   1,415   Other long-term investments   1,465     1,462     1,669   1,518   Short-term investments   303     691     245   199   Total investment assets     $ 27,259       $ 26,815     $ 29,864   $ 28,619     Fixed Maturities   Investments in fixed maturities include publicly traded and privately placed debt securities, mortgage and other asset-backed securities and preferred stocks redeemable by the investor.  These investments are classified as available for sale and are carried at fair value on our balance sheet.  Additional information regarding valuation methodologies, key inputs and controls is included in Note 9 to the Consolidated Financial Statements.  More detailed information about fixed maturities by type of issuer and maturity dates is included in Note 10 to thesethe Consolidated Financial Statements.   The following table reflects our fixed maturity portfolio by type of issuer as of March 31, 20172018 and December 31, 2016:2017:     March 31,   December 31,   (In millions)   2018   2017   Federal government and agency   $ 868   $ 779   State and local government   1,129   1,287   Foreign government   2,499   2,487   Corporate   19,173   18,088   Mortgage and other asset-backed   509   497   Total fixed maturities   $ 24,178   $ 23,138         March 31,     December 31,   (In millions)   2017     2016   Federal government and agency     $ 897       $ 877   State and local government   1,419     1,435   Foreign government   2,312     2,113   Corporate   16,627     16,050   Mortgage and other asset-backed   479     486   Total fixed maturities     $ 21,734       $ 20,961   The fixed maturity portfolio increased by $1.0 billion during the three months ended March 31, 2017,2018, primarily reflecting an increase in investable funds.funds, partially offset by declines in fair value due to increasing market interest rates.  As of March 31, 2017, $19.32018, $21.5 billion, or 89%, of the fixed maturities in our investment portfolio were investment grade (Baa and above, or equivalent), and the remaining $2.4$2.6 billion were below investment grade.  The majority of the bonds that arewere below investment grade arewere rated at the higher end of the non-investment grade spectrum.  These quality characteristics have not materially changed from the prior year and are consistent with our investment strategy.   State and local government.  Our investment in state and local government securities, with an average quality rating of Aa2, iswas diversified by issuer and geography with no single exposure greater than $30$35 million as of March 31, 2017.2018.  We assess each issuer’s credit quality based on a fundamental analysis of underlying financial information and do not rely solely on statistical rating organizations or monoline insurer guarantees.   Foreign government.  We invest in high quality foreign government obligations, with an average quality rating of Aa3 as of March 31, 2017.2018.  These investments arewere concentrated in Asia, primarily South Korea, consistent with the geographic locations of our international business operations.  Foreign government obligations also include $221$260 million of investments in European sovereign debt, none of which arewere in countries with significant political or economic concerns such as Portugal, Italy, Ireland, Greece, Spain andor Turkey.   Corporate.  As of March 31, 2017,2018, corporate fixed maturities included the following:   ·                Private placement investments were $5.4$7 billion.  These investments are generally less marketable than publicly-traded bonds,bonds; however, yields on these investments tend to be higher than yields on publicly-traded bonds with comparable credit risk.  We perform a credit analysis of each issuer, diversify investments by industry and issuer and require financial and other covenants that allow us to monitor issuers for deteriorating financial strength and pursue remedial actions, if warranted.   ·                Investments in companies that are domiciled or have significant business interests in Italy, Ireland, Spain and Turkey were $379$431 million.  These investments have an average quality rating of Baa3Baa2 and are diversified by industry sector, including approximately 2% invested in financial institutions.   ·               Investments in the energy and natural gas sector were $1.8 billion with gross unrealized losses of $13$22 million.  These investments have an average quality rating of Baa2 and arewere diversified by issuer with no single exposure greater than $40$65 million.   ·                Retail sector fixedFixed maturity investments in the retail sector were approximately $450$430 million as of March 31, 2017 with gross unrealized losses of $5$7 million.  These investments have an average quality rating of Baa1Baa2 and arewere diversified across approximately 5040 issuers with no single exposure exceeding $35$45 million.   In addition to amounts classified in fixed maturities on our Consolidated Balance Sheets, we operate aan insurance joint venture in China in which we have a 50% ownership interest.  We account for this joint venture on the equity basis of accounting and report it in other assets, including other intangibles.  This entity hashad an investment portfolio of approximately $3.9$5.5 billion that is primarily invested in local Chinese corporate and government fixed maturities and hasmaturities.  There are no investments with a material unrealized loss as of March 31, 2017.2018. Equity Securities   ApproximatelyAs of March 31, 2018, approximately $400 million in equity securities arewere invested in an exchange tradedexchange-traded fund (“ETF”) as part of a temporary program to invest available fundscash in high quality and liquid assets.  The underlying assets of the ETF are primarily U.S. investment grade corporate bonds and there is a grossbonds.  Effective January 1, 2018, unrealized lossgains of $4$10 million as of March 31, 2017 duewere reclassified from accumulated other comprehensive income to an increaseretained earnings upon adopting ASU 2016-01.  Going forward, quarterly changes in market yields since purchase.value will be recognized in realized investment results.   Commercial Mortgage Loans   Our commercial mortgage loans are fixed rate loans, diversified by property type, location and borrower.  Loans are secured by high quality commercial properties located throughout the United States and are generally made at less than 70% of the property’s value at origination of the loan.  Property value, debt service coverage, quality, building tenancy and stability of cash flows are all important financial underwriting considerations.  We hold no direct residential mortgage loans and do not originate or service securitized mortgage loans.   We completed the annual in-depth review of our commercial mortgage loan portfolio during the second quarter of 2016.  2017.  The results of the 2017 review were in line with the prior year and confirmed the strength of the overall portfolio.  For afurther discussion of the results of this review and changes in key loan metrics, see Note 10 to the Consolidated Financial Statements. Commercial real estate capital markets remain very active for well-leased, quality commercial real estate located in strong institutional investment markets.  The vast majority of properties securing the mortgages in our mortgage loan portfolio possess these characteristics.  We have $138As of March 31, 2018, we had $134 million of commercial mortgage loans in thesecured by retail properties, a sector for various shopping centers in the U.S.  Loan to valuethat has been under pressure generally.  The loan-to-value ratio for these loans was 53%48%, and the debt service coverage ratio was 1.94.2.16.  All of these loans are current.   TheAs of March 31, 2018, the $1.8 billion commercial mortgage loan portfolio consistsconsisted of approximately 6560 loans including one impaired loan with a carrying value of $6 million, net of a $3 million reserve, that is classified as a problem loan.  We have $138 million of loans maturingare all in the next twelve months.good standing.  Given the quality and diversity of the underlying real estate, positive debt service coverage and significant borrower cash investment generally ranging between 30 and 40%, we remain confident that borrowers will continue to perform as expected under their contract terms.   Other Long-term Investments   OtherAs of March 31, 2018, other long-term investments of $1.5$1.7 billion primarily includeincluded investments in security partnershipsecurities limited partnerships and real estate fundslimited partnerships as well as direct investments in real estate joint ventures.  The funds typically invest in mezzanine debt or equity of privately held companies (securities partnerships) and equity real estate.  Given our subordinate position in the capital structure of these underlying entities, we assume a higher level of risk for higher expected returns.  To mitigate risk, these investments are diversified across approximately 120125 separate partnerships, and approximately 7065 general partners who manage one or more of these partnerships.  Also, the funds’ underlying investments are diversified by industry sector or property type, and geographic region.  No single partnership investment exceedsexceeded 4% of our securities and real estate partnership portfolio.   Problem and Potential Problem Investments   “Problem” bonds and commercial mortgage loans are either delinquent by 60 days or more or have been restructured as to terms, including concessions by us to modify the interest rate, principal payment or maturity date.  “Potential problem” bonds and commercial mortgage loans are considered current (no payment is more than 59 days past due), but management believes they have certain characteristics that increase the likelihood that they may become problems.  The characteristics management considers include, but are not limited to, the following:   ·     request from the borrower for restructuring; ·     principal or interest payments past due by more than 30 but fewer than 60 days; ·     downgrade in credit rating; ·     collateral losses on asset-backed securities; and ·     for commercial mortgages, deterioration of debt service coverage below 1.0 or value declines resulting in estimated loan-to-value ratios increasing to 100% or more. We recognize interest income on problem bonds and commercial mortgage loans only when payment is actually received.  The amount that would have been reflected in net income if interest on non-accrual investments had been recognized in accordance with the original terms was not significant for the three months ended March 31, 20172018 or 2016.2017.   The following table shows problem and potential problem investments at amortized cost, net of valuation reserves and write-downs:     March 31, 2017   December 31, 2016     March 31, 2018   December 31, 2017   (In millions)   Gross   Reserve   Net    Gross   Reserve   Net     Gross    Reserve    Net    Gross   Reserve   Net   Problem bonds     $ 55   $ (10)   $ 45     $ 70   $ (9)   $ 61       $ 25   $ (14)   $ 11     $ 25   $ (7)   $ 18   Problem commercial mortgage loans   9   (3)   6     26   (5)   21   Foreclosed real estate   48   -   48     49   -   49     45   -   45     46   -   46   Total problem investments     $ 112   $ (13)   $ 99     $ 145   $ (14)   $ 131       $ 70   $ (14)   $ 56     $ 71   $ (7)   $ 64                                                       Potential problem bonds     $ 15   $ (8)   $ 7     $ 12   $ (7)   $ 5       $ 7   $ (1)   $ 6     $ 31   $ (1)   $ 30   Potential problem commercial mortgage loans   -   -   -     -   -   -   Total potential problem investments     $ 15   $ (8)   $ 7     $ 12   $ (7)   $ 5       $ 7   $ (1)   $ 6     $ 31   $ (1)   $ 30     Problem and potential problem investments decreased by $30$32 million fromsince December 31, 20162017 due primarily to payoffs and paydownssales of fixed maturity bonds.  There were no problem bonds andor potential problem mortgage loans at March 31, 2018 and new impairments on problem bonds.December 31, 2017. Investment Outlook   Although financialFinancial markets in the United States remained stableexperienced increased volatility during the first quarter weof 2018, as interest rates rose along with inflation expectations.  We continue to closely monitor global macroeconomic trends and thetheir potential impact to our investment portfolio.  Recently, theCertain sectors, such as retail, sector of the U.S. economy has shown some weaknessenergy and natural gas have continued to show volatility and we expect that trend is expected to continue.  See the fixed maturities and commercial mortgage loan sections of this MD&A for further information on our investments in that sector.these sectors.  Future realized and unrealized investment results will be driven largely by market conditions that exist when a transaction occurs or at the reporting date.  These future conditions are not reasonably predictable; however, we believe that the vast majority of our investments will continue to perform under their contractual terms.  Based on our strategy to match the duration of invested assets to the duration of insurance and contractholder liabilities, we expect to hold a significant portion of these assets for the long term.  Although future impairment losses resulting from interest rate movements and credit deterioration due to both company-specificinvestment-specific and the global economic uncertainties discussed above remain possible, we do not expect these losses to have a material adverse effect on our financial condition or liquidity.   MARKET RISK MARKET RISK   Financial Instruments   Our assets and liabilities include financial instruments subject to the risk of potential losses from adverse changes in market rates and prices.  Our primary market risk exposures are interest rate risk and foreign currency exchange rate risk.  Certain financial instruments, such as insurance-related assets and liabilities, are excluded from these hypothetical calculations.  We encourage you to read this in conjunction with “Market Risk – Financial Instruments” included in Part II, Item 7 of our 20162017 Form 10-K.  As of March 31, 2017,2018, there are no material changes in our risk exposures from that reported in our 20162017 Form 10-K. Item 3.  Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   Information responsive to this item is contained under the caption “Market Risk” in Item 2 above, Management’s Discussion and Analysis of Financial Condition and Results of Operations.   Item 4.CONTROLS AND PROCEDURES   Based on an evaluation of the effectiveness of Cigna’s disclosure controls and procedures conducted under the supervision and with the participation of Cigna’s management, Cigna’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, Cigna’s disclosure controls and procedures are effective to ensure that information required to be disclosed by Cigna in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to Cigna’s management, including Cigna’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.   During the period covered by this report, there have been no changes in Cigna’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Cigna’s internal control over financial reporting.         Part II.  OTHER INFORMATION           Item 1.LEGAL PROCEEDINGS   The information contained under “Litigation Matters”, “Regulatory Matters” and “Other Legal Matters” in Note 16 to the Consolidated Financial Statements is incorporated herein by reference. Item 1A.RISK FACTORS   In addition to the risk factors set forth in Part 1, Item 1A of Cigna’s Annual Report on Form 10-K for the year ended December 31, 2016 includes a2017, investors should consider the following risk factors arising from our proposed acquisition of Express Scripts. The risk factors set forth below update and should be read together with the detailed description of risk factors reported in Cigna’s 2017 Form 10-K. Cigna will be subject to business uncertainties and contractual restrictions while the Merger is pending. Uncertainty about the effect of the Merger on employees and customers may have an adverse effect on Cigna and consequently on the combined company after the closing of the Merger.  These uncertainties may impair Cigna’s ability to retain and motivate key personnel and could cause customers and others that deal with Cigna to defer or decline entering into contracts with Cigna or making other decisions concerning Cigna or seek to change existing business relationships with Cigna.  Certain of Cigna’s customer contracts, joint venture agreements, shareholder or partnership agreements, vendor or supplier contracts, financing-related agreements, promissory notes and indentures contain change of control restrictions that may give rise to a right of termination or cancellation in connection with the Merger.  In addition, if key employees depart because of uncertainty about their future roles and the potential complexities of the Merger, Cigna’s businesses could be harmed.  Furthermore, the Merger Agreement contains restrictions on the conduct of Cigna’s businesses prior to the consummation of the Merger, which may prevent Cigna from undertaking certain actions or business opportunities that may arise pending consummation of the Merger. The parties must obtain certain regulatory approvals in order to complete the actions contemplated by the Merger Agreement; if such approvals are not obtained or are obtained with conditions, the Merger may be prevented or delayed or the anticipated benefits of the Merger could be reduced. Consummation of the Merger is conditioned upon, among other things, the expiration or termination of the waiting period (and any extensions thereof) applicable to the Merger under the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”).  At any time before or after the Merger is consummated, any of the Department of Justice, the Federal Trade Commission or U.S. state attorneys general could take action under the antitrust laws in opposition to the Merger, including seeking to enjoin completion of the Merger, condition completion of the Merger upon the divestiture of assets of Cigna, Express Scripts or their subsidiaries or impose restrictions on the combined company’s post-merger operations.  These could negatively affect the results of operations and financial condition of the combined company following completion of the Merger.  Any such requirements or restrictions may prevent or delay completion of the Merger or may reduce the anticipated benefits of the Merger, which could also have a material adverse effect on the combined company’s business and cash flows, financial condition and results of operations.  Additionally, Cigna has agreed to accept certain remedies, conditioned on the closing, and may take other actions that Cigna determines in its risk factors.sole discretion to take, to the extent necessary to ensure satisfaction, on or prior to the termination date of the Merger Agreement (as it may be extended), of certain conditions to the closing of the Merger relating to regulatory approvals. Consummation of the Merger is also conditioned upon receiving certain approvals from, and/or making certain filings with, certain state insurance departments relating to Cigna’s and Express Scripts’ insurance company subsidiaries and certain state health departments relating to Cigna’s health care service plans and, to the extent required by applicable law, certain state pharmacy boards relating to Express Scripts’ subsidiaries licensed or authorized to engage in pharmaceutical-related business and certain state health departments relating to Express Scripts’ subsidiaries licensed or authorized as home health agencies.  No assurance can be given that the required regulatory approvals will be obtained or that the required conditions to closing will be satisfied, and, even if all such approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of the approvals. The Merger is subject to a number of closing conditions and, if these conditions are not satisfied, the Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed.  In addition, the parties have the right to terminate the Merger Agreement under other specified circumstances, in which case the Merger would not be completed. The Merger is subject to a number of closing conditions and, if these conditions are not satisfied or waived (to the extent permitted by law), the Merger will not be completed.  These conditions include, among others:  (1) the adoption of the Merger Agreement by Cigna stockholders; (2) the adoption of the Merger Agreement by Express Scripts stockholders; (3) the absence of certain legal restraints prohibiting completion of the Merger; (4) the absence of certain actions or proceedings seeking to prohibit consummation of the Merger; (5) the receipt of certain regulatory approvals and consents without the imposition, individually or in the aggregate, of any condition that would result in, or would be reasonably likely to result in, individually or in the aggregate, a material adverse effect on Cigna, Express Scripts and their respective subsidiaries, taken as a whole, after giving effect to the Merger, including the synergies expected to be realized from the Merger; (6) the approval for listing of the shares of New Cigna common stock on the NYSE to be issued to Cigna stockholders and Express Scripts stockholders; and (7) the effectiveness of the registration statement to be filed by New Cigna in connection with the Merger.  In addition, each of Cigna’s and Express Scripts’ obligation to complete the Merger is subject to the accuracy of the other party’s representations and warranties in the Merger Agreement (subject in most cases to “materiality” and “material adverse effect” qualifications), the other party’s compliance with its covenants and agreements in the Merger Agreement in all material respects and such party’s receipt of a legal opinion from its tax counsel with respect to the tax treatment of the Merger. The conditions to the closing may not be fulfilled and, accordingly, the Merger may not be completed.  In addition, if the Merger is not completed by December 8, 2018 (subject to extension to June 8, 2019 in certain circumstances), Cigna or Express Scripts may choose not to proceed with the Merger.  Moreover, the parties can mutually decide to terminate the Merger Agreement at any time prior to the consummation of the Merger, before or after the required Cigna stockholder approval and Express Scripts stockholder approval.  In addition, each of Cigna and Express Scripts may elect to terminate the Merger Agreement in certain other circumstances.  If the Merger Agreement is terminated, Cigna may incur substantial fees in connection with termination of the Merger Agreement and it will not realize the anticipated benefits of the Merger. Failure to complete the Merger could impact the business, financial results and stock price of Cigna. If the Merger is not completed, the ongoing businesses of Cigna may be adversely affected and Cigna will be subject to several risks and consequences, including the following: ·                  Cigna may be required, under certain circumstances, to pay Express Scripts a termination fee of $1.6 billion; ·                  Cigna may be required to pay Express Scripts a reverse termination fee of $2.1 billion under certain circumstances relating to the failure to obtain the required regulatory approvals for the Merger (but in no event will Cigna be required to pay both the termination fee and the reverse termination fee); ·                  Cigna will be required to pay certain costs relating to the Merger, whether or not the Merger is completed, such as significant fees and expenses relating to regulatory filings, financing arrangements and legal, accounting, financial advisory, consulting and other advisory fees and expenses, employee benefit-related expenses, and filing and printing fees; ·                  Cigna may be required to pay significant fees and expenses relating to financing arrangements, whether or not the Merger is completed, which may include investment banking fees and commissions, commitment fees, early termination or redemption premiums, interest on debt financing between the date of incurrence and the date of repayment, professional fees and other costs and expenses; ·                  under the Merger Agreement, Cigna is subject to certain restrictions on the conduct of its business prior to completing the Merger which may adversely affect its ability to execute certain of its business strategies; and ·                  matters relating to the Merger may require substantial commitments of time and resources by Cigna management and the expenditure of significant funds in the form of fees and expenses, which could otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to Cigna as an independent company. Investors’ reactions to a failure to complete the Merger may be reflected in the trading price of our common stock.  In addition, employees, clients, customers and partners could have a variety of reactions if the Merger is not completed, which could affect our business relationships.  Cigna also could be subject to litigation related to a failure to complete the Merger or to enforce its obligations under the Merger Agreement.  If the Merger is not consummated, Cigna cannot assure its stockholders that the risks described above will not materially affect the business, financial results and stock price of Cigna. Cigna’s inability to satisfy and comply with conditions under its existing financing arrangements or raise additional or replacement financing could delay or prevent the completion of the Merger. Consummation of the Merger is not conditioned on Cigna’s ability to obtain financing.  Cigna expects to use cash on hand and debt financing to fund the cash component of the Merger Consideration.  Such debt financing could take any of several forms or any combination of them, including but not limited to the following:  (1) New Cigna may borrow under the Bridge Facility; (2) Cigna or New Cigna may issue senior notes in the public and/or private capital markets; (3) New Cigna may borrow up to $3.0 billion under the Term Loan Credit Agreement; (4) New Cigna may borrow under the Revolving Credit Agreement; and (5) Cigna and/or New Cigna may issue commercial paper.  The Term Loan Credit Agreement contains and the Commitment Letter contemplates customary conditions to funding, affirmative covenants, negative covenants and events of default.  There is a risk that these conditions or covenants will not be satisfied or complied with, as applicable, on a timely basis or at all.  There is also a risk that one or more members of the lending syndicate will default on its obligations to provide its committed portion of the financing (and the commitments of any defaulting syndicate member may not be replaced on a timely basis or at all).  There are a number of risks and uncertainties associated with the execution of a capital markets financing.  All of these risks are magnified given the scale and complexity of financing required to consummate the transactions contemplated by the Merger Agreement.  Any failure of Cigna or New Cigna to satisfy and comply with conditions under its existing financing arrangements or raise additional or replacement financing could delay or impede the closing of the Merger. Failure to successfully combine the businesses of Cigna and Express Scripts in the expected time frame may adversely affect the combined company’s future results. The success of the Merger will depend, in part, on the combined company’s ability to realize the anticipated benefits from combining the businesses of Cigna and Express Scripts.  To realize these anticipated benefits, the businesses of Cigna and Express Scripts must be successfully combined.  Historically, Cigna and Express Scripts have been independent companies, and they will continue to be operated as such until the completion of the Merger.  The management of the combined company may face significant challenges in consolidating the functions of Cigna and Express Scripts, integrating the technologies, organizations, procedures, policies and operations, as well as addressing the different business cultures at the two companies, and retaining key personnel.  If the combined company is not successfully integrated, the anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected.  The integration may also be complex and time consuming, and require substantial resources and effort.  The integration process and other disruptions resulting from the Merger may also disrupt each company’s ongoing businesses and/or adversely affect each company’s relationships with employees, regulators and others with whom each company has business or other dealings. Combining the businesses of Cigna and Express Scripts may be more difficult, costly or time-consuming than expected, which may adversely affect the combined company’s results and negatively affect the value of the combined company’s common stock following the Merger. Cigna has entered into the Merger Agreement because it believes that the Merger will be beneficial to Cigna and its stockholders and that combining the businesses of Cigna and Express Scripts will produce benefits and cost savings.  If the combined company is not able to successfully combine the businesses of Cigna and Express Scripts in an efficient, effective and timely manner, the anticipated benefits and cost savings of the Merger may not be realized fully, or at all, or may take longer to realize than expected, and the value of the common stock of the combined company may be affected adversely.  An inability to realize the full extent of the anticipated benefits of the Merger, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, level of expenses and operating results of the combined company, which may adversely affect the value of the common stock of the combined company after the completion of the Merger.  In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized.  Actual synergies, if achieved, may be lower than expected and may take longer to achieve than anticipated.  If the combined company is not able to adequately address integration challenges, the combined company may be unable to successfully integrate Cigna’s and Express Scripts’ operations or to realize the anticipated benefits of the integration of the two companies. Third parties may terminate or alter existing contracts or relationships with Cigna or Express Scripts. Each of Cigna and Express Scripts has contracts with customers, vendors, licensors, joint venture partners, lenders and other business partners which may require Cigna or Express Scripts, as applicable, to obtain consents from these other parties in connection with the Merger.  If these consents cannot be obtained, the counterparties to these contracts and other third parties with which Cigna and/or Express Scripts currently have relationships may have the ability to terminate, reduce the scope of or otherwise materially adversely alter their relationships with either party or both parties in anticipation of the Merger, or with the combined company following the Merger.  The pursuit of such rights may result in Cigna, Express Scripts or the combined company suffering a loss of potential future revenue or incurring liabilities in connection with a breach of such agreements or losing rights that are material to its business.  Any such disruptions could limit the combined company’s ability to achieve the anticipated benefits of the Merger.  The adverse effect of such disruptions could also be exacerbated by a delay in the completion of the Merger or the termination of the Merger Agreement. The Merger Agreement limits Cigna’s ability to pursue alternatives to the Merger. The Merger Agreement contains provisions that make it more difficult for Cigna to enter into alternative transactions.  The Merger Agreement contains certain provisions that restrict Cigna’s ability to, among other things, solicit, initiate or knowingly encourage or knowingly facilitate the submission of inquiries, proposals or offers relating to or that would reasonably be expected to lead to any acquisition proposal from a third party.  The Merger Agreement also provides that the board of directors of Cigna will not change its recommendation that the stockholders of Cigna adopt the merger agreement and will not approve any agreement with respect to an acquisition proposal, subject to limited exceptions. In addition, Cigna may be required to pay a termination fee of $1.6 billion to Express Scripts if the Merger is not consummated under specified circumstances.  In addition, upon adoption of the merger agreement by the stockholders of Cigna, Cigna’s right to terminate the merger agreement in response to a superior proposal will be eliminated.  While Cigna believes these provisions are reasonable, customary and not preclusive of other offers, the provisions might discourage a third party that has an interest in acquiring all or a significant part of Cigna from considering or proposing such acquisition, even if such party were prepared to enter into an agreement that may be more favorable to Cigna and/or its stockholders.  Furthermore, the requirement to pay a termination fee under certain circumstances may result in a third party proposing to pay a lower per-share price to acquire Cigna than it might otherwise have proposed to pay because of the added expense of the $1.6 billion termination fee that may become payable by Cigna in certain circumstances. Cigna will incur significant transaction and merger-related transition costs in connection with the Merger. Cigna expects that it will incur significant, non-recurring costs in connection with consummating the Merger and integrating the operations of the two companies post-closing.  Cigna may incur additional costs to maintain employee morale and to retain key employees.  Cigna will also incur significant fees and expenses relating to financing arrangements and legal, accounting and other transaction fees and other costs associated with the Merger.  Some of these costs are payable regardless of whether the Merger is completed.  Moreover, under specified circumstances, Cigna may be required to pay a termination fee of $1.6 billion.  In addition, Cigna may be required to pay a reverse termination fee of $2.1 billion under certain circumstances relating to a failure to obtain the required regulatory approvals for the mergers.  Notwithstanding the foregoing, in no event will the termination fee be paid to a party more than once, and in no event will Cigna be required to pay both the termination fee and the reverse termination fee.  Cigna continues to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the Merger and the integration of the two companies’ businesses. Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   (c)  Purchases of Equity Securities by the Issuer and Affiliated Purchasers   The following table provides information about Cigna’s share repurchase activity for the quarter ended March 31, 2017:2018:     Issuer Purchases of Equity Securities     Period Total # of shares purchased (1)   Average price paid per share   Total # of shares purchased as part of publicly announced program (2)   Approximate dollar value of shares that may yet be purchased as part of publicly announced program (3)   January 1-31, 2017 333   $     134.72   -   $                725,000,122   February 1-28, 2017 1,281,243   $     147.15   999,855   $             3,611,474,335   March 1-31, 2017 718,453   $     150.79   680,900   $             3,508,792,842   Total 2,000,029   $     148.46   1,680,755   N/A   Period Total # of shares purchased (1)   Average price paid per share   Total # of shares purchased as part of publicly announced program (2)   Approximate dollar value of shares that may yet be purchased as part of publicly announced program (3)   January 1-31, 2018 1,222,045   $     212.01   1,221,529   $                   739,232,139   February 1-28, 2018 203,633   $     197.67   78,700   $                2,723,207,261   March 1-31, 2018 161,769   $     192.23   -   $                2,723,207,261   Total 1,587,447   $     208.16   1,300,229   N/A     (1) Includes shares tendered by employees as payment of taxes withheld on the vesting of restricted stock and strategic performance shares granted under the Company’s equity compensation plans.  Employees tendered 333516 shares in January, 281,388124,933 shares in February and 37,553161,769 shares in March 2017.2018.   (2) Additionally, the Company maintains a share repurchase program, authorized by the Board of Directors.  Under this program, the Company may repurchase shares from time to time, depending on market conditions and alternate uses of capital.  The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and alternate uses of capital.  The share repurchase program may be effected through open market purchases or privately negotiated transactions in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, including through Rule 10b5-1 trading plans.  The program may be suspended or discontinued at any time.  From April 1, 2017 through May 4, 2017, the Company repurchased 0.6 million shares for approximately $90 million.  In February 2017,2018, the Board increased repurchase authority to $3.7$2.7 billion.  No shares were repurchased from April 1, 2017 through May 2, 2018.  The remainingCompany does not expect to conduct additional share repurchase authorization underrepurchases prior to closing of the program was $3.4 billion as of May 4, 2017, and the Company is limited to a repurchase pace of $250 million per quarter, consistent with the merger agreement.Express Scripts combination.   (3) Approximate dollar value of shares is as of the last date of the applicable month. Item 4.MINE SAFETY DISCLOSURES Not applicable. Item 6.EXHIBITS   (a)See Exhibit Index SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Cigna Corporation Date: May 5, 2017 By: /s/ Thomas A. McCarthy Thomas A. McCarthy Executive Vice President Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) INDEX TO EXHIBITS   Number Description Method of Filing 2.1   Agreement and Plan of Merger, dated as of March 8, 2018, by and among Cigna Corporation, Express Scripts Holding Company, Halfmoon Parent, Inc., Halfmoon I, Inc., and Halfmoon II, Inc.   Filed as Exhibit 2.1 to the registrant’s Form 8-K filed March 13, 2018 and incorporated herein by reference. 3.1   Restated Certificate of Incorporation of the registrant as last amended October 28, 2011April 25, 2018   Filed as Exhibit 3.1 to the registrant’s Form 10-Q for the quarterly period ended September8-K filed April 30, 20112018 and incorporated herein by reference. 3.2   By-Laws of the registrant as last amended and restated December 6, 2012April 25, 2018   Filed as Exhibit 3.2 to the registrant’s Form 10-K for the year ended December 31, 2012 and incorporated herein by reference.8-K filed April 30, 2018. 10.1*10.1   Cigna Long-Term Incentive Plan as amendedRevolving Credit and restated effectiveLetter of Credit Agreement, dated as of April 26, 20176, 2018   Filed as Exhibit 10.1 to the registrant’s Form 8-K filed May 1, 2017April 12, 2018 and incorporated herein by reference. 10.2*10.2   FormTerm Loan Credit Agreement, dated as of Cigna Long-Term Incentive Plan: Strategic Performance Share Grant AgreementApril 6, 2018   Filed herewith.as Exhibit 10.2 to the registrant’s Form 8-K filed April 12, 2018 and incorporated herein by reference. 10.3*   Form ofAmendment No. 1, effective January 25, 2018, to the Cigna Long-Term Incentive Plan: Nonqualified Stock Option Grant AgreementPlan   Filed herewith. 10.4*   Form of Cigna Long-Term Incentive Plan: Restricted StockStrategic Performance Share Grant Agreement   Filed herewith. 10.5*   Form of Cigna Long-Term Incentive Plan: Nonqualified Stock Unit Plan as amended and restated effective February 22, 2017Option Grant Agreement   Filed herewith. 10.6*   Form of Cigna Long-Term Incentive Plan: Restricted Stock UnitGrant Agreement Filed herewith. 10.7* Form of Cigna Long-Term Incentive Plan: Restricted Stock Unit Grant Agreement Filed herewith. 10.8* Christopher Hocevar’s Promotion Letter dated January 30, 2017   Filed herewith. 12   Computation of Ratios of Earnings to Fixed Charges   Filed herewith. 31.1   Certification of Chief Executive Officer of Cigna Corporation pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934   Filed herewith. 31.2   Certification of Chief Financial Officer of Cigna Corporation pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934   Filed herewith. 32.1   Certification of Chief Executive Officer of Cigna Corporation pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350   Furnished herewith. 32.2   Certification of Chief Financial Officer of Cigna Corporation pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350   Furnished herewith. 101   Financial statements from the quarterly report on Form 10-Q of Cigna Corporation for the quarter ended March 31, 20172018 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Total Equity; (v) the Consolidated Statements of Cash Flow; and (vi) the Notes to the Consolidated Financial Statements   Filed herewith. *Management contracts and compensatory plans or arrangements.   Shareholders may obtain copies of exhibits by writing to Cigna Corporation, Shareholder Services Department, 1601 Chestnut Street, Philadelphia, PA  19192. SIGNATURE   E-1Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Cigna Corporation Date: May 3, 2018 By: /s/ Eric P. Palmer Eric P. Palmer Executive Vice President Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) 70