PART II ITEM 8 Financial Statements and Supplementary Data Assumed and Ceded reinsurance: Run-off Reinsurance segment. The Company’s Run-off Reinsurance operations assumed risks related to GMDB contracts, GMIB contracts, workers’ compensation, and personal accident business. The Run-off Reinsurance operations also purchased retrocessional coverage to reduce the risk of loss on these contracts. In December 2010, the Company entered into reinsurance arrangements to transfer the remaining liabilities and administration of the workers’ compensation and personal accident businesses to a subsidiary of Enstar Group Limited. Under this arrangement, the new reinsurer also assumes the future risk of collection from prior reinsurers. On February 4, 2013, the Company entered into a reinsurance arrangement related to its GMDB and GMIB contracts. See Note 25 for further details regarding these arrangements. Liabilities related to GMDB, workers’ compensation and personal accident are included in future policy benefits and unpaid claims. Because the GMIB contracts are treated as derivatives under GAAP, the asset related to GMIB is recorded in the Other assets, including other intangibles caption and the liability related to GMIB is recorded in Accounts payable, accrued expenses, and other liabilities on the Company’s Consolidated Balance Sheets (see Notes 11 and 24 for additional discussion of the GMIB assets and liabilities). The reinsurance recoverables for GMDB, workers’ compensation, and personal accident total $170 million as of December 31, 2012. Of this amount, approximately 97% are secured by assets in trust or letters of credit. In the Company’s Consolidated Income Statements, Premiums and fees were presented net of ceded premiums, and Total benefits and expenses were presented net of reinsurance recoveries, in the following amounts: The Company reviews its reinsurance arrangements and establishes reserves against the recoverables in the event that recovery is not considered probable. As of December 31, 2012, the Company’s recoverables related to this segment were net of a reserve of $1 million. The Company’s payment obligations for underlying reinsurance exposures assumed by the Company under these contracts are based on the ceding companies’ claim payments. For GMDB, claim payments vary because of changes in equity markets and interest rates, as well as mortality and contractholder behavior. Any of these claim payments can occur many years into the future, and the amount of the ceding companies’ ultimate claims, and therefore, the amount of the Company’s ultimate payment obligations and corresponding ultimate collection from retrocessionaires, may not be known with certainty for some time. Summary.  The Company’s reserves for underlying reinsurance exposures assumed by the Company, as well as for amounts recoverable from reinsurers/retrocessionaires for both ongoing operations and the run-off reinsurance operation, are considered appropriate as of December 31, 2012, based on current information. The Company bears the risk of loss if its retrocessionaires do not meet or are unable to meet their reinsurance obligations to the Company. The increase in direct premiums in 2012 as compared to 2011 primarily reflects the Company’s acquisitions of HealthSpring and Great American Supplemental Benefits as well as the conversion of Vanbreda business from service to insurance contracts in 2012. The increase in assumed premiums in 2012 largely results from the acquisition of FirstAssist. The decrease in assumed premiums in 2011 as compared to 2010 primarily reflects the effect of the Company’s exit from a large, low-margin assumed government life insurance program. The effects of reinsurance on written premiums and fees for short-duration contracts were not materially different from the recognized premium and fee amounts shown in the table above. 86 CIGNA CORPORATION -  2012 Form  10-K (In millions) 2012 2011 2010 Premiums and Fees Short-duration contracts: Direct $ 23,954 $ 17,300 $ 16,492 Assumed 382 158 496 Ceded (217) (185) (187) 24,119 17,273 16,801 Long-duration contracts: Direct 2,234 1,919 1,687 Assumed 86 36 36 Ceded: Individual life insurance and annuity business sold (186) (203) (195) Other (66) (59) (55) 2,068 1,693 1,473 TOTAL $ 26,187 $ 18,966 $ 18,274 Reinsurance recoveries Individual life insurance and annuity business sold $ 316 $ 310 $ 321 Other 201 213 156 TOTAL $ 517 $ 523 $ 477